Budget – Interview with Catherine McGrath, ABC, PM

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Budget, Telstra, leadership – Doorstop Interview, Ministerial Entrance, Parliament House
May 10, 2004
Budget – Interview with Ross Stevenson & John Burns, 3AW
May 12, 2004
Budget, Telstra, leadership – Doorstop Interview, Ministerial Entrance, Parliament House
May 10, 2004
Budget – Interview with Ross Stevenson & John Burns, 3AW
May 12, 2004

Budget – Interview with Catherine McGrath, ABC, PM



Interview with Catherine McGrath


Tuesday, 11 May 2004



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?


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.


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



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



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?


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



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



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.


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?


Well there’s a lot of investment in this Budget in health and education

as I…


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



Sure, even if it was announced in the last few months, it’s got to be

actually funded in this Budget.


But it’s effectively indexation, isn’t it?


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.


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?


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.


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?


Sure, and that’s one of the reasons why we introduced this new superannuation

policy which means that…


But they won’t get that benefit for many years?


Well if you put $100 into superannuation, the Government will put $150 in.

It’s your money.


And they also have to get that money to put in it in the first place.


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.


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?


No, I think there’s a lot in it.


For money in their pockets.


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.


The stimulatory effect possibly of these tax cuts, what do you think is going

to happen, how the market is going to respond?


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.


There will be much talk about possible interest rate rises, pressure on interest

rates after this.


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.


Treasurer, thank you for speaking to the ABC’s PM special tonight.


It’s great to be on PM. Thank you.