BEAUMONT:
Treasurer, good morning.
TREASURER:
Good morning, Simon.
BEAUMONT:
Treasurer, I was looking at a website yesterday, did you know you are one of about 800,000 men in this country who have, for more than 10 years, you have worked in the same job. You must love it.
TREASURER:
I am surprised there are 800,000. But look, it is a big responsibility but it is a great honour to serve the country as Treasurer. It is an area where you can make a difference and I think people will judge the record over the last 10 years but I think Australia is much stronger today than it was 10 years ago and you are seeing some of the benefits of strong economic management.
BEAUMONT:
When will the tax cuts start? I understand some will be phased in over the next few years at difference threshold levels, what will, specifically what will start from July?
TREASURER:
Well, from the 1st of July we cut taxes for all taxpayers and for a person on average wages, that means about $16 a week. So if you are paid on a fortnightly basis when your pay packet comes in mid-July it should be, and if you are on average wages, it should be $32 extra.
BEAUMONT:
Here in Perth Treasurer, fuel, rent, house prices have been spiralling upwards for some time, there are plenty of West Australians that will need those tax cuts just to get by.
TREASURER:
Well I think that is right. I think if you can deliver tax cuts you should do so. And we were in a position where we were able to make a big investment in the capacity of the country, really in particular in the education area – primary, secondary, tertiary and apprenticeships. And we were in a position to make that investment, we were in a position to balance our Budget and I have always said to Australians that if you can fund the services that people need and want, if you can keep your Budget in balance then you should work at keeping the tax burden as low as possible. This is the fifth Budget in which we have cut taxes and for those on average or slightly below average wages, the accumulated tax cut is now as high as 45 per cent.
BEAUMONT:
I go back to the point I guess, I understand all that you have said, but I go back to the point, whilst it seems generous on one hand, the point is, many people are struggling. We are an economy in Western Australia that we keep being told is being driven by the mining boom but not everyone works in the mining industry even here in Western Australia and there are people who are struggling and these tax cuts are really necessary as I said, just to scrape by on a week to week, pay to pay basis.
TREASURER:
Yes, I think that is right. I think that there will be a lot of people that are struggling so if you can give tax cuts then it is well worth doing. Now, what we have announced last night means that low income earners won’t pay any tax until they earn above $11,000 and then the tax rate that will apply up to $30,000 is 15 per cent. So, that means that people who are on low incomes will have a very small tax burden and of course if you have got families, there are Family Tax Payments to help out. But I agree with your proposition. I think that there are people that are struggling and if you can help them out by giving them a tax cut, I think it is well worth doing.
BEAUMONT:
As part of this, I heard you say last night that you are, trying to build capacity, you are trying to encourage either perhaps Mums who are coming back into the workforce or people who are working part-time, you acknowledge that you are trying to build that capacity and get these people, if they want to, to come back and perhaps work full-time or work a couple of extra days a week, whatever. Is it worth it doing that? The childcare rebate is still only at 30 per cent and if you are retired and you wanted to come back in and work a few extra days a week it does compromise your pension payments. Is it worth it, coming off a lower base?
TREASURER:
Yes I think so. See, bear in mind 10 years ago we had mass unemployment and there have been 2 million new jobs created in Australia since then and unemployment is very low, it is the lowest it has been for 30 years. So, if we want to grow the economy now we have got to get more people to come into the workforce. Now, suppose you are a woman that has left the workforce to have some kids and the kids are going off to school and you think to yourself, well it might be worthwhile going back into part-time work. Most mothers who come back into the workforce come back and do a day or two a week. And with these changes for childcare the cost of the childcare will be much less. You will get 30 per cent of the out-of-pocket costs back. And of course when you come in you will have a lower tax rate. So I think that does provide a bit more incentive to come back into the workforce. Now, with the older group that you are talking about, the whole thing in Australia some years ago is they used to pension people off at 45 or 50. We want to say to people, keep on working. In fact, keep on working after 60 if you want to. This is where we have superannuation changes that say after 60 you can take your pension and it will be tax free out of a superannuation fund, a taxed superannuation fund. And you might want to do some part-time work and because your superannuation pension is tax free it won’t affect your pension as a consequence.
BEAUMONT:
Mr Costello, a lot of people who want to work second jobs are taxed very heavily. Is there any consideration in this Budget or into the future to change or to reform the system whereby you are taxed heavily on your second job, which some people are working through necessity.
TREASURER:
Sure. Well, look we want to encourage an incentive in the tax system and one of the things that I announced last night is that from 1 July 2008 – that is July next year – you won’t go on the top tax rate until you earn over $180,000. So if you are earning in two jobs, most people would still be under $180,000. So the changes that I have announced will keep you off that top tax rate and will make it better to take up a second job. But the whole idea is here is…
BEAUMONT:
Sorry to interrupt Treasurer, what tax rate will you be taxed at if it is not the (inaudible) on your second job, if it is not the top one?
TREASURER:
Well it depends on your income. If you take a second job and your income is under $80,000, you will be taxed at 30 per cent. If you take a second job and your income is under $180,000, you will be taxed at 40 per cent. It depends on your income, the tax runs off the income. So the whole object here is to actually increase the strength of the Australian economy, to grow it bigger. If we have got a bigger economy and more people in work we can have better hospital and education services and we have got to lift the economic capacity of the country and that is why all of this investment that I announced last night is directed towards that economic goal.
BEAUMONT:
Treasurer, this largess, this generosity could be forgotten by the electorate and I use that word deliberately, by the voters if there is an interest rate rise before the election.
TREASURER:
Well that is why it is important that we are economically responsible and this Budget is economically responsible. I wouldn’t have done it if it wasn’t. I am very conscious of the importance of interest rates in Australia with the experience I have had in managing the economy. And at the end of the day I think this is very responsible targeted investment to lift the capacity of the Australian economy and I don’t think it will put pressure on interest rates. In fact, at the end of the day the Government is still going to be building up savings which should exert downward pressure rather than upward pressure on interest rates.
BEAUMONT:
Expected Budget surplus of $10.6 billion – plenty of our money there – the economy is going beautifully, there is plenty left for a fully costed pre-election promises. Will there be announcements specifically leading up to the election on environmental initiatives, on carbon trading and greenhouse gas emissions? That seems to be one area if any that has been criticised this morning.
TREASURER:
Well, yes we have got a taskforce that is looking at an emission trading system and that will be reporting shortly and when that reports we will announce our response to that. Of course the Budget contains a lot of measures in relation to water, in relation to encouraging solar power or households but you are quite right, we haven’t announced that position on emissions trading yet. We will do that as soon as we have considered the report. I think the important thing on this emissions trading system is to think about these things carefully. We don’t want to handicap Australia’s great industry, particularly the mining industry. Think of how important the mining industry, is in Western Australia. If you came out with a ridiculous target which could cost jobs and undermine the mining industry, it wouldn’t help anybody, particularly in Western Australia. So, we want to look at these things very carefully. We want to know the consequences of these decisions before we announce where we are going, we are carefully analysing this and I give this assurance, we are not going to do anything to tip the Australian economy into recession or put people out of work or have their mortgages foreclosed on them. We are going to do the things that will keep our living standards high and address environmental challenges and invest for the future.
BEAUMONT:
Just one final question Treasurer, some micro-management, micro-economic question I suppose. I guess you have control over the purse strings from a global perspective in this country, but I am just wondering if there is a line in the Budget in 2007-08 for a venue for the post-election party that you have presided over. I am asking what the date is we are going to the election. Have you booked a venue yet?
TREASURER:
I was going to say, there are several thousand pages in the Budget and if you can find that line you would be doing pretty well.
BEAUMONT:
Well I have asked the Prime Minister twice and he wouldn’t tell me either. All right, thanks for your time today.
TREASURER:
It is great to be with you. Thanks very much Simon.