Interview with Paul Bongiorno

Tuesday, 9 May 2006

SUBJECTS: Budget 2006-07

BONGIORNO:

Well this must be the most generous Budget I think since Federation. Is it the one you have enjoyed most giving of the eleven?

TREASURER:

I think the reform is huge; the tax reform, changing those thresholds, cutting those rates and the superannuation reform is a great reform. It will really cut through the complexity of superannuation. And I think this will set Australia up for great opportunities in the future and that is important.

BONGIORNO:

The $6 billion in the financial year coming up of the Budget, from July 1, you are not wasting much time with your generosity. Isn’t there a real danger that you could be overstimulating the economy?

TREASURER:

No, this is responsible. The Budget will be in surplus, about $10.8 billion, 1 per cent of GDP. By world standards that is a very strong surplus. We have repaid Labor’s debt, all $96 billion of it. We have got our Future Fund which is now investing for the future and it is now responsible to return to taxpayers some of their taxes so they can decide how to spend them, or save them I should say.

BONGIORNO:

By one estimate someone on average earnings of around $50,000 with a $250,000 mortgage, the interest rate rise was about $10 a week, the tax cut for them is about $10 a week, it sort of balances out doesn’t it?

TREASURER:

Well they are not directed at each other of course. The tax cut is directed at making the Australian tax system more competitive, rewarding people for effort, letting them work additional hours, making sure they are not put off by high marginal tax rates and developing the economy. That is what it is directed at.

BONGIORNO:

Are rising petrol prices the elephant in the room? You didn’t really mention them in your Budget, but it is affecting everybody. In fact, you seem fairly pessimistic on that front. You say they will go up rather than go down.

TREASURER:

Petrol prices are incredibly high. They are the highest they have ever been. They are inflicting a lot of pain on consumers and motorists, but they are determined by world oil prices. World oil prices are now at all time records. And there are some things we can control and there are some things unfortunately we can’t. The world oil price is one of them.

BONGIORNO:

I accept that but alternative fuels, biofuels, now the Government already has incentives out there for that. But aren’t we really at crisis point here? Shouldn’t you be doing more?

TREASURER:

Well as the price of petrol goes up, the competitiveness of alternative fuels becomes greater and I think you are going to see a much bigger investment going on in biofuels. Why? Because petrol is high and that is a good thing. There will be a strong market signal back to producers of alternative fuels, get on with it.

BONGIORNO:

In your Budget speech you left out the line that inflation should remain contained. Did your eyes skip it or was there something we should read in to that?

TREASURER:

Inflation should remain contained. We are forecasting 2¾ per cent and I think that is a reasonable forecast – a good forecast. It is well within our band of 2-3 per cent and it is all there in the Budget.

BONGIORNO:

With the productivity dividend from the workplace changes, I notice that the GDP as a measure of growth is around 3½ to 3¼ per cent in those out years. Australia before, under you of course, and under the previous government reached 4-4 and a bit per cent.

TREASURER:

Yes, I think that our growth will step up to 3½ per cent and there could be years in the future where we get it higher but I have also warned at this point, with the ageing of the population, with fewer people of working age supporting proportionately more people of retirement age, you are going to see over a longer period of time, Australian growth moderate. And that is because we are not growing our population to the same extent. I’ve been talking a lot about measures to grow the population. You would know that, that is one of the reasons why.

BONGIORNO:

You have been very generous to baby boomers and I’m a bit older than a baby boomer, but you talk about a superannuation plan, how confident are you that when you have had your discussions with the super industry that what you have announced tonight will take place?

TREASURER:

I am very confident it will take place on 1 July. There will be some technical details to be discussed but we have got 12 months to discuss those, get hopefully a consensus and enact them. That is why I have announced the plan will start on 1 July 2007.

BONGIORNO:

So any modifications would be what, tinkering at the edge?

TREASURER:

Well there is a lot of technical detail to be gone through in superannuation but the broad plan is this. No tax on end benefits. You have paid tax on the way in, and if your fund is subject to tax, no tax on end benefits, no tax on a lump sum, no tax on a pension, no tax on end benefits. The biggest simplification that we have ever seen in relation to superannuation.

BONGIORNO:

And I am sure it is welcome. Childcare – 25,000 places, the Budget Paper estimates, will come out of tonight’s announcement. Now speculation was and the demand was indeed for say around 100,000 places. Will that disappoint families and maybe some on your own backbench?

TREASURER:

Well, well, this is now not a capped program. So if there is demand for more places, they can be funded and they will be funded. And we take a stab at what we think the demand is. But if it is greater, good, great, we will fund them. It is not a capped program. It is anybody who is eligible can set up a program and they will get Commonwealth funding.

BONGIORNO:

Well thank’s for joining us and how can you do better than this next year?

TREASURER:

It is great to be with you Paul. I enjoy your company as always.