Interview with Laurie Oakes

Sunday Programme, Channel Nine

Sunday, 7 May 2006

SUBJECTS:

Budget, Victorian Liberal Leadership

OAKES:

Mr. Costello, welcome back to Sunday.

TREASURER:

Thanks very much, Laurie.

OAKES:

Ten years as Treasurer, 11 budgets, are you sick of it, are you getting stale?

TREASURER:

Actually I’m looking forward to next Tuesday. It’s a lot of work, we haven’t quite finished yet but when you actually get out there and deliver it and then more importantly go round Australia and explain things, it’s a very great relief, so, I’m looking forward to it.

OAKES:

One of the Sunday papers today, in an editorial, suggests given your Prime Ministerial ambitions this budget could be the one that makes or breaks you in the eyes of voters, do you see it that way?

TREASURER:

I’ve read editorials like that probably for the last 10 years and I don’t think it’s proper to frame your policy according to an editorial writer, if editorial writers want to govern the way the country’s being run, they can run for parliament themselves, so I think the most important thing for me is to ensure that I take the decisions that are right for the economy, that’ll keep our economy growing, keep people in jobs, keep businesses profitable, keep inflation low, keep mortgage interest rates manageable and keep the reform process going and that’s what I’ll be doing.

OAKES:

Can you give me a phrase that sums up the budget?

TREASURER:

This budget will invest for the nation, both in infrastructure and in terms of our people so that we’re going to be laying down changes and improvements that will give us greater opportunity. We’re standing at a quite historical time now Laurie, we are standing at a time where we have got rid of government debt. Our government is now debt free, we’ve got rid of the $96 billion of Labor debt, so the past is taken care of, now it’s the future that we’re going to concentrate, future investment and infrastructure for future investment in people, future investment in opportunities for all Australians.

OAKES:

What can we expect on the infrastructure front, the Reserve Bank’s identified rail as one area, there’s also been mention of a billion dollar roads package?

TREASURER:

There’ll certainly be strong investment in roads. We as a national government are responsible for the national highway and the major freight groups throughout Australia and we’re very conscious that improving those freight routes improves the capacity of the country, so there will be investment in physical transport infrastructure, which I think will be warmly welcomed by people, certainly warmly welcomed by the transport industry. At the end of the day better transport means a better economy with a higher speed limit for growth.

OAKES:

It’s been claimed that the roads package in particular is a concession to the Nationals, is that right, are the rural Liberals keeping quiet and letting the Nationals make the running on that?

TREASURER:

Well, it’s a decision to invest in the country which would be supported, I believe, by all people of all parties, who are interested in the national economy, so people in the National Party, people in the Liberal Party who knows, maybe the Labor Party will even support this program but it’s being done with the national interest in mind to ensure that the freight routes are as competitive and as strong and as well built and as economical as they can be here in Australia.

OAKES:

The dogs are barking that there’ll be no major tax cuts, why not?

TREASURER:

Well who knows why the dogs bark or why they don’t. If you believed everything you read in the newspaper you’d have all sorts of contradictory positions out there Laurie, but can I say this, that we began cutting taxes in the year 2000 the largest tax cut in Australian history. We cut taxes again in 2003, 2004, 2005, where we can cut tax consistent with funding the services that Australians want, we will do so and it’s something that we’ve considered very carefully. We’ve now benchmarked the Australian taxation system against the world, the developed economies of the world, we know where our strengths are, we know where our weaknesses are, we’ve got to move on those weaknesses. You can’t fix it once for all, there is no once for all fix. We did the biggest tax reform in 2000 and here we are back in 2006 and people are saying well there are still areas to go, there are still areas to go, we have to do them, when we do them there’ll still be further areas to go. What we have to do over time, is we just have to run as fast as we can and this budget will be part of that.

OAKES:

Isn’t it true though that the tax cuts will be more use to the government politically five months before the next election which is next year, so it suits you to hold them back for a year?

TREASURER:

Well, look I wouldn’t go into election strategy because that’s not what’s on my mind. What’s on my mind at the moment is what can we do to ensure our economy is competitive and where we can make improvements we will, we’ll work at it as we’ve been working at it from the year 2000. Let me give you one example, back in the year 2000 you used to go on the top marginal tax rate in Australia of 50,000, we’ve now got that to $125,000, if had merely indexed thresholds, it would have been raised from $50 to $64,000, it’s going to $125,000, that’s an enormous improvement. Do I say that’s the be-all and end result of the Australian taxation system no, but we’ve got it there between 2000 and 2006. If we can move it further we should and we will but this is a question of doing it in a responsible way, consistent with our economic objectives, consistent with fairness across the board. To continue the reform in a fair, prudent, wise, responsible way, will be the objective in this budget.

OAKES:

You’ve said the Government will cut the 48-and-a-half per cent top tax rate over time, what time period are you talking about and will lower and middle income earners get a whack at it first?

TREASURER:

Well I think lower and middle income earners have always been the focus of our government and we’ve had some criticism for that because our family tax benefit is really helping people in that $30, $40, $50, $60,000 range, it’s always been our focus and we want to be fair them, particularly to families because $50,000 is the middle income in Australia but if it’s a middle income that’s supporting mum, dad and a couple of kids, it stretched a bit further than if it’s just supporting one person, so, they’ve always been the focus of our reforms and of our government.

OAKES:

Now we read that you’re going to tackle current disincentives from mothers mostly mothers returning to work, or boosting the number of hours they work by lifting the threshold of family tax payments, is that so?

TREASURER:

Yes, there’s a big focus on child care in this budget, more places for child care, also funding for mothers that want to return to the workforce and have to do a training course or need to do some kind of preparation work and they incur child care costs and there will be payments to make the gaps up between the child care benefit and the cost of child care as they return to the workforce to alleviate the cost and encourage them to come back into the workforce, so we’re very conscious of building on the system that gives mothers choice but also encourages them if they want to come back into the workforce and our child care and family benefits reforms in this budget will be directed towards that objective.

OAKES:

So will more families be eligible for family tax benefits?

TREASURER:

Well we want to take the system and expand eligibility so that we can use the system that’s currently in place and for a particular period give them additional benefits, so our family tax benefit system which I think is a system that most people in the middle incomes know is working well and giving them enormous assistance, will be expanded in relation to eligibility so that people can access those benefits and families can have the benefits as a consequence.

OAKES:

What about the question of millionaire families getting $3,300 a year in family tax benefits when the mother stays at home, I mean, that doesn’t seem fair given its the battlers who are actually paying the taxes that pay those welfare payments.

TREASURER:

Well those circumstances that you’re talking about, the family tax benefit “B”, it is actually income tested, it’s income tested on the mother’s income, now this is an important point, it is actually income…

OAKES:

So, if the wife of a millionaire stays at home, doesn’t earn any income she’s entitled to welfare?

TREASURER:

No, no, if the wife of a millionaire were in the workforce, she would be getting a tax-free threshold, she would be getting a low income tax off-set at those levels of income….

OAKES:

And is she not in the workforce.

TREASURER:

No. No hang on

OAKES:

If she’s not in the workforce.

TREASURER:

No, no, let me make this point Laurie. We don’t say to the wife of a millionaire who goes into the workforce you’ve got a rich husband, you can’t have a tax-free threshold, she gets a tax-free threshold. We don’t say to her, you’ve got a millionaire husband, your Medicare levy cuts in immediately, we say you’ll get the Medicare levy shade in, if you’re a low income earner, because these things are on your income, you’ll get the low income tax off-set as well. Now what the family tax benefit “B” situation is it replicates tax free thresholds, Medicare shade ins, low income tax off-sets, dependant spouse rebates which have always applied in those circumstances, that’s how it came into existence because there was always a dependant spouse rebate and always those entitlements and they’ve been replicated with the updating of the system and they are income tested, they’re income tested on the earner’s income. In this case not income tested on the husband’s income.

OAKES:

All right, you said once that you wanted families to have one child for mum, one for dad, one for the country, is there anything in this budget to help encourage that?

TREASURER:

Well that was at a time when I was trying to alert Australians to the ageing of the population, the dropping of the fertility rate, the importance of children and I encourage people who can, if you have the opportunity, if you’re young enough, to have one for mum, one for dad and one for the country. Now, the baby bonus and some of the things that we’ve introduced, I think, have helped people with children. One of the things that we’re going to do in this budget is we’re going to extend a supplement which is paid to families with four kids, to families with three kids, it’s called the Large Family Supplement. Now I don’t want people to think that three is a large family, because I’m trying to think of them as quite normative but this benefit which is about ten dollars a fortnight is currently paid to so-called large families, families with four children, it will be extended to families with three children, so that that’s an additional benefit for families with three children and those families that are thinking about having just one for mum, one for dad, maybe they’ll think about one for the country as well.

OAKES:

OK, well on the subject of the ageing of the population, we’re told now that caring for the elderly is going to take over from child care as the big problem as our demographics change, what are you doing for carers?

TREASURER:

I think this is a big point Laurie, that we have focussed a lot on increasing child care places rightly in my view, but we know that the proportion of younger people in our society is going to be less and the proportion of older people in our society is going to be greater this is the great demographic change that I’ve been warning about and telling people that we have to prepare for. One of the things that we’ve had in the last two budgets was a bonus for carers, this is people who are on carers payment, or carers allowance. I think that’s been well received in the last two budgets and it’s something that we’ll do again to recognise the work of carers with that annual bonus which has been paid on the last two occasions, so that we acknowledge the work that they do as carers, important work in our society and wonderful voluntary care and concern for people who are in their homes and need particular care.

OAKES:

Before I let you go, question on the Victorian Liberal Party, were you embarrassed when Jeff Kennett pulled out of the Victorian Liberal leadership after you’d endorsed him?

TREASURER:

Well I said this, I said if he has the support of his colleagues and if he wants to return to politics and if they elect him then he would have my full support. Now, that still stands. I say the same for Ted, if Ted has the support of his colleagues, if he has the will to be the leader, he’ll have my full support but see the thing is, these things aren’t decided by newspapers or editorials, they’re decided by the Parliamentary Party. At the end of the day Mr Kennett didn’t nominate, didn’t even nominate for the Parliamentary Party, so…

OAKES:

But before he decided not to nominate the Prime Minister went in hard and said Jeff Kennett is the best man for the job, I mean that leaves poor old Ted Baillieu looking pretty silly doesn’t it?

TREASURER:

Well at the end of the day it’s a matter for the MPs, this is what I say, it’s not determined by us in Canberra, it’s not determined by the editorial writers, it’s determined by the MPs. My view always was it’s a matter…

OAKES:

Egg on the Prime Ministerial face?

TREASURER:

Well, let me say, Jeff’s a colourful character and those of us who’ve watched his career over a long period of time know that there’s a lot of colour and sometimes you have to be a bit more reserved in your reaction to that colour.

OAKES:

Mr Costello, we’ll let you go and write the Budget speech. Thank you very much.