Transcript No. 99/17

Hon Peter Costello MP

Interview with Alan Jones, 2UE

Wednesday, 17 March 1999

7.15 am

E&EO

SUBJECTS: Family assistance, tax reform

JONES:

Wherever you turn there is widespread public concern about the breakdown of the

family. Your letters to me about this subject in the last couple of weeks have been a

continuing stream. At the same time we’ve had political leaders boasting that

we’ve got high economic growth, yet research showing that the bottom 70 to 80 per

cent of Australians have seen their incomes stagnate or fall over the last 15 years. They

wonder where the benefits of economic growth have gone. Certainly not to the low and

middle-income earners, more to the high income groups. But when the stockmarket looks like

faltering, the Reserve Bank cuts interest rates and eases money supply. That helps the top

end of town. But small business and farmers are still paying 9 to 12 per cent interest

on loans and overdrafts, that when you put bank and Government charges and include them in

the cost of the money. It is valid to argue that we need a different form of economic

growth, that we need vital assistance for small business, for family farms and rural

communities. I’ve called for a development bank for low interest lending. Small

business is our biggest employer. And I have talked about the need by Government to

undertake major works to revive and expand the nation’s deteriorating infrastructure,

that would expand full time jobs, and that is important. There are a million children in

this country, living away from one of their natural parents. There are another three

quarters of a million living in homes where no one in that home has a job. Twenty per cent

of men between the ages of 24 and 45 have an income of no more than $15,600. Another 12

per cent have an income between $15,600 and $20,788. Those people surely can’t

support a family.

Research shows us that married men in the lowest income groups are more than twice as

likely to be divorced or separated than their higher income counterparts in the same age

group.

Marriage decline in this country is most pronounced in those who are on low incomes,

and least influenced by postmodern values. In other words unemployment, part time work and

low incomes are central to marriage decline. As I said, a million children in this country

living away from one of their natural parents. In 1986, 14.6 per cent of families were

sole parent families. In 1996 that figure’s 30 per cent. In the past decade the

number of babies born to unmarried mothers has increased by 70 per cent, we have the third

highest divorce rate in the world. In 1996 the Family Court granted 52,000 divorces. The

cost of marriage breakdowns is enormous. And we have been asking this question, why are

marriages collapsing? Why are families breaking up? And it is the children who are the

victims. Where love and care and attention and time offered to them are less than is

needed. And then we find the children who are idle or unloved or for whom there is

inadequate time, become victims of an anti-social culture. We are talking about real

emotional social and psychological problems, with our children being led into alienation,

isolation, unemployment, violence, crime, drugs and the lot.

When I interviewed Dr Lucy Sullivan the phones here went to meltdown. You know from

your own experience what I was talking about. It was at a time, two weeks ago, when a

national wage case was being heard in which the ACTU argued that low paid workers and

their families were living on wages below the level required to provide a modest but

adequate income. I told you about the 36 year-old labourer in a small factory that

manufactures doors, who was raising children aged six and nine on a full time net weekly

wage of $325.00. A 40 year-old female hotel cleaner, who argued she had about $40.00 week

left after basic expenses from her net income of $355.00 a week. Lucy Sullivan was arguing

that Governments fail to discriminate in anything but a token way between the pay packet

of the parent and that of the single wage earner. They argued that the loss of status for

the family was damaging. She described the 1970’s as the decade of the moral

rejection of the family, and the belief that children are ephemera, with no impact on

employment. She described the 70’s as the decade which saw the dismantling of the

provision, the careful provision, in the tax system, which had acknowledged that the

proper raising of children required the care and attendance of one parent, the mother, who

must therefore withdraw from income earning work. And the proper raising of children made

a large call on the family’s remaining income, brought into the family historically,

by the father. Dr Lucy Sullivan went right back to the Harvester judgement of Mr Justice

Higgins in 1907, which established what was called a basic wage. And without rehearsing

those arguments again, your letters to me demanded that I speak with the Federal

Treasurer, Peter Costello, himself very much a family man, and he is on the line. Peter

Costello good morning.

Good morning Alan.

I sent you that information about Dr Lucy Sullivan. I hope you read it.

Yes I did.

She talked about the Harvester judgement providing for, “the normal needs of a

family of five living in a civilised community”.

Now that wasn’t the absolute minimum wage was it, it was the minimum adult wage.

Yes it was, it all came from a concept which is first called the minimum wage that

the Arbitration Commission used to sit down and work out what you would need to be paid to

be a married person supporting a wife and children, and that’s what they would award

as a minimum.

We don’t have that now do we?

We don’t have that now because the pattern of the workforce has changed

considerably, including the entry of women into the workforce. It was very much a wage

which was for a man, because it was a man supporting a wife and children. Obviously

where married women went into the workforce, as they increasingly did after the second

world war, a concept of a man supporting a women with children was not relevant to them.

But Peter the key thing there wasn’t it was that when they set the basic wage

back in 1907, the wage for people without dependents was often as much as 50 per cent

lower, deliberately so, on the principle that a contribution was made from the labour of a

single person to support the income of the family.

Oh, but it wasn’t just a single person, wages for women were less than for men

too. Part of the concept was that you had one wage for men and another for women, because

a man would be supporting a family and a women wouldn’t and….

A single man wasn’t getting the basic wage?

No single men got a lesser amount and women got a lesser amount.

Absolutely, and that is the point that a lot of my listeners are making.

Yeah, well I think that is a fair point. But I’m sort of also making the other

point that I don’t think in this day and age, and I certainly wouldn’t support

it, you could have one wage for a man and another for a woman doing the same job.

No, no, we’re not saying that. What I think we’re saying though Peter is,

that how do you encourage the family other than by a tax system which recognises that the

cost of supporting the family is far greater and should be recognised in the structures,

rather than have the single income earner being taxed in much the same way

as the family man on the same income.

Sure, well this is of course what we are doing with our tax plan, which we have

currently got into the Parliament. With our tax plan if you happen to be supporting

dependent children you get a tax-free threshold for each additional child that you have.

And if you happen to be a single income family supporting a child, that is where there is

only one breadwinner in the family, you get an additional tax-free threshold of $5,000. So

if you happen to be that example you give, of the man with the, a married

man on a one income family with say two children, you get a $2,000 tax free threshold in

addition for each child, plus $5,000 for being a single income family, which is an

additional $9,000 tax free threshold which you add onto the 6…..

(inaudible)

….well we’re taking it up to $6,000. It’s at the moment, it’s

at $5,400.

A typical income family with two children under your new proposal would go to

$15,000 without paying any tax.

Yes. Gets the $6,000 than gets $2,000 a child, gets another $5,000, so they get 5,

7, 9 plus 6, $15,000 tax-free threshold. Whereas the single income person without any

dependents gets a $6,000 tax-free threshold. So they start paying tax on every dollar

after $6,000. The family man, in your example, starts paying tax after the first $15,000.

Now, that’s not the only benefit we give to families, because in addition to that we

are also increasing family assistance to give families a better go under the family

assistance package. And one of the things that when we sat down and we looked at the tax

system, we came to the same conclusion, that the tax system was not giving enough support

to the family which was raising children and, you know, everybody talks about this tax

reform as GST. That is part of it, but why are we reforming the indirect tax system? We

are reforming that so we can reduce income tax rates, increase tax free thresholds and

give better benefits to families.

Now, I pay tribute to the people who are opposing tax reform in this country because

they have managed to make out as if there is only one part of tax reform in the

Government’s plan in the Parliament, namely GST.

Where there is the $13 billion alteration to the whole tax structure….

$13 billion of tax cuts for families and increased family assistance and increased

family thresholds, which is why we are doing all of this to help families.

Right. Now, Lucy Sullivan, exactly, well I mean, that’s why I wanted to talk

to you because this is a bigger issue I think than often the public debate suggests. Now

she says that the withdrawal, there was a withdrawal of Menzies, the Menzies Government

had those family deductions, anything from doctors, dentists and chemists, school books

and so on, and that was than replaced by this Family Allowance which was a flat rate. But

then suddenly Labor Governments put an upper threshold on eligibility for it, and it was

not adjusted for inflation. And so the argument is that a family on $75,000 is well off.

Now it is not by the time all those costs are paid for the kids.

Yes, well again, this is part of our tax plan. This is one of the precise things

that we are dealing with. We are extending that income test so that the family with two

children in the example that you gave would get those benefits right up to $76,000,

indexed, up to $76,000. But we are doing another thing, which is very important. At the

moment if you earn an extra dollar under family assistance you lose 50 cents of your

benefit, right. So let’s suppose you are on $30,000 with two children and you earn an

extra dollar, they start withdrawing your family assistance at the rate of 50 per cent,

for every dollar you earn you lose fifty cents of family assistance. Another thing we are

doing is, we are changing that. We are reducing the taper rate to 30 per cent, so that for

every dollar you earn, instead of losing half of your benefit, you keep two thirds of your

benefit, so that the people that were being income tested out on middle incomes, will be

able to get that family assistance as well. As I say, I pay credit to the opponents of tax

reform, that they have managed to totally ignore the benefits to family and your listeners

probably think tax reform is only about GST.

No, they have heard me say that it’s foregoing a lot of other benefits. We are

not all that happy about these delays. I just want to come right back to the end of the

debate though, because even as you speak there now, and you know what you are talking

about, you must surely understand that even if you spoke to your wife or the neighbour,

that it does get very complicated. What Lucy Sullivan said was, get rid of all those

arrangements that you’re paying to families and give a child 0-13 a $60.00 a week

rebate, she said that’s about $3,000 a year, one of 14-17, $80.00 a week, one of

18-20, $100.00 a week. Administer it through the PAYE and there you are. There’s a

very simple formulae to say to families, well hang on, you may not be paying any tax at

all. That rebate will provide you with a tremendous capacity to be able to pay the family

bills. Why do we have such a complicated system?

Well I couldn’t agree more. We have, I think, 14, 12 family benefits at the

moment. Minimum family allowance, family allowance, family tax payment, basic parenting

payment, guardian allowance, family tax payment, childcare. I could go on.

Amazing.

It is absolutely amazing, and I can tell you, I mean, I am confused about this. So

again, part of our reform is to collapse all those 14 payments into three, so you are only

going to have three now. We are then going to set up something called the Family

Assistance Office, and it is going to administer all of these payments.

At the moment you have got some payments that are being administered by the Tax Office,

there are some payments being administered by Centrelink. Now I said there are 12 to 14 of

them…..

Are you confident though, because I know you believe in having someone at home to

look after the children, are you confident though, that this will give parents the choice,

an affordable choice of being able to keep one of the parents at home for that important

job of parental care?

I am confident that it is going to dramatically improve the situation on the

current situation.

You see the feminists mounted an attack, which was Lucy Sullivan’s point

wasn’t it, on tax provisions which supported the family, arguing that they provided

the capacity for mothers to stay at home and they were just a tool of patriarchal

oppression, and they were withdrawn, mothers would be forced into the workforce where they

should be for their own good anyway. And that really has been very costly hasn’t it

to the status of the family and the necessary care for young kids.

I think that’s right. I think the point is that women should be given choice.

There are some women Alan, and let’s be frank about this, that want to work and they

should be entitled to work, and they shouldn’t be discriminated against in any way.

There are other women who will choose to stay at home with the children, and by changing

the tax benefits in all of the ways that I have mentioned, they will get a better deal.

So you’re saying that a family on $75,000 total income, will be much better

off or slightly better off?

Oh a family, a family would be substantially better off, because not only are they

getting those increased tax-free thresholds, right, they are getting tax cuts. Don’t

forget we are cutting income tax rates right across the board.

Sure, what I am saying is the single person on $75,000 gets those tax cuts as well.

As well, but what they don’t get is, they don’t get the increased tax

free threshold, they don’t get the increased family assistance, they don’t get

the improved income test on the family assistance, they don’t get the improved taper

rate in relation to that, and they don’t get the benefits that come about from

collapsing all of those payments into three and increasing them.

Now, part of our tax plan is to dramatically improve the lot of families, including the

single income family. It was drawn for that purpose Alan. And what stands between

implementing this and the current situation at the moment is the Senate and the Labor

Party, you know, let’s come back to, you are going to say to me next, why

haven’t you done this already? Well, this is what we are trying, we fought the

election on it, we fought the election on it, we are trying to get it through the

Australian Senate, this takes legislation, it’s taxpayers money. It can only be done

by legislation. You’ve got people that are running around trying to interfere with

tax reform. Let’s put the cards on the table, they are interfering with a better deal

for families. Now, they never tell you that.

It is a matter of family survival in many instances isn’t it? It is really up

for grabs.

Look, I think, and I am a parent too, you know, I think that parents are feeling,

particularly as their kids become, sort of, teenagers, there’s so many difficult and

destructive impulses in society, how do you sort of keep them on the straight and narrow,

and you gave the statistics out about family break up and it worries us all.

When you get the thing through, we’ll talk again and put some specifics to

those general principles you’ve outlined.

I would love to do that Alan.

Thank you for your time.

Thank you.