E&OE TRANSCRIPT
TELEVISION INTERVIEW
SKY NEWS
MONDAY, 18 DECEMBER 2017
SUBJECT/S: MYEFO
SAMANTHA MAIDEN: Joining me now live to unpack all the MYEFO details is Shadow Finance Minister Jim Chalmers, who joins us from Sydney. Good afternoon Jim.
JIM CHALMERS, SHADOW MINISTER FOR FINANCE: G'day Sam, how are you?
MAIDEN: What sort of report card would you give this as an exercise in budget repair? We're told that there's been a $6 billion turn around in the budget deficit this year. It's down from $29 billion to $23 billion, that's an improvement and they're still on track to deliver a $10 billion surplus down the line in 2020/21. Are they doing a good job do you think?
CHALMERS: A few things about that Sam and thanks for having me on the program. The first thing is it is a pretty shabby Christmas present for people. The core of this budget update is an increase in income taxes for working people, tens of billions of dollars in tax cuts for the top end of town and we've still got record and growing debt. On the fiscal situation specifically, you mentioned the deficit for this year, that we're in now. The deficit for this year is eight times bigger, even with that marginal improvement that you mentioned, eight times bigger that what it was predicted to be in Joe Hockey's first budget in 2014. So we welcome any improvement, however marginal, but this improvement has happened despite the Government's efforts not because of them. If they genuinely wanted to fix the budget they would get rid of that big business tax cut - that'd be the best thing they could do.
MAIDEN: Okay, let's go to income tax. Individual tax take is down $500 million this year alone and it is down $8 billion over the forward estimates. So surely that's a Christmas present of sorts, for workers, they're going to pay less tax.
CHALMERS: Those figures that you cite Sam are just because we've got what I think of as a triple whammy in the economy. We've got very stagnant wages, we've got very low household consumption and we've got very high household debt. What that means is that people are paying less income tax because their wages are not growing especially fast. I mean that's just the reality of the economy as it is right now. The problem we've got is the Turnbull Government is so out of touch that they see those sort of conditions and they actually want to increase income taxes on Australian workers at the same time that they give those multibillion dollar tax cuts to the big four banks. That's really the difference between Labor and Liberal, that's how we’d do things differently in this budget update, we wouldn't continue to shower largesse on the top end of town like Malcolm Turnbull wants to. We think we can repair the budget but we can do it in a fairer way.
MAIDEN: When you talk about income tax rises what you're talking there is in relation wacking people extra for the Medicare levy to pay for the NDIS?
CHALMERS: Yeah indeed. What people need to understand is when Malcolm Turnbull fronts up to the Business Council of Australia and says 'wouldn't it be lovely if Australian workers paid less income tax' he says that at exactly the same time that there is legislation in the House of Representatives and the Senate which actually increases taxes on those workers. We don't think that's fair, we don't think we should be jacking up income taxes on people who earn less than $87,000 a year. Not when we have those very squishy household income and debt and consumption figures. We think if you want to repair the budget you should begin at the top end of town, that'd be a much fairer way to repair the budget and fix this mess that's been made where we still have record and growing debt. The Government wants a big pat on the back for a $23 billion improvement in the debt profile, that is a drop in the ocean really. They are racking up debt at an alarming rate, much faster than Labor did, and Labor had to deal with the global financial crisis. So that's an important bit of perspective.
MAIDEN: You would of course reintroduce the deficit levy if you win the next election and you would keep in place that increase in the Medicare Levy for higher income earners delivering a 49.5 cents in the dollar income tax rate for those high income earners earning over $180,000 a year. Surely that is going to make Australia's tax system extremely uncompetitive on an international basis for those higher income earners.
CHALMERS: I don't necessarily accept that Sam but I think the most important point there is when you've got the budget in the condition that it is in, deficit for this year eight times bigger, record and growing debt - gross debt doesn't even peak over the next ten years - so we've got a real problem that we have to deal with, so you have to settle your priorities. The people who need the most help the most urgently. That's why we've settled on opposing a tax hike for people who earn less than $87,000 a year. That's because they're the people under the most pressure. That's because if we want to grow the economy, we want to make sure there is demand in the economy at low and middle income levels and that's why we've prioritised them over people on higher incomes.
MAIDEN: Where's the economic case for those income tax cuts for even people earning $87,000, presumably they'll be quite modest, you yourself say 'yes, wage growth is reasonably modest and that's behind the drop in expected revenue from individual tax take'. But if inflation is not out of control and people aren't get a lot more in their pay packet - what's the case for individual income tax relief if it is not really going to make much of a difference to the economy?
CHALMERS: I think opposing the Government's tax hike on people earning up to $87,000 a year will make a difference to those people. I think we've got a pretty stunning disconnect in this country between the sort of headline GDP growth figures and all of the jargon and in what I call the people-facing part of the economy. In the people-facing part of the economy what they're experiencing is stagnant wages, high household debt, low household consumption and they're facing up to a Government that wants to cut penalty rates for weekend work, jack up income taxes, all of these sorts of things. If you want to grow the economy you need to make sure that you have people who have the capacity to spend and invest and save. What the Government is doing is precisely the opposite and that's why when it comes to those squishy statistics in the people-facing part of the economy the Government's really part of the problem and not part of the solution. Their whole recipe is to shower largesse on the top end of town, jack up taxes on middle Australia and to hope that somehow it trickles down from the top. That's a flawed economic model. It hasn't worked here, it hasn't worked around the world. We have a different approach.
MAIDEN: There's plenty of economists who will say you get more bang for your buck in delivering company tax cuts, even though it is not politically popular always. Now these figures in MYEFO suggest that company tax takes is absolutely booming, it's $3.2 billion more than expected this year alone and over $7 billion over the forward estimates. Don't these numbers suggest that the priority should actually be company tax cuts which a lot of people will tell you you get more bang for your buck if you give them to the larger companies because they employ more people and they are more likely to put on staff.
CHALMERS: I think those company tax figures are a reflection of the very strong global conditions that we're experiencing. The global economy is in better nick now that it's probably been in the last ten years or so. So you will get higher company tax receipts. I think the Treasury themselves have said, the Australian Treasury, Scott Morrison's department, has said that you get negligible benefits from that company tax cut, ten and twenty years down the track. We think there are other priorities. We don't think we should be attacking people on the energy supplement or jacking up the pension age or attacking the most vulnerable people in our community or jacking up taxes on middle Australia in order to fund something which will give a negligible benefit at best.
MAIDEN: You're planning to jack up taxes on small businesses though. You've currently got a policy in the field of only offering tax relief for companies with a turnover of $2 million or less there's an expectation, but you haven't announced that, that you're going to increase that before the next budget to companies with a turnover of $10 million or less. Is what you're going to do? Are you planning to offer a little bit more relief for some of those small and medium businesses?
CHALMERS: We're working through all the details of that Sam and the most important thing that we'll factor into that decision and that discussion is the fiscal situation that we inherit. The fiscal situation is not terrific as I've just explained to you ...
MAIDEN: ... is $2 million too low you think?
CHALMERS: I beg your pardon Sam?
MAIDEN: Is $2 million or less turnover too low? Are you aiming to try to improve that in the lead up to the next election so you offer a tax cut to more small businesses?
CHALMERS: We're still discussing and deciding that Sam as I just indicated. The Australian people will know well in advance of the next election. We've got good form in announcing our tax policies well in advance of elections so people can judge them. We haven't decided, we're still discussing the best level to set that threshold at and the most important factor there will be the fiscal situation that we inherit.
MAIDEN: If you win the next election will you continue the freeze on Commonwealth grants to universities that the Government has announced today or will you overturn that and put the money back? Will you give the universities back the money that they'll have frozen in 2018?
CHALMERS: There are a whole range of cuts in this Mid-Year update Sam, as you know. There's the university cut you just mentioned, it has still got the cuts to the energy supplement, still got the dramatically higher pension age, all of those sorts of things are still in there. The ones that are new - like the universities one you just mentioned - we'll take the time to discuss it with our colleagues. We're not red hot at the prospect of limiting access to universities. We're in the Labor Party. We want people, particularly from backgrounds like mine, to particulate in university. So we don't look favourably at things that restrict access. We'll work through the details of all the announcements that are new in this Mid-Year update, including that one, and we'll make our views known in time.
MAIDEN: So you can't tell us yet whether or not you'd overturn that universities freeze, that freeze to universities, if you win the next election? What about this measure that we're told doesn't require legislation to extend and expand the requirements for newly arrived migrants to wait before they receive certain welfare payments. If you win the next election will you allow those migrants to start claiming that welfare again right away?
CHALMERS: Again Sam that one has come very much out of the blue for us. That wasn't one that was speculated on in advance and so that's a new announcement today. As Chris Bowen indicated in the press conference that we gave in Sydney we'll work our way through that as well. We do have concerns about the Government's willingness, or the relish really with which they attack the most vulnerable people in our community. But we'll go through it properly and have proper discussions with our colleagues before we announce a view.
MAIDEN: Just finally in the family tax benefit space. You're well across the detail here from your previous employment but the family tax benefit lump sum. Payments are to be used to repay outstanding social security debt and they also want to maintain those high income thresholds and supplement amounts for family payments at their current level until 2021. If you win the next election will you provide relief to families by overturning that or are you going to leave it in place?
CHALMERS: Again we'll go through the detail of those Sam. In the quick glance I was able to have before coming on the program today there are aspects of that that I think we would probably look favourably on. We have to have a proper look at that. We have to discuss it all the colleagues, not least of which Jenny Macklin, who is an encyclopaedia on the family payments system as you know. We'll announce a view on that but there are aspects of that which seem sensible.
MAIDEN: Thank you very much for that Jim, we appreciate your time today.
CHALMERS: Thank you Sam.
ENDS
