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Transcript of interview with Matthew Abraham and David Bevan: 891 ABC Adelaide Breakfast: 23 October 2012: Mid-Year Economic and Fiscal Outlook

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Parliament House, Canberra ACT 2600 Australia  Tel: (02) 6277 7400 Fax: (02) 6273 4110

PW 217/12 23 October 2012




JOURNALIST: Good morning to you Senator.

WONG: Good morning to you both, it‟s good to be back.

JOURNALIST: It‟s nice to hear your dulcet tones on 891.

WONG: Dulcet tones… (laughs)

JOURNALIST: Are we hearing the dulcet tones of tax rises, another tax increase before the next election?

WONG: I‟m happy to answer that question, but I wouldn‟t mind having a response to a couple of the things Jamie [Briggs] has just said. But on tax, we‟ve made a commitment, we‟ll tax less than the Howard Government, and we‟ll stick to that commitment. If you look at the tax to GDP ratio, which is the best way of looking at the tax burden, they had a tax burden in excess of 23.7 per cent of GDP. We‟ll stay under that.

JOURNALIST: But that‟s a bit of a fiddle. Isn‟t that a bit of a fiddle?

WONG: No -

JOURNALIST: Because the bracket creep takes care of that, doesn‟t it? You can always say „we‟ll tax less than the Howard Government‟, but -

WONG: No, no. What I‟m saying is, if you look at the forward estimates for all of the budget years, and you calculate tax as a share of GDP, we stay below what the Howard Government was taxing Australians across the board. And just an example, if we were taking the same amount of tax as the Howard Government did when they left office, we


would have a surplus that was some $23 billion higher this year. So that just gives you an example of what I‟m talking about. But if I can -

JOURNALIST: Yes, fair enough, you want to respond on this question of the Baby Bonus, particularly.

WONG: Two issues, very quickly. In February of this year, Jamie Briggs wrote an article for the Financial Review where he railed against the Government supporting child care.

He said “pensions, disability support, family tax benefits and child care support create a cycle of dependency for millions of Australians”. So the question I have, and I think Australians would have: why are pensions, disability support and child support so bad, but the Baby Bonus so good that the Government can‟t reduce payments for second and subsequent children?

JOURNALIST: OK. Do you, though, have a bit of a problem with the middle class? And that is, here you are, you‟re cutting the Baby Bonus down to $3,000 from $5,000; welfare groups and others have said that the poor will suffer from that. You‟re also looking at trimming the Health Insurance rebate after having only four months ago introduced a means test for the 30 per cent rebate.

WONG: There is no way to make popular budget savings measures, budget cuts. The reality is that none of these measures are popular. But there‟s a more important principle here, which is, when you‟ve got an economy growing at trend, and low unemployment, and an investment boom that we‟ve seen, you need to make sure you run a budget policy which gives the Reserve Bank room to move. And we‟ve done that, and we‟ve seen the benefit of that. Australians who have mortgages or businesses who have borrowings have obviously got the benefit of that. But there is a more important issue as well, and that is the sustainability of the budget going forward. I mean, I think you‟ve got to make sure you fund health, not just today, but in ten years‟ time.

JOURNALIST: Minister, you‟re having to make these changes because of a tough economy. The businesses you‟ve hit with monthly tax payments are operating in that same economy. Why make a tough economy even tougher for companies?

WONG: I think it‟s important to remember we‟re not actually increasing the tax take from companies. The only party that‟s proposing that is the Liberal Party, who want to put a tax increase on companies to pay for their paid parental leave scheme. This is a timing change. We‟ve given a lot of notice because we want to work through the details of this with companies, and we‟ll do that. But it isn‟t an increase.

JOURNALIST: But Minister, the front page of the Financial Review, “the business community believes it is being forced into an unnecessary, expensive and administratively complex change” to help you get a budget surplus. So I ask you again, why make a tough economy even tougher for companies?

WONG: I think the economy we want is an economy where the Reserve Bank has room to move, and that is a good thing for companies as well as for families.


JOURNALIST: Do you say this will not be administratively complex and expensive for companies?

WONG: I‟d say two things. First, this is not contributing to the surplus. This change does not take effect until the next financial year. So that‟s the first point. The second point is, unlike the Liberal Party, we‟re actually not proposing a tax increase for companies.

JOURNALIST: Doesn‟t this raise $8.3 billion over four years?

WONG: That is simply a reflection of a timing shift when you move from a quarterly payment to a monthly payment.

JOURNALIST: You must be getting more money.

WONG: No, we‟re not getting any more money. There‟s no increased tax take. It‟s just that a couple of months of one year would therefore be paid in a different year -

JOURNALIST: So it‟s a fiddle?

WONG: No it‟s not a fiddle.

JOURNALIST: It‟s a fiddle.

WONG: It is not a fiddle. It‟s reflecting -

JOURNALIST: Well it‟s not real money. You‟re not raising any extra money; you‟re just pulling it from one financial year into another. It‟s a fiddle.

WONG: Can I respond to that? You‟ve said fiddle three times. I reckon it‟s about my turn. What do you reckon?

JOURNALIST: OK. Well is it a fiddle?

WONG: No it‟s not. It‟s making tax payments in line with the way in which GST is remitted. It is an approach that has been taken in a number of other advanced economies. And in terms of administrative complexity I think we‟ve given a lot of notice. The first companies, and that‟s only the biggest companies, would start on 1 January 2014 and then we‟d do a tranche each year depending on how much turnover. And there‟s a lot of consultation which will occur.

JOURNALIST: It‟s $8.3 billion but its no extra money from companies.

WONG: That‟s correct.

JOURNALIST: It just makes your books look better.

WONG: It‟s a reform about how people pay tax. I mean, how often do you pay tax?

JOURNALIST: Well every fortnight.


WONG: Correct. So, you know I think it‟s not an unreasonable proposition to say we want to line it up with GST.

JOURNALIST: But it‟s not pay as you earn is it for companies?

WONG: No that‟s true.

JOURNALIST: So it‟s quite painless. You take the money out and I try and get some of it back at the end of the year by claiming my record library.

WONG: And I‟m sure you‟d work very hard on that (laughs)

JOURNALIST: (laughs) I do, I do. Legitimately.

WONG: Fair enough, fair enough.

JOURNALIST: We‟re talking to Penny Wong, South Australian Senator, Minister for Finance and Deregulation at five minutes to nine. Jane has called from Adelaide. Hello Jane.

CALLER 1: Good morning.

JOURNALIST: What are your thoughts?

CALLER 1: About the Baby Bonus. I think $5000 for the first baby, fine. And then after that, nothing. Why do people expect to have everything paid for - life costs, living costs? Just having babies shouldn‟t be a burden on the public purse all the time.

JOURNALIST: Okay, Jane thank you for your call. Gunther has called 891 Breakfast, hello Gunther.

CALLER 2: Yeah, good morning. On the $700,000 stated savings, is that attributed in the first year? So therefore do we actually have a $700,000 saving over four years attributed in the first year?

JOURNALIST: Is that on the Baby Bonus, Gunther?

CALLER 2: On the Baby Bonus.

JOURNALIST: OK, just quickly Penny Wong answering those two questions I suppose, or two views.

WONG: Well Jane I think is suggesting we should go harder than we did, which is pretty unusual for a Finance Minister to get that question I‟d have to say. I think in our community we do want to help families with the costs of children and with the costs of education, because we understand that‟s very important for the future of our community. But you have to also make sure it‟s sustainable which is what the Government‟s doing. In terms of the Baby Bonus the changes don‟t start until next year, so I‟m not sure if that was Gunther‟s question. But we‟re not making these changes until 1 July next year.


JOURNALIST: Okay, well, Penny Wong thank you for talking to us.

WONG: Good to be with you again.