FRIDAY, 10 MAY 2019
SUBJECTS: Labor’s Fair Go Budget Plan.
CHRIS BOWEN, SHADOW TREASURER: Bigger Budget surpluses. More spending on health and education. Fairer taxes. That's what a Shorten Labor Government will deliver and that's what the costings that Jim and I are releasing today confirm. Now for six years Labor's been leading the policy debate. We've been putting out detailed policies and we've been outlining the impact on the Budget as we do so. But today as we always said we would, Jim and I are releasing the consolidated and updated Budget impact of Labor's policies that we're taking to the election. This is the earliest any Opposition has released Budget costings ever. Of course in 2013 the last time the Liberal Party was in Opposition they released their costings 36 hours before the people went to the polls. Here we are before the last week starts releasing our costings. But of course the Liberals release their true policies in the 2014 Budget when they cut health, education, the pension, ABC, and SBS after having given a solemn promise not to do so. Of course this has been a rigorous process. The culmination of working with the Parliamentary Budget Office and our panel of experts in financial accounting and Government accounting means we are able to provide a very rigorous process. Jim will talk more about that and the panel is here today as well and James Mackenzie will briefly outline the work of the panel before we take questions.
Because of our policies a Shorten Labor Government will deliver a surplus next financial year, the same year as the Government, bigger Budget surpluses over the forward estimates, 40 per cent larger than the Government, a bigger Budget surplus each and every year, next year and beyond including all years over the forward estimates and over the medium term. We'd previously committed to bigger Budget surpluses cumulatively. Today we're confirming bigger Budget surpluses each and every year under a Shorten Labor Government. We will reach a surplus of 1 per cent of GDP in 2020/23, four years earlier than the Government is forecasting. That is $21.7 billion surplus in that year. These forecasts take into account all of Labor's policies both spending and revenue and also take into account an assumption that a Shorten Labor Government will deliver further tax relief when the tax to GDP ratio hits 24.3 three per cent, the same rate as the Howard Government. I'll just take a moment just to explain that. Just as the previous Labor Government's Budgets had an assumption, just as the current Liberal Government's Budgets had an assumption until 2017, we have incorporated an assumption in our forecast to provide a realistic indication of the surpluses under us.
It would be unrealistic not to assume tax relief at a certain level. We've assumed that under a Shorten Labor Government that we will provide tax relief when the tax to GDP ratio hits 24.3 per cent which is equivalent to that under the Howard Government. Now as Bill and I and Jim have consistently said when the Budget returns to sustainable surplus, that's when tax relief can prudently and sensibly be considered and delivered. I agree with Peter Costello, tax relief should be delivered Budget by Budget, turn by turn, not on the never never. But the assumption that we've incorporated in these figures means that our forecast surpluses are more realistic. Under the Shorten Labor Government, as I said, we'll have bigger Budget surpluses over the forward estimates. We will also have bigger Budget surpluses over the decade cumulatively and in each and every year.
A red line of course recognises the underlying cash balance under the Labor Government. The blue lines indicate the PEFO projections. Now these figures importantly incorporate the 24.3 per cent assumption. We can deliver these bigger Budget surpluses and the bigger investments in health and education while also assuming tax relief going forward. Now with that 24.3 per cent assumption Australia will of course remain a low taxing country in the third-- in the lowest third of OECD countries when it comes to the tax to GDP ratio as the next graph will indicate.
Australia will remain a low taxing Government under a Shorten Labor Government. That’s the tax to GDP ratio of the OECD, Australia remains a low taxing Government under a Shorten Labor Government. Now as you know we've adopted a proactive approach when it comes to policy of closing down and reforming tax loopholes and concessions which overwhelmingly benefit high wealth individuals. Australia has a two class tax system. If you have means, if your incomes come from a certain place, you’ve got good accounting advice you get access to the first class tax system. If you're a normal pay-as-you-go taxpayer with just the very basic deductions, it's economy class for you. We're reforming the tax system. These reforms raise $154 billion over the next decade.
I know there's a lot of figures the Government would have you believe. These are the figures, the verified costed figures of Labor's policy of closing down tax concessions and loopholes. Now the Liberals will run and have run a dishonest campaign about who's impacted. It's worth just spending a moment running through it: 96 per cent of Australians won't be impacted by the abolition of franking credit refunds. 95 per cent of superannuants won't be affected by our changes to superannuation. 98 per cent of taxpayers won't be affected by our family trust reforms. 99 per cent of taxpayers won't be affected by our reforms to limit the tax deduction for managing your tax affairs and 100 per cent of people who currently negatively gear will be not impacted because of the grandfathering of our policy.
Now I know it's unusual for the Labor Party to go to an election promising bigger Budget surpluses. We can do so not just as a committee but because it's underpinned by these policies. It's the hard work of the Labor team identifying the tax concessions, modernising our tax system, making it fairer, making it better. Hence our promise of bigger Budget surpluses is not just a promise, it's underpinned by policy. But it's also important just to spend a moment on the why Bill Shorten and I and Jim and the team believe in bigger Budget surpluses; because Australia's economy needs a fighting fund. It needs a buffer. We need to replenish the buffers in case they're ever needed. We need bigger Budget surpluses. We get to 1 per cent of GDP more quickly and we maintain the increase in the bigger Budget surplus because we believe in it. We believe in defending the triple-A credit rating. We believe in reducing our interest bill, we would rather spend that money on health and education than debt interest and we believe in providing a bigger buffer going forward.
So the contrast is clear. By having Budget surpluses $86 billion bigger than the Liberals over the next 10 years, $17 billion bigger over the forward estimates, we will pay down debt faster, we will improve the capacity of the Government to respond to changing economic circumstances and we will provide more capability of investing in health and education. The contrast is clear. We are providing a real choice to the Australian people. A remedy not a replica, an alternative not an echo but that's what this election is all about. The Liberals have spent the last six years fighting amongst themselves. The only thing they've agreed on is an $80 billion tax cut to big business. And we know that that will be back if they have a majority in the Senate with Clive Palmer and Pauline Hanson.
We know their policy is to lock in billions of dollars worth of high income tax cuts at least $77 billion, probably $89 billion but they won't tell you they're being dishonest about it. Here we are accounting for our policies, outlining them in detail. We've done the hard work. We've got the more responsible set of books. We have bigger investments in health and education, bigger Budget surpluses and we're ready for Government. We've got the team, the experience, the policies, the program and the rigour to show that we're ready for Government. We're ready to serve the Australian people as the Government.
Now I'm going to ask Jim just to add to my remarks about the rigour of our process and also run through some of our spending items then Mr McKenzie is going to make a brief statement to you about the rigorous work of the costings panel and then Jim and I will take your questions.
JIM CHALMERS, SHADOW MINISTER FOR FINANCE: Thanks very much Chris, and g'day, everybody. Today is an important day because today we show that by addressing unfair and unsustainable tax loopholes, we can have bigger surpluses, we can pay down more debt, we can make room for game-changing investments in health and education and helping workers and families and pensioners deal with the rising cost of living. As Chris said, we will have a surplus in the same year as the Government, we'll have bigger surpluses after that, and less debt after that, because we've done a heap of work and we've made difficult decisions to fund the nation's priorities.
Budgets are about choices. We have chosen hospitals and schools over more of the same damaging cuts; we've chosen cost-of-living relief over bigger tax breaks for the top end of town. What that means is that in Bill Shorten's Australia, workers and pensioners will pay less for their healthcare and their childcare because multinationals will pay their fair share of tax. In Scott Morrison's Australia, workers and pensioners will pay more so that multinationals and millionaires can pay less.
What's not often discussed when we talk about these tax loopholes that we're addressing in the statement that we're releasing today is that they only benefit a tiny sliver of the Australian population, as Chris said, but everybody pays for them in some way or another. It's a massive transfer of billions of dollars out of the pockets of ordinary working people to benefit a tiny sliver of the Australian population. And if we are serious about getting the Budget into a sustainable condition, we need to take those difficult decisions and deal with those issues.
No Opposition in recent times has taken a more responsible set of books to an election and no Opposition has gone about that task in a more rigorous way than what we have. We knew that if we wanted to make big investments in dental for pensioners, schools funding, hospitals and cancer care, relief from childcare costs, we needed to make room for that at the same time as we rebuilt the buffers in the Budget so that we can deal with, or anticipate or have the capacity to respond to a global downturn. We will make the Budget deliver for workers, pensioners and families at the same time as we will make it more sustainable and less vulnerable to the ups and downs of a global economy.
As Chris said, and as I mentioned a moment ago, we have gone about this far more rigorously than is traditionally expected of or delivered by Oppositions. We have engaged with the great people at the independent Parliamentary Budget Office. We have worked with an incredibly distinguished panel which includes Bob Officer, Mike Keating and James MacKenzie. It's hard to find three more experienced people and they have helped us to ensure that our assumptions and our methodology and our costings are sound and I will throw to James in a moment to add some perspectives from their point of view. But that's been an important part of adding an additional level of rigour to the costings that we are releasing today. We flagged our intentions early. In some cases, years ago we announced the policies which are costed today. We released our numbers, we are releasing our numbers early. As Chris said, far earlier than has traditionally been the case. The other important thing is we have worked as a team in the Labor Party, in the Shadow Cabinet. We have worked as a team to settle our priorities and to fund them responsibly. And that's where the unity and the stability and the experience and the team culture that Bill Shorten has built in our show has really paid dividends. You couldn't make the same point about our political opponents.
That's not the only contrast between how we have gone about this and what we are proposing and how our opponents have gone about and what they are proposing at this election. Our surpluses are $17 billion better over the forwards. They are substantially better over the medium term. We do get to that substantial surplus of one per cent of GDP far faster than Mathias Cormann and Josh Frydenberg intend to. In doing so and making those contrasts and making those points, what we're doing today is exposing what is arguably the biggest lie of this entire campaign: that is that the Liberals have done a good job of managing the economy. Of all the many lies they have told during the course of the campaign, that is arguably the most significant one. Saying that the Liberals have done a good job managing the economy is a bit like saying Clive Palmer did a good job building a dinosaur park. There was lots of rhetoric, lots of promising, lots of fanfare, lots of hyperbole, but when you look at the reality of the situation and what they actually delivered, it falls far short of what was promised. The Liberals are the party that said they would pay down debt; instead, they have more than doubled net debt on their watch. They inherited $175 billion of net debt in 2013 and they turned it into $377 billion. Whoever wins this election, whether it is us or the other mob, will inherit a Budget which is currently in deficit. Scott Morrison finally admitted that to Leigh Sales during the course of this week. Whoever wins this election will inherit a Budget in deficit, so there are big challenges for either side to deal with.
The other point I would make about our opponents: we have released our costings now. You have them in your hands. We have released a whole bunch of detail very early. We have done what is expected of us. 26 days ago now, Mathias Cormann told David Speers that he would provide a dollar figure, the total amount of dollars that would be provided to Australians in the top tax bracket in the Government's tax plan. 26 days have passed. They have been asked repeatedly. Mathias Cormann was asked again this morning; Josh Frydenberg in the last couple of days. They refused to tell the Australian people what the total amount - the total billions of dollars - they will be providing the highest income earners. Independent modelling has it somewhere between $77 billion and $89 billion. They cannot go to the election without 'fessing up about how much they want to give to the highest income earners in this country. They say it is their highest legislative priority if they are re-elected, but they won't tell Australians how much goes to their highest income earners and what cuts to hospitals and schools will be necessary to pay for that largesse.
We have some big challenges in the economy. We have global uncertainty; we have household insecurity; we have slowing growth; stagnant wages; sluggish consumption; and flagging confidence. There are two ways to respond to this. This goes to the choices which are at play in this election as well. Our way, which you see in the costings before you, is to help people with the cost of living, boost wages, prioritise people on low and middle incomes when it comes to tax relief, because they are more likely to spend in the economy and you get consumption going again; invest in infrastructure and human capital; and strengthen the Budget in case of a global downturn. The worst thing you can do in these conditions is what the Government is proposing to do - $88 billion or thereabouts for people who won't spend it, funded by another $40 billion of cuts, as the Grattan Institute has revealed. Our strategy will get the Budget back on track, make the Budget more sustainable, but it will also get the economy growing again the right way, whereas theirs is a recipe for more of the same stagnant wages and floundering economy that we have had over the last six years or so.
So now I'll invite James MacKenzie to come and say a few words about the work of the costings panel, and then obviously over to you for questions.
JAMES MACKENZIE: Thanks Jim. Doctor Keating, Professor Officer and I have been engaged by the Australian Labor Party to examine and assess their Federal Election policy costings. The scope of our work was purely confined to an examination of the costings and the process by which they’ve been prepared by the Parliamentary Budget Office. We do not and were not asked to endorse any of these policies but all of the policy costings in Labor’s budget plan have been submitted to the panel and have been fully assessed and reviewed. In assessing Labor’s policy costings we’ve had access to all costings undertaken by the Parliamentary Budget Office and have assessed all assumptions and calculation methods used to cost Labor’s election policy commitments. It’s worth noting that a significant number of the costings – about half – have cap funding and therefore present a high degree of certainty. With the assumptions that have been made around potential behavioural responses, we’ve relied on the assessments of the Parliamentary Budget Office and we are comfortable the information drawn upon by the PBO in support of these assessments. To this end we note that these estimates and medium term projections are subject to the same degree of uncertainty as that described in Commonwealth Budgets whether they’re prepared by the Parliamentary Budget Office or whether they’re prepared by the Treasury and Finance Departments. We are satisfied that the Parliamentary Budget Office has in developing its cost estimates and forecasts applied established and reasonable Budget standards and practices. We’ve directly engaged with the PBO, with face-to-face meetings as well as numerous clarifications issues being resolved by email. And this is a process that we’ve been involved in with Chris and Jim and the team for the past two years. So Dr Keating, Professor Officer and I are of the opinion that the costing process has been thorough and comprehensive; that the assumptions which underpin the Parliamentary Budget Office costings are sound and realistic and have been developed using appropriate methodology; and all of the costings in Labor’s budget plan are of a similar quality as Budget Estimates are generally and therefore represent a reasonable basis for assessing the net impact on the Commonwealth Budget.
BOWEN: Thanks very much, James. Now there’s a lot of people here so we will keep a bit of order but I’ll make sure that people will get a fair go. We’ll start with Phil.
JOURNALIST: [inaudible] degree of uncertainty [inaudible]. If everything doesn’t materialise as planned, what is your priority? Is it the high surpluses or keeping your election promises?
BOWEN: Well Phil, we’ll keep our election promises. Now, every forecast whether it’s a Treasury forecast or a PBO forecast is subject to you know obviously the impact of changing economic circumstances. I don’t hold the Government to any higher account than I hold ourselves to make the best possible forecasts with all the evidence at the time. But each election – in each election, each political party outlines its priorities, outlines the Budget impact and it’s what we’re doing today – it’s what we’re doing today. And these are our commitments. And these are the projections of the impact on the Budget. And that’s what will be – that’s the best forecasts based on all the work as Mr Mackenzie outlined and the rigorous process in costings that have been provided.
Mr David Speers.
JOURNALIST: Can I ask – are you able to say what will happen to economic growth as a result of the policies that you have costed? And if I could just squeeze in a second – is that 24.3 per cent now your tax-to-GDP cap?
BOWEN: No, I think I explained, David, with respect how our assumption works. It’s the same budgetary process that the previous Labor Government had and the Liberal Government had up until 2017 otherwise the forecast surpluses wouldn’t be realistic. They would be too big because no Government under us is not going to provide tax relief at that point. And that’s the assumption we’ve built into the figures and it’s in keeping with the traditional Budget – prudent budgeting. This Government has changed the approach slightly but we’re adopting the traditional budgetary approach.
Now, in terms of economic growth. I mean, our policies are pro-growth. Our Australian Investments Guarantee – the Government hasn’t matched. Businesses small, medium and large tell me that that is a material impact on their investment decisions. Our new jobs tax cuts – the Government hasn’t matched. And our investments in infrastructure and in skills in particular over a longer term – have a longer time to pay back, but they are pro-growth, pro-productivity. And we’ve had low productivity growth in Australia on this Government’s watch. And we’ve had growth below trend – economic growth below trend. So this Government’s had absolutely nothing to crumb about. We’ve designed our policies carefully to ensure the investments we believe are important priorities – the Budget repair we believe is important. And in particular in relation to the investment guarantee, tax relief conditional on investment which reduces the tax on new investment by economic modellers have determined down to about 26 per cent is a pro-investment, pro-growth policy.
JOURNALIST: On the 24.3 per cent. In what year do you reach 24.3? You project bigger surpluses of $83.7 billion over the decade, how big are those surpluses if you don’t have 24.3?
BOWEN: We reach the assumption in 2022-3. Sorry! No – 23-24. 2023-24. And then the assumption applies after that. Look the surpluses would be a lot bigger – a lot bigger –
JOURNALIST: Are we talking 160 instead of 87?
BOWEN: It’s really, with respect David, not going to go over. That’s not our assumption that we’d go over that. The surpluses would be unrealistically big. Jim and I could not honestly present them to the Australian people and say they were realistic unless we had that assumption in place.
JOURNALIST: So in that case –
BOWEN: I’ll let David have one follow up before I go to Michelle Grattan –
JOURNALIST: The reason for the question is we’ve been hearing rhetoric about Budget emergencies and the state of – and need to pay down debt for a long time now. Why isn’t there an argument to ignore completely an artificial cap on revenue to GDP and actually pose the bigger surpluses to pay down debt?
BOWEN: I think, David, with respect, I’ll get Jim to add to my comments but with respect, I mean here we are as the alternative Government and a Labor Party going to the Election with bigger Budget surpluses both over the forward estimates and the medium term – substantially bigger, bigger in every single year. We had the more responsible set of books. But we do recognise, with wages growth so low and cost of living pressure high, there’s a case for tax relief when it can be prudently done. And I agree with Peter Costello, it’s prudently done Budget by Budget, term by term. I’ll get Jim to add and go to Michelle Grattan.
CHALMERS: It's just important to remind you, David, in our case it's not a cap. It's in every Budget, there needs to be some sort of assumption, because it's unrealistic to think that bracket creep wouldn't be returned in some form at some future point. The point that Chris has made and the point that I have made before, is that tax relief, it matters where it is directed to. And it matters whether you can afford it at the time and what we won't be doing is the irresponsible thing that the Government is doing, which is to commit hundreds of billions of dollars of tax cuts on the never-never without knowing what the fiscal and economic circumstances are. What we have done is struck the best possible balance. We have said here is an assumption that we have built into our Budget. We have given ourselves room for future tax cuts to return bracket creep, or to satisfy other economic objectives, but we've done that in a responsible way. The other thing we done - you've mentioned the debt emergency, and I think that's a crucial point - when the Government was talking about a debt emergency, net debt was $175 billion. It's now $377 billion. This is under the Liberals' watch over the last six years. And one of the reasons we have those $87 billion in bigger surpluses is because we do want to pay down debt. We want to save money being spent on debt interest, which would be better directed towards schools and hospitals.
JOURNALIST: I just wanted to completely clarify this and Jim’s gone to it in part but you’ve got the assumption there but you’ve also got quite a strong statement that you’ve been making that tax cuts would only come when it was economically responsible to do that. Now, is that the primary commitment, the economic responsibility, rather than this assumption which could change in later times?
BOWEN: Well, I think they’re complementary Michelle. We’ve been consistent. Bill, Jim and I have consistently said we will provide tax relief when it is prudent to do so, when we are back in good healthy surplus. And we’ll so in the normal, traditional, small-c ‘conservative’, responsible way of being able to assess the economic circumstances at the time.
Baking tax cuts now, off in the never-never, two elections away when we don't know what the economy will be like, trying to legislate them: in our view, that irresponsible. Particularly when so much of it goes to high income earners. But we are, if you like, providing a roadmap as to when that tax relief will be provided by the tax to GDP assumption and keeping tax to GDP no higher than under the Howard government.
I’ll go to Sam, and then Tim.
JOURNALIST: Just on that tax to GDP ratio. You set your target at the Howard-Costello government. This is a government that you repeatedly criticised as the highest taxing government in history. Why would you set your target as the Howard-Costello years, given that record, particularly when the 24 per cent is at the height. I mean, I think they started off at 21per cent, it was fuelled at the time by big mining revenues and so on. This time, you are not getting it from mining industry. The biggest chunk, according to those figures, is coming from retirees.
BOWEN: Well Sam, I can't accept your language of a target. It’s not a target, it’s an assumption, and it’s a realistic assumption. It reflects the policies which we’ve laid out. I mean, the Government’s got a cap of 23.9 per cent. I mean, there’s an arbitrariness to these decisions to be fair. There’s an arbitrariness to theirs, they’ve chosen 23.9per cent. We’ve indicated 24.3per cent.
I mean, over the decade, there’s going to be trillions of dollars of tax raised, regardless of who is in office. But we are providing a roadmap, a guideline, an assumption, as to how the tax relief, or when the tax relief will be provided under us.
Now, if Mr Morrison and Mr Frydenberg say, ‘Oh, it’s terrible the tax will be so high’, well, they can explain that to John Howard and Peter Costello. The can explain their criticism to him. We’ve made the point, of course, that the Howard government had that tax to GDP ratio as a historical point. But we’re outlining very clearly how we can provide tax relief and when we should do so.
And I think we go to Tim.
JOURNALIST: Two quick questions. First, from what you said before, your wage growth assumptions are identical to those in the budget?
BOWEN: Well, the budget is the baseline. I mean, it’s the way these things work. It would be the same if the Liberal Party were in opposition to us, they would take our budget as the baseline and then it's the impact of our decisions on the budget.
JOURNALIST: And secondly Jim, you said the 24.3 per cent is not a cap. Could you explain the difference?
CHALMERS: Chris has just gone through that a bit as well, Tim. But really, the difference is the Liberals in the last two years have introduced what is an arbitrary cap. In their case, a relatively meaningless arbitrary cap. What we've said is that a Budget requires some kind of technical assumption about the future trajectory of tax. You need to provide some kind of assumption, some kind of technical working figure so that you can present a realistic set of books. And that's the difference between us and them.
BOWEN: Katharine Murphy.
JOURNALIST: Chris, obviously this is a costings document, not a budget, but do you intend to release any of the assumptions underlying some of your policies: negative gearing for example, what happens to house prices; because we have none of those assumptions available to us in this document?
And also do you accept that, given you've got a couple of floating commitments that you haven't costed - like, for example, an increase to Newstart, based on everything you guys have said through the campaign that is coming, that is clearly coming - the only thing that's missing is the quantum and it's likely to be several billion, that's not in the document.
Also, your climate policies have not yet been finalised, and therefore are not costed, to some degree. So, those floaters are sort of sitting above this. Do you accept that those things are not identified here?
BOWEN: No, I don’t –
JOURNALIST: And is it prudent to point to tax relief when you've got some expenditures that have not been accounted for?
BOWEN: I don't accept all of that, Katharine, with respect. Newstart, we’ve made very clear, we'll have a review. Now, the choice between the Australian people is the Government, who says, ‘No problem, nothing to see here, we'll keep it the same,’ and us who say there’s legitimate issues. We haven't announced many reviews – often opposition’s will, you know, hit the ground reviewing – we've announced a couple of reviews: Newstart is one of them, because it's complicated. But these documents reflect our policy commitments. And as we've said, we think there are issues with Newstart. But we're not going to the election promising a quantum of an increase, and so it's not reflected here, and nor should it be.
It's not dissimilar, if you like, to Scott Morrison at the debate. Bill Shorten asked him, ‘Will you adopt our cancer plan?’, he said, ‘I'll think about it in the next Budget’. I wouldn't expect him to incorporate those budget figures in his election commitments. He's just said he recognises there’s issues and he will contemplate. We have a firm commitment to deal with cancer. The numbers are in our document. He doesn't, he's going to review it or think about it. That's fair enough.
The choice for the – I understand some people would want us to commit to a particular Newstart increase, we're not, we're not. We are committing to a review and we'll consider the impacts of that review. I can't agree with you on climate change: the climate change impact is here in the budget - the impact of our climate change policies is outlined in some detail.
JOURNALIST: What's been decided is here, Chris, but there's a bunch of things that have not been decided in relation to how the safeguard mechanism works –
BOWEN: Well no, we've said that the safeguard mechanism will apply to the 250 biggest emitters, for example. Of course, there’s some modalities in terms of how it gets implemented, but they don’t impact on the costing.
I mean, the 250 biggest emitters will be brought into the safeguards mechanism. We'll abolish the Climate Solutions Fund: that's a $1.7 billion save over the decade. We'll make contributions to the CFC, and we'll have an Energy Security Modernisation Fund. We'll have a Strategic Industries Fund. All those costings are there, outlined in very considerable detail in the document – the budget impact.
I said I'd go next to - who did I say I'd go to next? John Keogh.
JOURNALIST: Thanks, Chris. Just on the spending side, in the medium to long term, what do you expect your spending to GDP ratio to get to, given that some of the larger costs of those programs don't really kick in until beyond the forward estimates? I ask that in the context that you said you've used the government's baseline: now you've said the spending to GDP baseline in their budget is unrealistic and requires $40 billion worth of cuts a year. So doesn't that make your spending to GDP ratio just as unrealistic as theirs?
BOWEN: As I said, you use the budget as a baseline, then we add in our spending. Our very considerable - you indicate, and I agree with you - considerable investments in health and education being primary amongst them. So, we will invest more in health and education, particularly, and other things than the Government. In terms of the spending to GDP, it would peak under us at 25 per cent. That's the average under the Abbott-Turnbull-Morrison Government. It would peak under us in 2022-23.
JOURNALIST: Mr Chalmers, you touched on net debt. What is your assessment as to what gross debt - gross debt at the moment's about $537 billion and is unlikely to change a great deal over the next 10 years under the Government's books. Under your plans where you're running your larger surpluses, how much lower do you expect that to be, and what does that do to your interest payments assumptions?
CHALMERS: You're quite right that there's been a big increase in gross debt as well. I think the Government inherited about $280 billion worth of gross debt, and it's around the level that you just indicated. So, almost double, on gross debt. What we're saying is that the interest saving that we expect to make is something like $13 billion, which is a substantial sum that can be spent on Budget repair, or it can be spent on hospitals or schools or child care and the like. And that is one of the dividends of those substantially bigger surpluses that we have.
BOWEN: Chris Uhlmann.
JOURNALIST: Just as a matter of prudence, will you put your plans to raise money for Parliament before you put your spending plans to Parliament? Because we know that in the past, they’ve been quite happy to spend money but unlikely to raise tax?
BOWEN: Well Chris, we'll prioritise our legislative program when and if we win the election. I’ve indicated there will be a budget in the third quarter of this year. And I will seek, and Jim will seek, and we will collectively seek to get our program through the Parliament.
Phil, you've already had a go, with respect. So, Laura Tingle. I won't rule out a second go, but I'm going to give people first goes first.
JOURNALIST: Thank you, Chris. Now, in your press conference today you've talked about a possible downturn and needing a fighting fund. You've talked a lot about the sluggish nature of the economy. And you've talked about getting the economy going the right way.
My question to you is about the macro-economic impact over the next term of the Parliament of your budget measures. It does involve a big change in spending and taxing. Have you modelled what impact it will actually have and will it address that central issue that you say reflects badly on the current Government?
BOWEN: I think Jim might want to add, but just a few points Laura. There's the impact of the budget surplus, of course. And we believe that budget surplus being bigger is prudent.
But there's also the impact of our policies. Now, as I talked about the Australian Investment Guarantee, for example, a spur to investment. I’d also talk about, if you like, the impact of consumption of our bigger tax cuts for low-income earners. I mean, the propensity to spend a tax cut if you're a high-income earner is pretty low. But if you're a low-income earner and you get a bit of tax relief, you spend every dollar. That impacts on the economy.
Same with childcare subsidies, and those hundreds of thousands of families that are better off with their childcare fees under us. That's money they can spend and stimulate the economy. So, the quantum impact is a legitimate question, but I'd also point to the stimulatory impact of several of our specific policies and the propensity to spend of those who benefit from them.
Jim, do you want to add?
CHALMERS: It's partly about the quantum, but it's more importantly in fiscal policy about the nature and quality of your spends, and the nature and the impact of your tax changes. And I think one of the defining features of what we're doing, or proposing to do, in tax will impact on such a tiny sliver of the Australian population, who aren't, as Chris said, as sensitive to big changes in tax as people on low incomes. Because the people on low incomes spend all of their disposable income. The big macro challenge we have in the economy is consumption. We've got that problem because wages have been sluggish; people are running down their savings to pay for the essentials of life. These aren't opinions; these are in all of the economic data that the RBA has been dealing with. They're in the pages of the Government's own Budget. We've got a huge challenge here which stems from a lot of household insecurity. People have got insecure work and sluggish wages and they're running down their savings. It's a big problem for them, but it's a massive problem for our economy that relies so heavily on consumption. Our responsibility and our objective is to get consumption going again. Our tax cuts are directed towards people on low and middle incomes, not people at the top. Our tax changes impact, a handful of percentage points at the top of the income scale. This is quite deliberate, because if we are to get the economy growing the right way, which is a sustainable way and inclusive way; a way that gives everybody a stake in our national economic success, then we have to do things differently. And this election is really about what kind of change we want to see in this country. Australians are crying out for change, and all this Government in the economy is promising them is more of the same - same sluggish wages, same sluggish growth, same weak consumption, same decreasing household savings. It's a massive problem.
JOURNALIST: So given the answer to that, have you modelled the impact of those policies collectively, as opposed to the quantum total?
CHALMERS: That sort of modelling is not available to Oppositions. It's not part of the Parliamentary Budget Office process. But what we are proposing today is, in the economic orthodoxy, more likely to grow the economy than what the Government is proposing. If you look at the challenges that I've just outlined, the worst possible thing that you should do is smash the Budget with big tax loopholes which won't be spent in the economy, at the same time as you identify tens of billions of dollars of cuts to health and education and other services. That would be a disastrous approach to take to the economy. It's consistent with the economic failures that we've seen over the last six years, and it's a key reason why we've got a floundering economy.
BOWEN: OK, guys, I think we're drawing to an end. But, Colin Brinsden.
JOURNALIST: In your first budget, assuming you win May 18, will you change, or will you get Treasury to change the assumptions they use for wages? Because each year they're going 3.5per cent or higher, which, you know, are not realistic?
BOWEN: Well, look, as you know, our longer-term policy is to refer that to the Parliamentary Budget Office to take over, but that will take some time to implement. I will ask the Treasury to provide the most realistic assumptions going forward, and I will ask them, obviously, to provide me with the most up-to-date and realistic forecast going forward, and I will question them about whether those forecasts, any of them, not just wages, but any forecast in the Budget is too optimistic. At the end of the day, they will provide the best advice they can. But when I do bring down the budget, Colin, you will be able to see what the forecasts are and you will be able to ask me at that point. Peter and Lanai, then we'll call it quits.
JOURNALIST: I think this one's for Jim. Mr MacKenzie said that he had full access to the PBO assumptions. We haven't. Labor has chosen not to release - with one or two exceptions - not to release any of its PBO costings. Fortunately, thanks to your former boss, Wayne Swan, they'll all be released after the election. 10 days after the election, we'll get to see what the assumptions are. Given that you're likely to be in Government, or if you are in Government, will you look at changing the PBO rules to require Oppositions - and I guess if you are in Government, it will be a Coalition Opposition - to require Oppositions, or require the PBO, once the Opposition has quoted a PBO costing, to release the document so that we can have access to what Mr MacKenzie and his colleagues have had access to?
CHALMERS: We haven't considered or contemplated any changes to the way that the Parliamentary Budget Office proceeds during election campaigns.
JOURNALIST: You've been busy?
CHALMERS: (Laughs) Well we've had a few things on our plate and we have been working hard on these costings that we present to you today. We're presenting a heap of detail. And I know that people will always want more detail. But I think one of the important reasons why the PBO process works is because you can present a range of options, you can have them test out a range of different scenarios, and we don't consider it appropriate to release all of that.
JOURNALIST: Just the final document, not the iterative stuff. Would you consider that?
CHALMERS: That's not what we're proposing, no.
BOWEN: Can I just add to that? Nor does the Government release Treasury costings. You never see the assumptions underpinning a Treasury costing. Now, the Parliamentary Budget Office, I get annoyed when I see the Parliamentary Budget Office being attacked and criticised. The Parliamentary Budget Office is a coster of equal status with the of the Treasury and Department of Finance. If questions are going to be made about what assumptions the Parliamentary Budget Office make, that's perfectly legitimate, the same questions could apply to the Treasury, which you never see. You didn't see it in the Budget document, you don't know the underlying assumptions of a Government costing. They should be held to the same account. At the moment, they are held at the same test, because neither are released. But we have the extra layer of rigour by asking three eminent Australians with enormous experience, including the former Secretary of Prime Minister and Cabinet and Finance, to examine the costings, and to satisfy themselves of the rigour applied. And they've given you a very comprehensive outline of their level of satisfaction today.
JOURNALIST: There's 195,000 workers in the childcare sector which you've promised a significant pay rise to, of, I think, $11,300 annual pay rise. The figures today hardly show that it comes anywhere close to that. How do you respond?
BOWEN: I will answer your question. I know the Treasurer has got himself excited about this. I wish he would show as much interest his own policy and costings as he does ours. If he's asking questions about our policy he might want to answer questions about the $77 billion on high-income earners. I'm just making that point on the way through, because he's the one who's raised the issue. On the matter of substance, do we want our early childhood educators paid more, yes, we do.
JOURNALIST: How much?
BOWEN: We've outlined that policy. The policy applies to early childhood educators, as I said before, not everybody in child care is an early childhood educator. You need to have a level of qualification, it applies to long day care in the private sector as we've outlined. The costing is rigorous, the Treasurer just doesn't want to do it.
Thanks for your time.