MCGRATH:
Treasurer, you spoke in the press conference this evening about Australians possibly having three children - one for their wife, one for their husband and one for the country. Now judging on the tax cuts you’ve offered, you’re quite serious about that?
TREASURER:
Well, we’ve got an ageing population in Australia. On our current projections the number of people of working age is hardly going to increase over the next four years and that’s because the fertility rate is 1.7. That is, families have a lower number of children than the replacement rate. The number of people over 65 is going to more than double. And what that means long term is that you’re going to have fewer people in the workforce to support more people in retirement.
MCGRATH:
And this package you’ve unashamedly pitched at families, are you in some ways looking to grab those people who’ve caught the attention of Mark Latham?
TREASURER:
I think it’s important to help families where you can, and we’ve increased payments, and we’ve made it easier for more families to get access. But we wanted to do another thing, which is to particularly help those families where mum comes out of the workforce and then goes back in. We have a maternity payment when she comes out, a $3000 payment, but more importantly than that, when she goes back in - mostly mum goes back into part-time work - and we’ve changed the family benefits so that she can keep more of her family benefits while she’s in part-time work and that’s a big structural change.
MCGRATH:
Now look at the changes in the tax scale. The highest income tax rate will now not come in at $62,500, but $80,000 once it’s fully implemented. How did you decide on that?
TREASURER:
Well you look around the world and you try and maintain parity with comparable countries. Our top tax rate comes in lower than most developed countries, so that’s the first thing. The second thing is, we don’t want people on average earnings to be facing upper rates, we want them to be on a 30 per cent or less. And so, we looked at that and we thought that was the right amount to help people on middle incomes, really. I don’t think people on $62,500 are rich, I think these days in Australia, you’re probably a middle income earner.
MCGRATH:
And that new $600 payment, $1,200 this year, but $600 afterwards, it’s going to be seen as a bribe by Labor and perhaps by much of the community as well.
TREASURER:
I don’t think so. It’s something that we’ve been working on now for several years. We, in our first Budget, introduced an increase in this payment. In 2000, we introduced an increase in this payment. We’ve built on it again. Since 1996, this payment has increased by more than 100 per cent in real terms. So this stands in a long line of policies and it’s designed to help the families.
MCGRATH:
Now you’ve made a big spend here on families, but what about the surveys that were saying that people wanted improved services rather than tax cuts, did you listen to those surveys?
TREASURER:
Well there’s a lot of investment in this Budget in health and education as I…
MCGRATH:
Well there’s not much really, and much of it had already been announced, announced during the last few months, the education, for example, is very much indexation.
TREASURER:
Sure, even if it was announced in the last few months, it’s got to be actually funded in this Budget.
MCGRATH:
But it’s effectively indexation, isn’t it?
TREASURER:
Well, let’s take health. Health spending has doubled, has doubled since 1996. The increase in education is another $8 billion over four years to government and non-government schools. So, sure we’ve announced that earlier, but this is the Budget that has to actually fund it and show how it’s going to be done.
MCGRATH:
For people though in the community who are going to be looking at this and also deciding how they are going to vote at the next election, some of them will say, no, no, no we don’t really want this tax cut, we want more services. Now have you considered how many people that is, and do you think you are going win the argument on that?
TREASURER:
Well I think people want both really, I think they want good services and they want tax rates to be as low as possible. And this is a Budget which invests in health, and invests in education, it invests in defence and it’s balanced. And once you’ve done that, if you’ve got a low debt position, as we currently have, I think you should try and reduce people’s costs. Put some money back into their pockets and they can decide how to spend it themselves.
MCGRATH:
You talk so much about families and in your Budget speech tonight you open with comments about families, you know, what happens if a father is put out of work, what about those singles because they vote too?
TREASURER:
Sure, and that’s one of the reasons why we introduced this new superannuation policy which means that…
MCGRATH:
But they won’t get that benefit for many years?
TREASURER:
Well if you put $100 into superannuation, the Government will put $150 in. It’s your money.
MCGRATH:
And they also have to get that money to put in it in the first place.
TREASURER:
Sure, sure, but the Government will put in $150. It’s your money, it’s always your money. You can’t draw down on superannuation until preservation age, we know that, that’s true. It’s your money, it’s your asset, it’s going to help you in retirement. And this is another theme that we’ve got, is helping people in retirement. Ageing of the population, let’s encourage people to save for retirement.
MCGRATH:
But for those low income earners who are on their own, who don’t have children, and don’t plan to, there’s not much in it for them for this election, is there?
TREASURER:
No, I think there’s a lot in it.
MCGRATH:
For money in their pockets.
TREASURER:
Well, well it’s, you’re talking about single income people, who are not retirees - because retirees have different benefits, single income people without children. And I think those people are interested in their retirement and I think they will be interested in making a contribution to their retirement.
MCGRATH:
The stimulatory effect possibly of these tax cuts, what do you think is going to happen, how the market is going to respond?
TREASURER:
Well the fiscal effect of this is probably a stimulus of half a per cent of GDP on a budget which is a surplus. You look at countries like the United States, they’ve got a budget deficit of five per cent of GDP. So, it’s nothing like the stimulus that we’re looking at in other developed economies at the moment.
MCGRATH:
There will be much talk about possible interest rate rises, pressure on interest rates after this.
TREASURER:
No, not as a consequence of this. I’ve said earlier that interest rates will rise around the world, but I think that the Australian economy, if we can get this package through, balance our budget and keep it going strongly on low inflation, I think the Australian economy will be as well placed as any in the world to deal with that situation.
MCGRATH:
Treasurer, thank you for speaking to the ABC’s PM special tonight.
TREASURER:
It’s great to be on PM. Thank you.