BEN FORDHAM:
The Federal Treasurer Scott Morrison is live on the line from Canberra, Treasurer good afternoon.
TREASURER:
G'day Ben.
FORDHAM:
You must be happy?
TREASURER:
I'm pleased for Australians who pay tax and work hard because they've had a big win today. Not just today but into the future. Bracket creep is something, I don't know how many times I've heard people raise bracket creep with me as Treasurer, and we've got a plan to deal with that and 94 per cent of Australians going into the future will pay no more than 32.5 cents in the dollar on a marginal rate. So it's a big change today, it's good for people who work hard.
FORDHAM:
You've got Pauline Hanson to thank.
TREASURER:
Amongst many. It wasn't just two crossbenchers we had to get in the Senate, we had to get quite a number and we've been working hard on that, having those conversation directly and respectfully and now we wouldn't have to do that of course if Labor supported cutting taxes but that's what we had to do but that's what we have to do in Government and that's what we've achieved again.
FORDHAM:
Let's go through it step, by step. Step one involved permanent tac relief to lower and middle income earners, so this is a rebate of sorts. $530 a year from July 1, 2018.
TREASURER:
Yeah that's right. So when you do your tax return for next year, you will get on top of what you'd normally get back on your tax return, depending on your income, up to $530 on top of that tax refund. Now the good thing about it coming in one go is that it can help with some big bills. It will put more than a set of tires on a car, it deals with electricity quarterly bills. For two people together, obviously, who are in that zone, that's over $1000 bucks for a family. This is meaningful. I think it prioritises as it should lower-middle income earners first to provide some real relief.
FORDHAM:
Then you've got step two which is about lifting tax brackets, so explain the tax brackets that are going to change under step two and when.
TREASURER:
The first one is the $37,000 threshold will go up to $41,000. So those on lower incomes, that threshold will move up and the $90,000 threshold goes up to $120,000. Remember this is a few years' time. So, people's wages just by inflation, but with a stronger economy we'll see wages move a bit more. That will go up to $120,000. Then the final stage, which is the next step after that, two years after that, is we get rid of that 37 cent threshold all together.
FORDHAM:
Ok, so in step two, the $37,000 threshold goes to $41,000. So there's about half of a million people in there, who will be, well they'll be saving a lot of money.
TREASURER:
Step one continues by the way. That flows all the way through. So you're getting $530, you'll keep getting that as we continue to move those thresholds up, as people, depending on what they earn, they'll also get the tax relief that applies to them.
FORDHAM:
So when that $90,000 threshold goes to $120,000 there's 1.8 million people who fall into that category?
TREASURER:
That's correct, there's millions of people obviously paying tax and particularly in those brackets that go up to about $120,000. That's where the bulk of Australians are. It's only 4 per cent of Australians who are actually in the top tax bracket but they pay 30 per cent of the tax. Now, at the end of this plan they'll actually pay 36 per cent. So this idea that it's all beer and skittles for high income earners, actually no. They'll end up paying an even greater share.
FORDHAM:
What are the chances of us getting to step two and step three? I know this depends on who is going to be in the Senate and I suppose where the Labor party stands and where others are going to stand because when you get to step three, that's when the 37 per cent tax bracket is abolished entirely. That's 2024-2025, it's a long way away.
TREASURER:
I'd love to do it sooner and what I think people can take from the Turnbull Government is if we can we will, because we are about having lower taxes. But we'll always do it responsibly. A number of times, I'm sure on your program Ben, you've been in the media quite a while and you've heard people say we need politicians to look longer term, well that's what this plan does and if we're able to bring it forward of course I'll seek to do that. You're introduction was dead right. It's their money. I just want them to keep more of it so they can do with it what they think is best for them and their family. I don't think what people earn the government has some sort of right over. We should only tax as much as we need to. That's why in the Budget this year I actually put a cap, a ceiling on just how much tax can come out of the Australian economy and that is binding us into the future but sadly the Labor party don't want to be bound on tax and you'll see taxes go up and up and up, some $270 billion in extra taxes from them if they're elected.
FORDHAM:
I know this is not your motivation but it gives some incentive for people to keep on voting for the Coalition if they're hanging in there for 2024-25.
TREASURER:
It's a simple choice. I sort of joked about it, people remember the Karate Kid movie, "wax on, wax off", but what I was talking about with the Labor party is "tax on" and with the Liberal Party, it's "tax off". And that's a pretty clear choice, I've been saying that now for several months before the Budget. We're for lower taxes, they're for higher taxes so people can make their choice.
FORDHAM:
There's some figures out today just on debt. We don't often hear about State Governments and Territory Governments and debt but when you add the national debt to the debts of all other states, our governments are closing in on a combined debt of $1 trillion. You can understand why a lot of people are worried about that when they hear figures like that, Treasurer.
TREASURER:
I do and when people look in from outside, the ratings agencies and so on, they look at all the governments. Now, as far as we're concerned, our net debt peaks this year and it comes down. It's taken us some years to get that under control and now start paying it off, it goes down $30 billion over the next four years – $230 billion down to less than four per cent of the economy over the next 10 years. You probably remember the Key Government in New Zealand. Everyone knows about John Key when he was a very successful Prime Minister with Bill English. It took that Government six years to get the Budget back into surplus and start paying down that debt. Now, we would have achieved by 2019-20 exactly the same thing in exactly the same timeframe. So it does take a while. Labor had runaway debt, runaway deficits and it's a bit like bringing Andrew Fifita to the ground. It's not done easy.
FORDHAM:
I was also encouraged today to see some numbers on middle class welfare, the Bureau of Statistics shows the majority of middle income workers on welfare have had their government benefits reduced from $91 a week to $76 a week since 2010. I know it's not a big drop, but it is significant because we had to do something about that middle class welfare, didn't we?
TREASURER:
Well we haven't so much cut benefits. These are people who don't need the benefits because they've been getting jobs. When you get record jobs growth, we now have the lowest level of welfare dependency of people of working age than of any other time in more than 25 years. It's down to about 15 per cent. Now, when I left university, it was up around 25 per cent and more. It was about one in four, one in five people and that's come right down because when people get jobs, they get off welfare and that's what we've been doing. It was interesting in there also, Ben, there were some very interesting statistics. For those in the lowest 20 per cent of incomes on households, for every dollar they pay out in taxes, they get about $9 worth of benefits back from the Government. Now, that's just not in the form of welfare assistance and things like that but it's what seen as the value of schools and hospitals and all of those things. But if you're in the top 20 per cent, for every dollar you pay out in tax, about 25 cents comes back in benefits so those in the bottom 20 per cent get 36 times the pay back on what they put in in tax than those on the highest. Now, that's a progressive tax system, that's fair enough but you know, those who are on the higher incomes do pay a lot of tax, they pay their fair share and I don't know why the Labor party would want to demonise them so much and want them to pay even more tax.
FORDHAM:
Well, we're looking forward to having more money in our pockets and in our bank accounts. Before I let you go, do you want to be the first member of the Australian Government to offer congratulations to the New Zealand Prime Minister Jacinda Ardern because she has just shared the first photo of her new baby girl. There's no name, but it's a beautiful photograph of the New Zealand Prime Minister and her husband, big smiles and a gorgeous little baby girl.
TREASURER:
Well, that's tremendous news and all the best to Jacinda and her family. I've got two little girls so I know how precious that little smile is, it's been a few years since we had that first one but, gosh, the smile is just as beautiful no matter how old they get.
FORDHAM:
Good to catch up.
TREASURER:
Thanks, mate. Cheers.