SARUMPAET:
Peter there is a lot largesse in this budget but there is no tax cut for anyone less on than $50,000 a year. Why are the tax cuts directed at the most well off.
TREASURER:
Well, I don’t think I would say that people on $55,000 are well off. I think they’re middle income earners and I think they don’t deserve to be on top marginal tax rates. If you compare Australia’s tax system with those overseas, their top thresholds cut in at much higher levels, generally speaking, than ours and I think that you shouldn’t have to go on the top tax threshold in Australia until you hit $80,000. That is about twice average earnings. I don’t think people on average earnings should be near those top rates.
SARUMPAET:
Haven’t low income Australians without children though, also suffered as inflation has put them into higher tax brackets?
TREASURER:
Well, we have now one bracket at 30 cents between $21,600 and $52,000, so those people are on a lower rate already. 30 cents in the dollar is their top rate, we introduced that some time ago. But we do not want those people knocking into a 42 cent rate or a 47 cent rate. So you have got to push those thresholds out, so that the income earners at $55,000, $60,000, $65,000 do not go on top marginal rates. These are the people working overtime. They might be upgrading their skills and they need more incentive.
SARUMPAET:
You have a surplus of $2.4 billion for 2004-05 year. Does that leave room for more spending announcements before an election, to reply to what Labor might through out?
TREASURER:
I think that it is a prudent surplus. We want to keep the budget in surplus. It took so much effort to get it there and it’s the 7th surplus that our government has delivered so I call it prudent. I would not say that it has room for great spending measures.
SARUMPAET:
Why have you waited until an election year to recognise needs such as for subsidised insulin pumps and support for full-time carers?
TREASURER:
Well, you always work at improving things as the finance becomes available. You could not have done these things eight years ago because the budget was deeply in debt so we did not have any money. So we had to balance the budget first of all, repay $70 billion worth of Labor’s debt and now we are in a stronger financial position and people can share in it.
SARUMPAET:
What about the inflationary concerns of stimulating demand through these tax cuts. Mightn’t that be a mistake that the Reserve Bank might just have to fix by lifting interest rates?
TREASURER:
No, the stimulation is about half a percent of GDP and we are actually forecasting growth to slow somewhat. Next year, 3.5 per cent, it’s a good clip by world standards but a little slower than this year. So I do not see any inflationary consequences there.
SARUMPAET:
Well Treasurer, thanks very much for joining us at SBS.
TREASURER:
It’s a great pleasure to be here, thank you.