E&OE TRANSCRIPT
PODCAST INTERVIEW
THE CONVERSATION’S POLITICS PODCAST
WEDNESDAY, 9 MAY 2018

SUBJECT/S: 2018 Budget; tax cuts; Newstart; election timing

MICHELLE GRATTAN: Jim Chalmers, Labor attacks the Budget on fairness grounds, yet the tax cuts are basically targeted to lower- and middle-income earners, most notably in the early stages. Doesn't that undercut the fairness criticism?

JIM CHALMERS, SHADOW MINISTER FOR FINANCE: We support those initial tax cuts which would come into place on 1 July because they are geared towards low- and middle-income earners and we've been saying for a long time now that if the Government proposes something at that end of the income spectrum that we would look favourably on it. So we support that part of it. But the Budget doesn't pass the fairness test because it gives $80 billion to multinationals and the big banks at the same the time as it takes money from pensioners, and I think any Budget which takes money from pensioners and gives that money to the big four banks falls at that fairness hurdle.

GRATTAN: Just on the income tax package, the Government says it's an all-or-nothing package. In other words, you can't just support those early stages and not the later stages.

CHALMERS: Very disappointing position. What that effectively does is it says to millions of low- and middle-income earners in this country that we are prepared as a Turnbull Government to hold you hostage and your tax relief hostage to the rest of a tax plan which doesn't come in for seven years. So what Malcolm Turnbull's effectively saying to the Australian people is "you can get this tax cut seven years down the track if you re-elect me two more times". We will support today, we are prepared to vote for that low- and middle-income relief immediately, it's a real shame that they are saying that they will hold those low- and middle-income earners hostage to the rest of the package.

GRATTAN: But if the Government holds the line on that position, will Labor then vote against the whole package if it can't just get part of it through?

CHALMERS: We're still considering the rest of the package. We're not convinced yet that the rest of the package is a good idea. Most of it is on the never never, two elections away as I've said. But also the Prime Minister even today, even the day after the Budget, the Prime Minister, the Treasurer, the Finance Minister, have been unable to say how much the components of their tax proposals even cost. So not anywhere in the Budget was the $140 billion figure, which was the total cost. We had to drag that out of them. And now we say it's not unreasonable for the Government to tell Labor how much the different components cost. How can we make a decision on the rest of the tax proposals if they can't even tell us how much they cost, and even today none of the senior figures in the Turnbull Government were able to do so, or willing to do so.

GRATTAN: So at this point you haven't yet made a decision about whether you would reject the whole package if you can't divide it up?

CHALMERS: We don't make a decision on a 10-year tax plan in ten minutes, or even 10 hours. There's a lot of money at stake here, and so we will take our time to carefully consider what's being proposed, but already we've said we'll support the tax proposals which come into effect on 1 July this year. We can pass that through the Parliament. We can let the Parliament do its job and properly understand and come to a decision on the rest of the package.

GRATTAN: In the immediate term, do you think that the Budget has made Labor's task more difficult?

CHALMERS: No, I don't think the Australian people will conclude anything other than the modest tax relief in this Budget does not make up for the damage and the pain inflicted on them over the last five years and the last four budgets. I don't think people in the community are rushing to pat Malcolm Turnbull or Scott Morrison on the back because they know that their cost of living has gone through the roof. They know that people are having their penalty rates taken away, private health insurance is going through the roof, energy costs are going through the roof, and so this modest tax relief won't undo all of that damage.

GRATTAN: Labor criticises the Budget on fiscal grounds, and yet it says it will return to balance in the same year as the Government. Are you saying the surpluses in that and subsequent years should be larger?

CHALMERS: Yeah, we're saying that we would get to Budget balance in the same year, which is now 2019-20. But the criticism we make of the Government on fiscal grounds, on Budget responsibility grounds, is they've had this enormous influx of additional taxes and charges - something like $40 billion of taxes and charges have come into the Budget. And yet we've still got net debt which is double what they inherited, record net debt. We've still got gross debt, which only ever went through half-a-trillion dollars on their watch and stays above half-a-trillion in gross debt every year for the next 10 years. It's higher in 10 years than it is today. So the criticism that we make is even with amazing global conditions, which are delivering billions of dollars of new revenue to the Budget, we've still got record debt. We've still got debt at very, very high levels. So what we're proposing to do, because of the difficult decisions we've taken in terms of closing down some of the loopholes which overwhelmingly favour the wealthiest in our community. Because we've said we can deliver tax relief for low- and middle-income earners. We can invest in health and education, and we can repair the Budget in a fair way. And if we got to the election and the Government wants to have a fight about who's got a fairer approach to the Budget, we saw bring it on. Because we think that we've done the work to make a more responsible case to the Australian people that we will put the Budget on a more sustainable footing.

GRATTAN: You can give more generous tax relief to lower- and middle-income earners than this Budget provides?

CHALMERS: That's to be determined, but one of the reasons we took those difficult decisions around negative gearing, for example, family trusts, dividend imputation, was to repair the Budget, repair the damage done to health and education, but also to give ourselves the room to provide genuine cost of living relief for the people who need it most. The vulnerable people, but also right through middle Australia. So if we were to take that decision, to give additional relief, and we are certainly working through the options, then we have already made the responsible decisions to make that affordable.

GRATTAN: If you're still working through the options we can't expect to see this week the alternative tax package?

CHALMERS: That's to be determined, these are complex matters. Tax policy is not simple, and our first responsibility is to go through the detail of what the Government is proposing because that establishes a base-line that we are considering and part of that means understanding how much the different components of the tax plan cost, and we don't know that yet. But, of course, we've been working for some time, as you'd expect from the Labor Party, on ways to ease cost-of-living pressures on working people in particular. And we'll have more to say at some future point. We haven't finalised our plans, and so we're not ready to say when we will announce them.

GRATTAN: You'll still be subject to, at the election, the argument that you're the higher taxing party because you do have the various crackdowns on negative gearing and cash refunds from dividend imputation and so on. Do you think you can combat that argument out in the community?

CHALMERS: Absolutely. I am supremely confident that our tax policy is well received in the community. It's not universally applauded because they’re difficult decisions, but I think overwhelmingly our tax plans are supported in the community, really for two reasons. People don't care about some sort of arbitrary or abstract 23.9 per cent of GDP tax cap, which Scott Morrison bangs on about. They care about two things: They care about whether the tax system is fair, and we're making it fairer. And they care about whether the tax system raises enough money to pay for the things which we truly value as a community, which is educating our kids, looking after our sick people, making sure the vulnerable don't fall behind, and making sure that the people who work hard are rewarded for it. I think we tick both of those boxes: we’re making the tax system fairer, and we're funding the things that the community truly values. And so I would welcome an election contest on tax. 

GRATTAN: Just on the fairness front, on another part of fairness, the Budget didn't increase Newstart and yet there's a general feeling that this benefit for unemployed people is far too low. And yet Labor is only promising a review into it. Why don't you just say a Labor Government would boost Newstart?

CHALMERS: We want to do it properly, Michelle. We want to get the sharpest minds and we want to get some analysis done.

GRATTAN: It's not complicated.

CHALMERS: Well, we need to find an affordable, sustainable way to address it. It is an issue. We've said for some time we think that it acts as a deterrent to finding work. We've said that we believe it's too low. But we think the best way to come to an appropriate outcome to address this is to do it in the first term of a Labor Government. And I understand that some people would like us to come up with a number now. Other people would like us not to change the Newstart rate. What we're trying to do is to strike an appropriate balance, but that begins with recognising - which the Government won't do - that life is very tough on Newstart. But one thing that has been lost in this, Michelle, which is very, very important - the Budget last night actually cuts money which goes to Newstart recipients. So because the energy supplement cut is in the Budget, which I think is something like $8.80 a fortnight for a Newstart recipient, the Budget last night actually makes it harder for people on Newstart, let alone doesn't given them an improvement in their payment, but actually cuts their payment. It also cuts more than that for age pensioners, something like $14 a fortnight. So the Budget last night makes it harder for some of our most vulnerable people. We oppose that cut to the energy supplement. The Government has bowled it up before. They've missed the start date. They still haven't named a new start date. They're using it to prop up their Budget. It's a very cruel attack on pensioners and recipients of payments, and we oppose it.

GRATTAN: It's not going to happen though because it's not going to get through the Senate.

CHALMERS: Well they can't have it both ways. In my view, it won't get through the Senate. But it's still in the Budget propping up the bottom line. And by the way, that surplus that you talked about before, that early surplus of $2.2 billion, that's propped up by the following things: cuts which won't get through the Senate, what people refer to as the zombie measures; it's propped up by optimistic assumptions about wages; it's propped up by the fact they've brought some tobacco tax forward. Indeed, the whole surplus can be explained, as Richard Holden from the University of New South Wales said on your website, The Conversation, they've brought forward tobacco tax and so that explains the surplus. So I guess what I'm saying about the energy supplement cut - can't have it both ways, they're attacking pensioners and Newstart recipients. Either that will get through and that will be a bad outcome. Or if it won't get through, take it out of the Budget. Because it's falsely and fakely propping up the bottom line.

GRATTAN: Just finally, there's a lot of speculation about election timings. When do you think the election will be?

CHALMERS: It's certainly an election Budget. It relies on Malcolm Turnbull crossing his fingers and desperately hoping people will forget the pain that this Government's inflicted on them in the last five and the four budgets before this one. It's definitely geared up for an election. You can tell this a very politically focused Government. Turnbull's got his own internal critics, which will be factoring into his decision making as well. We're ready to go whenever he calls it. When he says it will definitely be next year, I don't think people really believe that. You've been around this building long enough to know that Prime Ministers say all kinds of things about election timing and we very rarely go back and see whether that turned out to be true. We're ready to go if it's in August, or if it's later. We've got, I think, the more credible, definitely fairer set of economic policies and Budget policies. So we welcome an election determined by them. The central issue of that election, just like it was the central issue of the Budget last night, is actually not the income tax cuts, but the $80 billion tax cuts for big business, of which $17 billion goes to the big four banks. In my community, and the communities I spend time in around Australia, that is actually the biggest issue - a Budget which takes money from pensioners and gives $17 billion to the big banks that have been exposed in this Royal Commission for the rorts and rip-offs in the system. I think that will be defining issue of the election, whenever it's held.

GRATTAN: They are also of course subject to the Senate.

CHALMERS: Subject to the Senate, of course. All kinds of considerations, but overwhelmingly, Malcolm Turnbull will make a political judgement as Prime Ministers do. When he does, whenever he calls the election, we'll be ready to go and we'll have a fairer, more responsible approach to the Budget, and to the broader economy.

GRATTAN: Jim Chalmers, thank you for talking with The Conversation.

ENDS