TRANSCRIPT

of

THE HON PETER COSTELLO MP
Treasurer

Interview with Alan Jones

2GB

Wednesday, 12 May 2004
7.14 am

SUBJECTS: Budget

JONES:

Treasurer, good morning.

TREASURER:

Good morning Alan.

JONES:

Thank you for your time, can we just go back a little bit, when you became, because we take those barometers which I suppose have enabled you to do what you did last night, of unemployment, inflation, interest rates and debt, this now is your ninth Budget, where were they when you came to cast and draft your first Budget?

TREASURER:

Well, unemployment was much higher than it is today, unemployment was about 8.2 per cent and it has fallen to 5.6 per cent, we have got 1.3 million new jobs in Australia since then, inflation was more than double what it was today, it was around about 5 per cent back then, and the Commonwealth debt which we inherited from Labor was $96 billion and I was able to announce last night we have paid back $70 billion of that, so we have taken it down from $96 billion to $26 billion.

JONES:

And yet, I suppose the criticism today will be in the light of the changing

of the tax scales, that there is nothing in the Budget for someone under $52,000

by way of tax relief.

TREASURER:

No, well I will come to that in a moment, but I just want to say this Alan,

when we introduced our new tax plan we cut income taxes, this is back in 2000

when the GST was coming in, and we cut them particularly at that low end, we

cut the 20 per cent rate to 17 and the 34 per cent rate to 30 per cent, but

the Senate would never allow us to pass the income tax cuts for middle income

earners, Labor blocked it in the Senate. And I have always regarded it as unfinished

business, that when that deal was broken in the Senate by Labor, the middle

income earners missed out and as a consequence of that, in Australia today,

you can go onto the top rate of tax at $62,500, now $62,500, you are not rich…

JONES:

No, not at all.

TREASURER:

…you have got people like policemen and firemen, building workers who

are paid a lot more than that, people who want to do overtime, so in this Budget

I have said if we can get Labor to pass this in the Senate…

JONES:

Just interrupting you there, they seem to be saying that they will, don’t

they?

TREASURER:

…well, I hope they do.

JONES:

Right, so you will still pay only 30 cents in the dollar up to $58,000 from

July 1 this year…

TREASURER:

Yes.

JONES:

…and it will be $63,000 from July 1 next year?

TREASURER:

That’s right, and the top rate after it has fully come in on 1 July

of next year, you won’t go onto the top rate until you earn $80,000 and

I think for those people between $60,000 and $80,000 as I said, there is a lot

of policemen, there would be firemen, people doing overtime, you are not rich

and you shouldn’t be on the top tax rate and…

JONES:

Right, well that…

TREASURER:

…I call on the Senate to pass that.

JONES:

…well that is fantastic stuff, but can I ask you this question, there

are 5 million workers on the 30 cent rate and another 2 million on the 17 cent

rate, what do you say to them today?

TREASURER:

Well a lot of those are the self-funded retirees, and…

JONES:

Who are doing it tough because you have kept interest rates down, which is

to your credit, if people have got debt, but if you are relying on interest

rates to make a quid, they are suffering, aren’t they?

TREASURER:

…well, this is why in our Budget a couple of years ago we introduced

a new thing for Senior Australians, the Senior Australians Tax Offset, and for

the self-funded retiree, if you qualify for that you don’t pay tax until

you are on $20,500, you get the effect of a tax-free threshold and we did that

two years ago and that has introduced for self-funded retirees benefits which

were not previously available. You see, what we are doing here, having done

that for the senior Australians, having cut rates back in 2000 for the lower

income Australians, what we are doing now is we are returning to the unfinished

business and we are making the picture complete, it shouldn’t have been

this way…

JONES:

So 80 per cent of taxpayers will only now pay no more than 30 cents in the

dollar.

TREASURER:

…absolutely, and I don’t think they should pay more than that…

JONES:

Can I just ask you this question though, the tax-free threshold where you

pay nothing is $6000, but our welfare system recognises that a single person

living alone needs more than twice that amount to keep body and soul together,

did you ever at any point consider raising that tax-free threshold to what in

fact the welfare system recognises as the base rate at which, on which you need

to, a base rate of money you need to live?

TREASURER:

No, because people who are down in those levels do get benefits out of the

welfare system. If you raise that tax threshold you might cut tax but $1 a week

maybe or $2 a week, but people down on those levels of income, if they are pensioners,

they get pensions…

JONES:

So that is the other half of this isn’t it?

TREASURER:

…the other half of this is, the really low income earners get benefits

out of the pension system, that is the other part of this and they have already

been put in place, and I keep on coming back to this point, that this is unfinished

business, this should have been done before, it was defeated in the Senate and

we have now returned to try and complete the picture.

JONES:

OK, well completing the picture, you have relaxed the incomes tests on the

core family allowance scheme which is a Family Tax Benefit Part A…

TREASURER:

Yes.

JONES:

…so, the minimum payment will now be available to families with two

children earning $87,000 and a bit which is well up from the $68,000, isn’t

it?

TREASURER:

That’s right, and we have increased the amount by $600 per child.

JONES:

And they will get that $600 lump sum before June 30?

TREASURER:

First payment before June 30 and then next year’s payment as soon as

they lodge their tax return, so that for each child that is an increase of $600,

so the minimum amount that families were getting per child was $1095 and it

is going up to $1695 so that is a pretty fair increase for families…

JONES:

Yes, absolutely, so that is the family side, the incentive I suppose in all

of this is to say to the bloke out there, well listen you get a promotion, you

earn a few more quid, but you don’t shift out of that tax bracket.

TREASURER:

Out of the 30 cent tax bracket, that is the point here. You see, people that

are getting a promotion or doing overtime, they were starting to pay more than

40 cents in the dollar on their tax and they were saying, I don’t want

to get a promotion or it is not worth doing overtime. If you can keep the great

bulk of Australians on that 30 cent or less tax bracket, then you are going

to get a lot more incentive in the system, and that is what we want. Look, Alan

at the end of the day and I keep on saying this, you can’t do anything

if you don’t have a strong economy…

JONES:

Yes, you made the point last night, that is not accidental is it?

TREASURER:

It is not accidental, it is not a fluke, it just doesn’t happen, it

has to be managed and you have to make good choices in really hard situations,

but one of the ways that we can make the Australian economy stronger is by promoting

incentive and we have got a lot of (inaudible)…

JONES:

On that, the incentive in retirement, now you have offered a further incentive,

the co-contribution scheme, you have allowed that for people, now you have extended

it up to $58,000, right, and the co-contribution will now be $1.50 for every

dollar we stick in.

TREASURER:

That’s right, if you want to put $100 into your superannuation fund,

the Government will put $150 in for you, so you put in $100 and the total amount

that goes in will be $250, $100 from you and $150 from the Government. It is

your money, it is your funds and it will be for your retirement, and it is a

way, you have probably seen these ads on television with the piggy bank, a bloke

puts a dollar in and an unseen hand puts another dollar in, well, now he is

going to put a dollar in and it will be $1.50…

JONES:

And you are trying to cut, and I say trying because it looks as though there

are some people there who are going to oppose this, Senator Brown in one amongst

them, the 14.5 per cent tax on high income earners, the superannuation surcharge

down to 7 per cent in 2006-2007.

TREASURER:

…halve it, we want to halve it and again we have had a go at this before

and the Labor Party has blocked it so I haven’t heard what they have said

in relation to that, but we have got this $1.50 for a dollar for the low income

earner and for those higher up the scale, what we are trying to do is to cut

the additional tax they pay when they put money into superannuation, so that

is a balanced package, it gives incentives to the lower income earner and the

middle to upper income earner to save for their retirement which is something

that we have got to do as the population ages.

JONES:

I see that, the Budget Papers suggest that there will be about 800,000 workers

who will now drop back to the 30 cent rate by July 1.

TREASURER:

Yes, these are people that are in those middle income ranges and if we don’t

get these tax changes through, they will be pushed into higher brackets. Now

Alan, we are introducing this legislation tomorrow and it has to go through

by early June because the Tax Commissioner has then got to publish the instalments

and employers have got to know how much tax to take out of the pay packets before

1 July, so there is no excuse for mucking around here, there is no excuse for

mucking around in the Senate by Senator Brown or any of his people trying to

delay these tax cuts or the Labor Party trying to engage in delaying tactics,

we really have to get this through if people are going to get their benefits

on 1 July and we have to get this through if families are going to get their

payment of $600 by 1 July.

JONES:

Can I just ask you one, we had a lot of calls this morning for the non-custodial

parents, becaue they say now as the incentive exists to earn more and stay in

the same tax bracket there is no incentive for them because when they earn more

the child support agency then bumps up the amount that they have to pay as a

non-custodial parent. Is there any contemplation of trying to reform that where

these people really feel as though they are down and out?

TREASURER:

Well I know Larry Anthony, the Minister responsible, has been looking at this

formula, it works off a formula as you know, you have got to give X per cent

to the child support agency for the support of your children, and as your income

goes up the formula works on your rising income and sends more money across.

I know that Larry Anthony is…

JONES:

But you understand the point.

TREASURER:

…I understand the point absolutely, look it is a difficult one, this,

because people should be responsible for their children, we all know that, there

are a lot of arguments about whether the formula is right or whether the formula

is wrong, but I know that Larry Anthony, the Minister responsible is looking

very carefully at these formulas.

JONES:

Every one will be asking you I suppose today whether this is your last Budget,

you have done nine, will you be doing ten, if you win the election is it a tenth

Budget in the offing?

TREASURER:

Well, let’s win the election, that is what I keep on saying and if people

say how is next year’s Budget going and I say look, if we don’t

win the election, you could have Simon Crean doing next year’s Budget

and think about that.

JONES:

A lot of work putting this together, how many months have you been working

on this?

TREASURER:

Since before Christmas, and it takes about 6 months to put it together. Alan, you know it is a big thing, these Budgets are $200 billion, and they involve maintenance on your fighter aircraft…

JONES:

Yes.

TREASURER:

…docking your Collins Class submarines…

JONES:

And giving a little bit to the circus industry which we approve of. We have got to go to the news.

TREASURER:

OK, thanks Alan.

JONES:

Thank you for talking to us.