Press Conference

Treasury Place, Melbourne

Friday, 19 October 2007

4.05pm

SUBJECTS: Labor’s tax policy

TREASURER:

On Monday of this week the Government laid down an ambitious plan for Australia’s next wave of tax reform.We laid down a three year plan to increase the Low Income Tax Offset and lift effective tax free thresholds; to increase the threshold for the 15 cent rate; to reduce the top marginal tax rates.And we laid out a careful plan which would achieve our goal over a five year period.

It is now clear Labor never had a tax plan.For all of the talk about Labor having done the work and thought about policy, and as they claimed, having a tax policy, it is clear Labor never had a tax policy.And here we are at 2.30 pm on a Friday afternoon and the Labor Party has made an announcement which has the very same cost as the Coalition plan announced on Monday and which is 91.5 per cent the same.91.5 per cent the same.

Mr Rudd talks about education. If he had brought his exam paper in after copying 91.5 per cent of the answers from the student sitting next to him, he would have got an ‘F’ for fail.And it is entirely clear now that he has spent in fact the last four days since we announced our tax plan, copying it – 91.5 per cent of it is the same.

He has lobbed off 8.5 per cent, and that is what he talks about as his Education Initiative, and then he says he will catch up to the Government, not in the next Parliament – not between 2007 and 2010 – but in the one after.The Parliament after the next – he will catch up to the Government between 2010 and 2013.

I want to make a couple of points about that.First of course, the public shouldn’t believe a promise that he won’t make for the next Parliament on the grounds that they can believe a promise he might make for the one after that.The second point of course is unless you can manage the Australian economy, these tax cuts will not be deliverable.And Mr Rudd and Mr Swan do not understand the Australian economy.That is entirely clear from the fact that they have spent four days copying 91.5 per cent of our tax plan.

Thirdly of course, if Mr Rudd can’t follow the Government in cutting the top marginal tax rate in this Parliament, who believes the unions would let him cut it in the next Parliament.Who believes that leading a government with 70 per cent former trade union officials as his Ministers, they would let him in the next Parliament reduce the top marginal tax rate when he can’t even follow the Government in its plan in this Parliament.

The final point that I want to make is this: that like a bad copier, where the boy next door doesn’t actually put the answer out, you really get caught out.And this is where Mr Rudd and Mr Swan got really caught out.When they say on page 8 that our aspiration for 2012-13 includes the 15 cent rate between $6,000 and $37,000 they are wrong.That is the part they couldn’t copy.Because we never put it down there.That threshold will have to be higher than $37,000 to meet the aspirational goal of having 45 per cent of taxpayers on a top rate of 15 per cent or less.

And if you kept that threshold at $37,000 in the next Parliament, you would not do that.You would in fact make working mums pay a higher rate than the 15 per cent top marginal tax rate.This is a problem you have when you copy the work of the boy sitting in the next door desk.If he doesn’t fill in one of the answers you are all at sea; and when you fill it in, you get it wrong.

Now this of course means that there will be a huge hole open up if Mr Rudd were ever in the position to implement what he says he would want to do – not in the next Parliament but the Parliament after the next one.A huge hole.And I will have a lot more to say about that over the weeks which lie ahead.

But I want to conclude by saying, it is one thing to copy the Government, and that is what he has done as to 91.5 per cent.But Mr Rudd wants to become the Government.And if became the Government he wouldn’t have me or Mr Howard there to write his policies for him.He would have to think of them himself.And he would have to not only think of them himself, he would have to overcome huge trade union influence in relation to those policies.He would never be able to deliver because he would never have the capacity to build the economic management which is required.

JOURNALIST:

Mr Costello, do you see any merit in the education proposals?

TREASURER:

Well, it is very curious, the way it has been designed, because we all believe in helping parents with educational costs and I certainly believe we should help parents with educational costs.But of course, the one educational cost that he has carefully excluded is helping parents with fees or the contribution that they have to make in government schools.I assume that this is because the education unions wouldn’t allow that.So it is very curious the way that he has done it.

Can I also make the point, before people get too carried away with what he has announced on education, that no one would get anything for two years.

JOURNALIST:

Could you put a value on the size of that huge hole (inaudible)?

TREASURER:

Well I will.I won’t do it today, but I will have a lot more to say about this.But he opens up a huge hole in the next Parliament because he doesn’t follow us in reducing the top marginal tax rate and then he says after the next Parliament and the one after he is going to catch up with us.And the catch up requires a very large cost.

JOURNALIST:

Mr Costello, you seem to be suggesting you set a trap in the announcement you made earlier this week and Mr Rudd has fallen for it.Was that the strategy?

TREASURER:

Well we announced the tax policy of $34 billion which moved the effective tax-free threshold for low income earners, moved the $30,000 threshold for those who are on 15 cents and started bringing the top marginal tax rates down.Five days later Kevin Rudd’s tax plan, let’s guess: costs $34 billion, moves the effective tax-free threshold by the same amounts forthree years, moves the 15 cent threshold by the same amount, moves all of the other changes except for the line he whited-out and he says he’ll catch up to us in the next Parliament.Now the sums involved mean he copied 91.5 per cent and the education stuff is the remaining 8.5 per cent.In fact, if you want to have a look at his table that he puts out, this table here – it is our table but down here he has whited-out our figures, but 91.5 per cent of it is the same table.So what do we learn from this?We learn from this that he never had a tax policy. He never had a tax policy.He hadn’t done the work.Five days after our tax policy his great contribution to the tax debate in this country is to say ‘me too, but’.

JOURNALIST:

What if he gets in?If people accept the ‘me too, but’ and he gets in?How would that make you feel?

TREASURER:

The trouble with ‘me too, but’ is it is okay to say, for Mr Rudd to say ‘me too, I’ll be like Howard and Costello and adopt their policies’, but if he gets in, Howard and Costello won’t be there writing the policies.So who is he going to say ‘me too, but’ to then?I think the union movement will be giving him a few ideas.I think if we’re not around he can’t say ‘me too’ to our policy.I think he will be saying ‘me too’ to the union policy.That is what will be happening.

JOURNALIST:

Mr Costello, you also say that if you can’t manage the Australian economy, these tax cuts are not achievable.Isn’t that an (inaudible) that if something goes wrong with the Australian economy in the years ahead that you can’t control, that you won’t be able to deliver your tax cuts either?

TREASURER:

Well people can judge me on my record.I delivered tax cuts in 2000, 2003, 2004, 2005, 2006, 2007.You will recall Kevin Rudd opposed those tax changes.Now, I’ve laid down a plan which will cut tax further in 2008, 2009, 2010.I’ve cut tax five times in last five years.I introduced A New Tax System.Bang on what I promised.So people can judge me by my record and they can judge Mr Rudd by his record.He has never introduced a tax cut.He would say, oh, well I wasn’t in Government, but he opposed a large number of the tax cuts I did introduce.He opposed it.He opposed A New Tax System in 2000.He opposed the tax cuts which were in the Budget before last, and now he says after opposing those tax cuts, you can believe him – not just for the next Parliament but the Parliament after next and I would invite people when they are looking at the credibility of him on tax and comparing him to me on tax to judge us by our record.

JOURNALIST:

Mr Costello, when you announced your tax plan, economists and analysts said because of the state of the economy it did have the potential to be inflationary even at the margins but there was potential for it there to push up inflation.The initial reaction to Mr Rudd’s plan has been that it won’t do that, that it won’t have an impact on inflation.It has been generally welcomed so far by economists and accountants. How do you feel about that?It seems less inflationary than your plan?

TREASURER:

Well how can it be any different if it costs precisely the same?You couldn’t run around and say well, if the Government cuts tax by $34 billion that’s inflationary, but if Mr Rudd cuts tax by $34billion that is not inflationary.I will be very surprised if there is any economist today that will say that the Coalition tax cut of $34 billion is inflationary and a Labor tax cut of $34 billion is not inflationary.I would be very surprised.I don’t think you will see people say that.And of course the dimension of the tax plans is now identical. So the Labor Party can’t say that our plan is somehow inflationary when their plan is exactly the same amount.You can’t copy the guy’s paper next door 91.5 per cent and say he got all the answers right and when I copied them he got all the answers wrong and when I copied them they were all right.He’s copied the answers.

JOURNALIST:

What about Mr Rudd’s suggestion though that basically you can barely function in schools today unless you’ve got a laptop, do you think that’s the case?

TREASURER:

Well, you know I go around schools all the time in my electorate and most of the schools in my electorate have good computer facilities. Kids are using computer facilities and computers, they are very computer literate.I think it depends on your age. I think laptops are good things.But I doubt that you would be sending somebody off to Grade 1 or Prep with a laptop.They have got to be carried to and from school.And so, in my electorate what I notice is that they, the schools have computer centres and they do have kids in Prep and Grade 1 on them but they’re operating computers, PCs in the school.So look I am not against laptops, I am totally in favour of laptops. In my experience that kids generally speaking don’t use laptops carried to and from school until they are a bit older.You have got to actually carry the laptop to and from school you know.

JOURNALIST:

Mr Costello, Jeff Kennett told the Melbourne Press Club yesterday that he believed the future of the country might be in better shape if instead of all $34 billion being spent on tax cuts, more of it was invested in (inaudible) including education and health. What do you say to that?

TREASURER:

Well you see this is a plan to build Australia’s economy and this plan will get more people in work, and it will make our economy stronger and with a stronger economy we can invest more in education and health.But you have got to get the economy right first. If you don’t have the economy right you won’t be investing in anything.One of the reasons why we’ve been able to increase investment in health, in road, in rail and in education is because we now have two million more Australians in work than we did in 1996.I should make this clear, if we didn’t have an extra two million Australians in work then we wouldn’t – not only would we not be cutting taxes – but we wouldn’t have anything like the investment like we have in health and education. And the plan I laid down on Monday, a tax plan to make Australia more competitive, to get more people into work – will build our economy. And for all the talk of the Labor Party five days later, guess what? As for 91.5 per cent of it, my plan turned out to be their plan.

JOURNALIST:

The Labor leader says that high income earners, in which he includes himself in that category, would be happy to put off their tax cuts in favour of putting a bit of extra money into services, education, health. What is your view of this analysis?

TREASURER:

Well you see, he tries to have it every way, Mr Rudd.You know, he says: ‘oh we don’t need to cut the top marginal tax rate in the next Parliament but we need to cut it very aggressively in the one thereafter’.So he takes that bit out, and when you say to him – but that is not going to give us an internationally competitive system, he says: ‘oh I’m in favour of an internationally competitive system too.I am just not in favour of it occurring in the next Parliament, I’d like it to appear in the Parliament after the next.’Now, if it is important to do, why don’t we start moving towards it?That is the plan I laid down, that is the 8.5 per cent that he didn’t copy.The 8.5 per cent that he didn’t copy, and I think 91.5 per cent of his plan is good. And the 8.5 per cent is the part he misses out on.Thanks very much.