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Transcript of Press Conference of the Leader of the Opposition: Sydney: 8 September 2004: Family and tax policy.



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FEDERAL LABOR LEADER MARK LATHAM

TRANSCRIPT OF PRESS CONFERENCE

SYDNEY

7 SEPTEMBER 2004

*E&OE ** Subjects: Family and Tax Policy

Today I’m launching Labor's tax and family policy. This is a policy to take the financial pressure off Australian families. This is a policy to ease the squeeze on middle Australia.

As I've been moving around our country over the last nine months, people have been saying to me - the mums and dads have been saying it, the young single people, the hard workers, the great backbone of our nation, middle Australia, the taxpayers and families on $25,000 to $85,000 a year they've all been saying - ‘Ease the squeeze. Take financial pressure off Australian

taxpayers. Take financial pressure off Australian families.’ They've been saying, ‘Ease the squeeze from the impact of the highest taxing Government in Australia's history.’ They've been saying, ‘Ease the squeeze against very high levels, record levels, of household debt in Australia.’ They've been saying, ‘Ease the squeeze against the family payment crisis that so many Australian families face.’ Six hundred thousand families with average debts of a $1,000.

They've been saying, ‘Ease the squeeze from the decline in bulk-billing and higher medical costs out-of-pocket for Australian families.’ They've been saying, ‘Ease the squeeze from the growing costs of education, at school, at TAFE, at university.’ It’s a cry for help from people who need financial relief.

We need to ease the financial pressure on Australian families. We need to ensure that middle Australia has a government that’s on their side, a government that understands the real life circumstances of these families, the

financial pressures and challenges that they face. Labor is on their side and our package today proves it.

On budget night, like the rest of the country, we were shocked, absolutely shocked that the Government failed to provide tax relief for people under $52,000. The Government forgot about 80 per cent of Australian taxpayers. What sort of Government forgets about 80 per cent of Australian taxpayers? The hard workers on $30,000, $40,000, $50,000 a year, they deserve incentive as well. They deserve reward for effort. I’ve believed in these values all my life - that if you get stuck in, you have a go, you work hard, you try your hardest in life, you need a government that is there saying, ‘Come on do more’ and giving you the incentive to get on with the job.

These values of hard work and incentive need to be restored to the tax and family systems under which so many Australian families are now struggling. Labor hasn't forgotten about these people. Our working tax bonus will provide relief of up to $416 a year or $8 a week to taxpayers earning up to $52,000 per annum. This is the tax relief the Government said couldn't be provided. There they were saying that they’re experienced economic managers and

they couldn't give Australian taxpayers under $52,000 a year the positive experience of a tax cut. That's what they were saying on budget night. Labor is filling the gap and providing that relief.

Labor will provide tax relief to all the taxpayers who missed out on budget night. The PAYE taxpayers, the self-funded retirees, the part-pensioners. Our working tax bonus incorporates the existing low income tax offset. For existing PAYE taxpayers, it will be paid fortnightly unless they specifically opt for an end of year payment. New PAYE taxpayers will make a straight choice between fortnightly and annual payments, and all non-PAYE taxpayers will receive the working tax bonus at the end of the financial year.

This important new benefit is the equivalent of a tax-free threshold of $8,447, providing significant incentives for low income Australians to work more without extending this benefit into the higher reaches of the tax system. The full $8 per week working tax benefit will be available to taxpayers on $30,000, $40,000, $50,000 a year - the PAYE taxpayers, the people working hard on $30,000, $40,000, $50,000 a year, the middle Australians forgotten, absolutely forgotten, by the Howard Government. Labor will also do more to make our tax system internationally competitive, stepping up the threshold for the top marginal tax rate from $80,000 to $85,000 in 2006-07. The other income tax cuts in the May budget will be paid in full by a future Labor Government.

Our tax policy is about fairness, it's about tax relief for all Australian taxpayers. It's also about welfare to work incentives for low income Australians. It provides significant tax relief for the great band of middle Australians - $25,000 to $85,000 a year, and the national economic benefits

that come from a more internationally competitive tax system.

Labor also believes in a superannuation tax cut for all working Australians, reducing the contributions tax from 15 per cent to 13 per cent. The Howard Government is delivering superannuation concession to just 10 per cent of Australian workers: five per cent with its co-contribution scheme and another five per cent with its reduction in the superannuation surcharge.

The Labor way is a tax cut for all. The Labor way is a tax cut for all, building up retirement incomes by reducing taxes, feEs and charges. We want Australians to get the full benefit of their superannuation, full odds on their superannuation, instead of having it eaten up by one of the worst taxes in the system - I mean, there are some bad taxes in Canberra and one of the worst of them is the superannuation contribution tax.

Tax reform is the first element in this package. It’s the first element in Labor's policy. The second is the reform of the family payment system. Labor will replace the complex and debt-ridden family tax benefit A and B to the Better Family Payment that takes the pressure off Australian families. Our new payment will ease the squeeze on middle Australia. Parents work hard to raise the next generation of young Australians. We know that - parents are looking after their kids. They're working hard. It would be one of the most important social tasks - raising the next generation of young Australians. They deserve the very best system of Government financial support in return. They don't deserve the complexity of the current system. They don't deserve the absolute nightmare of the family payment debt crisis. They don't deserve to be punished when they work overtime or when their partner decides to join the work force. And they certainly deserve better, so much better than the pre-election lump sum payments that merely compensate for family debts and lose their value because of the introduction of the CPI inflation, something that the Government has yet to correct in practice.

Under Labor's tax plan and better family payment, nine out of 10 Australian families currently receiving family payments will better off on a weekly basis. If you are receiving family payments now, nine out of 10 Australian families will be better off under our tax and family initiatives than the current system. They’ll be doing that on a weekly basis. Take the example of a dual income couple with three children. Splitting their income fifty-fifty. These middle Australian families on a combined income of $50,000, $55,000, $60,000, $65,000 a year will be $132 better off on a weekly basis under Labor compared to the Coalition. For a single income couple on $50,000 a year with two children the weekly gains under Labor compared to the Government are $85. At $60,000 they’re $66 ahead on a weekly basis - nine out of 10 families better off on a weekly basis. The beneficiaries of a simpler, fairer and more efficient family payment system and the beneficiaries of Labor's fair tax relief. A sure sign that Labor is on their side. A sure sign that Labor is easing the squeeze on middle Australia.

How have we achieved these goals? We have done it through quality reform - the quality reforms solving the problems that the Howard Government has been neglecting for years. We've actually been working on the plan that solves the problems that this administration has been neglecting for ages. The big improvement is the introduction of our tax free guarantee, providing two tax-free thresholds for every family receiving payments with a child under 18, even if the family has one income earner. Now, for years - in fact, I would say decades, Mr Howard has been talking about income splitting but never delivering. Well, Labor has. Not talk: actually delivering, with an element of income splitting in our policy.

We'll provide a 12,000 tax-free guarantee, two tax free thresholds for a single income family, paid weekly through the tax system or, if they choose, at the end of the year. Sole parents earning up to $50,000 a year will have a tax-free guarantee paid through the family payment system. Sole parents above $50,000 will have it paid through the tax system.

The second big improvement is pushing out the means test on family payments from the current point of $33,000 under FTB A to 50,000 under our new system. This puts dollars into the pockets of families, and it helps take the pressure off the household budget. It also increases work incentives, bringing down effective marginal tax rates, plus it fixes the family debt trap. Under Labor, it won’t be possible to have a debt on family incomes of less than $50,000. We’ve all been hearing the complaints from families about debts, about the debt crisis. Under Labor, it won't be possible to have a family payment debt on less than $50,000. This is a major breakthrough in the administration of policy for the benefit of Australian families.

With our other improvements to the administration of the system, Labor has found a solution to the family debt crisis and in a short time Wayne Swan will be talking about those administrative changes and the way in which we've solved the problem that the Howard Government has just left hanging - the family debt crisis.

The third big gain is the creation of strong incentives and investments for people to move from welfare to work. This is the major economic reform that we are putting forward today and major economic reform based on three principles: participation, participation, and more participation. They're the principles that we're advocating in this major economic reform.

This is the agenda the Howard Government talks about, but that's all it's ever been. It’s only ever been talk. The national shame we face as Australians - and we have got to face up to this reality - lies in the 800,000 children growing up in jobless families. Don't talk to me about good economic management by the current administration. If they were good economic managers, they would be giving these children the important role models in life, the role model and positive example of work in their home. Parents who

are working, providing the positive influences and letting them know that work is the way of the future.

I've been to public housing estates. I represent public housing estates. We're getting into a third generation of young Australians who don't know what work is, who haven't seen it in their house from their parents, from their grandparents. This is the entrenchment of poverty and a decline in participation that we can no longer tolerate as a nation. We've got to bring these people into Australian opportunities. We've got to bring them into the Australian way, the real fair go of looking after them, providing services, providing incentives and then demanding from them responsibility and effort in return.

I'm an optimistic person about this. I'm a real optimist about what we can achieve in Australia, if we get policy right. I think we can tackle this entrenched problem of poverty. I think we can tackle this entrenched problem of disadvantage and bring these people back into real life Australian opportunity, living out the ethos of a fair go for all. So I'm optimistic that these reforms will make a great difference. I also say that the best welfare policy is a job. The best welfare policy that’s available in life is a job and work in the home provides that positive influence for the generations that follow. We've got to get people active in the labour market providing training and child-care services, giving the 80,000 parents from jobless families in Australia an absolute foothold on the ladder of opportunity. So we will be providing in Government the opportunity and we’ll be demanding responsibility in return.

In this package today, the Melbourne Institute has confirmed that our tax and family reforms will bring an extra 72,000 people into the labour market, compared to the Government's May budget which had a participation impact of just 3,000. That was their best go. After eight years their best go was a participation impact of 3,000. We're putting forward a policy, with modelling from the Melbourne Institute, saying we’re increasing participation in the labour market by 72,000.

The Intergenerational Report so trumpeted by the Treasurer demanded significantly increased participation. It’s only Labor that’s delivering. It's only Labor that's delivering with good economic policy and a better society. Simon Crean will elaborate on these reforms and the Melbourne Institute work and also outline the nature of the savings measures in this package. But, on the bottom line, our package is fully costed and fully funded. Our package is fully costed and fully funded and, if you want to look at the net impact on Commonwealth revenue, overall, Labor is reducing Commonwealth revenue in this package by $5.5 billion. We're getting the tax man out of the pockets and off the back of middle Australia, reducing overall Commonwealth revenue by $5.5 billion, consistent with our budget pledge about lean Government, about reducing the proportion of revenue to GDP. We’re bringing the revenue down in net terms by $5.5 million. But most of all this is a package that eases the financial pressure on low to middle income Australians that rewards hard

work, that’s the importance of incentive. It says that participation is good and opportunity is even better. It says that we can do some things on the economic front that are beneficial to the entire nation.

It proves that with better policy and a change of government we can be a better nation. I say that, with these better policies and a change of government, we can be a better nation, so much better than the Howard Government and the problems that they’ve just put on the too hard shelf, that they’ve just stored away saying they’re too hard to try and fix.

Labor believes in a stronger economy and a fairer society easing the squeeze on Australian families. That's the Labor way, that's the policy we're advocating and, from every day until election day, I'll be talking about financial pressures on Australian families, how there is a better way, how the Howard Government problems that have just been sitting there can be solved, how we can do so much more to ease the squeeze on middle Australia, and build fairness, opportunity and participation in this great nation of ours. I will now ask Wayne Swan to talk about the resolution of the family tax crisis.

SWAN - Thanks very much, Mark. I just want to talk about our plans to fix the family payment debt trap. As I think you're all aware, in the last budget the Government put a temporary $600 band aid on the family payment debt trap just to get it through the election. That is John Howard made a conscious decision not to reform family payments. He made a decision to leave the threat of an end of year family payment debt hanging over the heads of tens of thousands of Australian families - that is, in that budget he squibbed it.

The result has been that in the last three years family payment debts have hit 2.4 million families and that has put them under unprecedented financial pressure. These debts punish families that work harder, that work some overtime, and they punish families that return to work following the birth of a child. Something like 57 per cent of all family payments are incorrect. Just imagine if 57 per cent of the pay packets in this room were incorrect every year. Now these mistakes in debts are the reason that before the last election that John Howard offered a one-off $1,000 debt waiver, which he clawed back after that election.

In fact, in the subsequent three years after the last election, John Howard clawed back $1.8 billion from Australian families. So what he has been doing is balancing his budgets on the back of family debt. Now this time he's at it again: he's offering a $600 supplement which is legislated to disappear within six years. This $600 supplement that he goes on about is legislated to disappear in six years. He doesn't believe in the $600 payment. He didn’t want it but he needs it to get him through this election. Well, the last thing that Australian families want is John Howard's stop-start assistance. He starts it before each election and he stops it the day after the vote, when scrooge

returns to Kirribilli and the clawback begins. It is nothing more than a bandaid and a bribe.

Labor's package sweeps away the debts, the tax stripping, the bribes, and the clawbacks. It's a long-term plan to end financial pressure on low and middle income families. So what are the debt busters in this package? Essentially, there are three debt busters in the package. The first debt buster is the payment of maximum rates of family payments to every family earning less than $50,000. That will remove more than one million families from any risk of debt.

There’s a table that's been handed out with all of the papers - I didn’t get a chance to talk to you about earlier - but the maximum rates of family payment have two components. A family component that goes to each family and they qualify for it by the age of the youngest child. So, if your youngest child is under five, the family payment is $102. Then there is a payment per child and you can multiply that by the number of children and that will give you the maximum rate of family payment. So as I said this will remove more than one million families from any risk of debt. There will be a 20 per cent taper for those earning between $50,000 and $80,000, and a 30 per cent taper beginning from $85,000.

The second debt buster in this package is the merging of Family Tax Benefit A and B and the $600 supplement into one simple fortnightly payment. Family Tax Benefit B will be replaced by the guarantee of two tax-free thresholds for single income families and Mark referred to that before. As a result, single income families with kids will pay less tax under the Latham Government than they do under John Howard. And we are relacing the $600 supplement with higher fortnightly payments because we know that 95 per cent of families choose to take their family payments fortnightly. Labor will make sure they have more in their pockets when they need it most. So in short we are creating real simple payments that families can factor into their real budgets, their real weekly budgets.

So Family Tax Benefit B is the cause of thousands of large family payment debts. At the moment it punishes men and women who return to work after caring for a child and it punishes those that are working overtime. John Howard’s own research shows that in any twelve month period 73 per cent of mothers with dependent children are in the labour force at any one time. This system will be simple and it will stop punishing mums who work full time, part time or just casually. For single income families, Family Tax Benefit B will be replaced by, as I said before, two tax-free thresholds. The third debt buster in this package is a new system of family payment administration. Labor will put a stop to John Howard’s annual raid on people’s tax return. Families who advise of changes in income will be at virtually no risk of a family payment debt. If a family advises promptly of a change in income, the Government won’t go trawling back to raise debts. Labor will also ensure single parents who receive maintenance payments in lump sums aren’t saddled with debts.

There is also a major welfare to work message in this package. Labor will invest a quarter of a billion dollars in jobless families and it will build on already announced commitments to tackle poverty, a commitment to a national strategy through the Council of Australian Governments. This package recognises that parents are doing a vital job for all of us bringing up the next generation of young Australians and this reform package delivers on that vision. Thank you

CREAN: This is an $11 billion package which does three things. It rewards hard work, it supports families and it strengthens the nation. It strengthens it in economic terms; it strengthens it in social terms. And, like all of our policies, it’s fully costed and fully funded. It delivers a tax cut to all taxpayers earning less than $52,000 and it gives substantial benefits to families of up to $132 extra per week. Nine out of ten families in receipt of family benefits are better off under this package than under John Howard. But this is also a package which is more than just about dollars in the pockets, because we have crafted a reform package as well: reform to encourage greater participation in the work force.

Treasury tells us that, with an ageing population, increasing participation is the new economic reform agenda for this country. The Liberals of course have ignored the warnings. They’ve talked about the problem but they haven’t acted. We have acted. The combination of measures that have been outlined by Mark do just that. But don’t just take our word for it. We got the Melbourne Institute to model the impact of our measures. The Melbourne Institute have specialists modelling expertise on work force participation and on the interaction between the tax and the Family Transfer System. What did they conclude? They said that on the Government’s Family Tax Benefit measures announced in the last budget, 22,000 people would choose not to look for work - $19 billion spent but 22,000 discouraged from looking for work. In contrast, our package, the consolidation measures, encourage 41,000 additional people to work. In addition to that 41,000, our tax cuts encourage a further 30,000 - 72,000 in total.

This is a huge opportunity, not just for the jobless, and they in particular are the beneficiaries of this, but for the economy as well. And of course there is a dividend for this reform. It doesn’t just benefit the individuals, it benefits the budget. It pays a dividend to the budget, good for the individuals, good for the economy. Smart reform: reform for a purpose.

This $11 billion package is fully costed and fully funded. Done through making hard decisions and not running down the surplus. In keeping our budget pledge of reducing expenditure as a proportion of the economy and reducing taxation revenue as a proportion of the economy, not drawing on the surplus, in keeping with our guarantee to keep downward pressure on interest rates.

The savings are a combination of both revenue and outlay measures, tough decisions but the right decisions. On superannuation, there are three important measures. One of those measures is in keeping with international practice. Two others of the measures are measures under this government that benefit only five per cent of the work force. But Labor has funded a tax cut for the whole of the work force on superannuation contributions. This is Labor reinforcing our commitment to a universal superannuation system not just encouragements and incentives to certain pockets of it.

We’ve also increased, by a small proportion, the amount of excise on cigarettes. This is a huge health issue in our economy and the Australian public as a whole has to pay for it. We want to ensure that we are sending a signal to deter young people from taking up smoking but against the significant benefits that this measure contributes to through tax and through family benefits, to families, they’re substantial.

On tariffs what we’ve proposed is a phased reduction, the same end point, we’re still committed to the reform, but we’ve learnt from the experience. We want to phase the pace of the tariff reform so that Australian people and the Australian industry can adjust. Over three years, this package provides $11.2 billion gross in tax cuts, $5.5 billion in net terms. The outlays measures are $4.4 billion, the tax savings measures $5.7 billion. And the participation dividend produces the $1.2 billion benefit to the budget as people move off welfare. It’s a package that’s fully costed, a package that’s fully funded; big benefits for individuals, great reform for the Australian economy.

LATHAM: Thank you, and happy to take questions.

JOURNALIST: When you are Prime Minister and any extra bit of revenue you get, will your priority be services or tax relief?

LATHAM: The priority is in the policies we’re setting out in this campaign. You can judge me as Prime Minster by the commitments we’re making in the campaign.

JOURNALIST: Mr Latham, why did you find it necessary not to wait for the PEFO figures and does that show the economy is really quite strong?

LATHAM: We’re not waiting for PEFO because our package is fully costed and fully funded. It’s neutral in terms of impact on the budget surplus and for that reason we’re confident in putting it out, advocating it, and arguing through this election campaign for the important ways in which we can ease the squeeze on middle Australia, take the financial pressure off Australian families. So it’s interesting to note, in the different claims about economic responsibility, we’re the only party that’s been putting out policies that are fully costed and fully funded. The government has a different approach where they’re throwing money around in a way that seems that they’re running down the surplus at least short of what we know about that

on Friday in PEFO. We’re confident in this because it’s fully costed and fully funded.

JOURNALIST: You say families are better off on a weekly basis what proportion of families are better off on an annual basis?

LATHAM: The annual figures we believe, in as much that they reflect the $600 supplement, that $600 supplement is not real. It’s a supplement because of the change in indexation arrangements, the move to CPI away from the wage-based indexation is losing value and we produce figures here showing that that value erodes over a six to seven year period. The $600 payment is not real because of the way in which it is simply a bandaid compensation for the family debt crisis. For so many families, it’s money that’s going to be used just to tidy up a family debt and they’re never going to see the real benefit of any of those resources. The other thing about the $600 payment, coming at the end of the year in a lump sum, that’s not when the family need it. They need it on a fortnightly basis, as the bills come in, as you pay for the nappies, the food, the clothes, the equipment for sport and school. Families need the support on a fortnightly basis.

We don’t regard the $600 payment as real but we provided, for the point of completeness, tables in the back that give you annual comparisons, if you take the Government’s argument at that point. But, for us, the valid comparisons are weekly and fortnightly because that’s when the families need

the money and they’re the valid comparison we working on.

JOURNALIST: So, what’s the answer to that question? What proportion are better off over a year?

LATHAM: You can look at the tables at the back but we are not treating them as the valid comparison. Our comparison is nine out of 10 better off than those receiving family payments now on a weekly basis - because that’s the valid comparison given the problems - the many, many problems - of the Government’s $600 payment.

JOURNALIST: Are you’re saying you don’t know that figure or you won’t give that figure?

LATHAM: We can provide that figure I suppose but we don’t regard it as a valid figure. We don’t regard it as a valid figure. The comparison we’re relying on is on a weekly basis comparison so that it’s possible to make a real life assessment of the circumstances of these families. They need the payments fortnightly. What use is the $600 to you in practical terms if it’s used to pay for the debt? If it’s a compensation -

JOURNALIST: [inaudible]

LATHAM: Michelle, those comparisons are in the document, the tables that set out the annual comparisons. So if there is anyone there who takes the Government’s argument at face value and wants to look at their individual circumstances they can see those in the tables at the back of the document. But our valid comparison is weekly and that’s why we say nine out of ten are better off.

JOURNALIST: Mr Latham, when will you be submitting these figures to Treasury and indeed will you be submitting to Treasury?

LATHAM: Through the course of the campaign we’ll be complying with the Charter of Budget Honesty.

JOURNALIST: What does that require of you?

LATHAM: That requires us to have our policies assessed and you’ll find in this documentation material from NATSEM that assesses the tax and family initiatives, checking from the Melbourne Institute and the Melbourne Institute material on the participation dividend and also find a letter from the former Tax Commissioner, Trevor Boucher, saying that the working tax bonus is kosher in terms of tax administration. So, you’ve got there assessments and certifications of the independent analysis that been made and that’s a requirement that we’ve been holding to consistently but, through the course of the campaign, we’ll also be complying with the Charter of Budget Honesty and, once these negotiations are worked out between our Shadow Finance spokesperson and the Government, some time after that and some time before polling day, we’ll be lodging our material.

JOURNALIST: Mr Latham -

LATHAM: You’ve got plenty of certification and independent assessment here. Let’s not forget that the NATSEM model that’s used is part owned by the Commonwealth.

JOURNALIST: Mr Latham, John Howard is running the mother of all scare campaigns on interest rates. It appears to be biting, if you look at the polls. He’s also claiming that the participation dividend that you’re banking is simply a heroic assumption because your industrial relations policies will increase unemployment. Do you think you’ve got the capacity over the course of the remainder of this election to pitch your message to middle Australia? Are you confident that they’re going to listen to you rather than the Prime Minister?

LATHAM: He’s got an argument that’s running around in circles, if you listen to the totality of how you explained it. But our participation dividend is far from heroic. It replicates what the Government itself did in the Australians Working Together package, what they did in the [inaudible] package and the Ralph Business Tax reform. So they’ve done it three times.

So you didn’t say it was heroic when they did it three times. We’re doing it here based on the good research findings of the Melbourne Institute which, again, are best practice in this country.

JOURNALIST: What will $8 a week buy you?

LATHAM: It’s assistance that goes a long way further than the Government. Let’s look at the Government’s performance in the last two budgets. They had $4 a week two budgets ago and then nothing. So they’ve had two goes at it for $4, we’re having one go at it for $8. So families and taxpayers are substantially ahead, especially when you combine the reforms to the family payment system that provide very substantial benefits that I’ve outlined for middle Australian families in particular.

JOURNALIST: [inaudible] savings on super. Do you think it’s been rorted?

LATHAM: We’ve got concerns about various integrity aspects and that’s part of our thinking on those superannuation changes. But, overwhelmingly, our belief particularly in regard to co-contribution is that families need the money now. Not many families feeling the squeeze have got a spare $1,000 sitting around that they can put into the co-contribution scheme. They want the support now to reconcile the family budget and take the financial pressure off themselves and their children. So that’s our thinking - that they need the resources now - and that’s why, effectively, we’re bringing that money forward to help them right now.

JOURNALIST: Mr Latham, on a net basis, you’re withdrawing incentive for superannuation. Doesn’t this aggravate the saving investment imbalance in the economy? And, if that’s so, how does that look to put downward pressure on interest rates?

LATHAM: Our approach is about fairness. The Government has got limited superannuation measures. Five per cent of workers might benefit from the co-contribution, five per cent of people from the surcharge deduction. So there’s 10 per cent of the relevant population. We’ve got tax cuts for all working Australians, bringing down the superannuation contribution tax from 15 per cent to 13 per cent. That’s a fairer approach that gives incentive for all Australian workers to save. Combined with our policies to hold down the fees and charges, get rid of the excessive entry and exit fees in superannuation, you’re actually building up the best superannuation model possible when you’re maximising the money that goes in and minimising the drag and withdrawal of that money on the way into the accounts that comes from taxes, fees and charges. So the more money that goes in, the greater the benefits of compound interest and managed investment strategies, and the greater the retirement income benefits for working Australians when they get to retirement age.

JOURNALIST: If nine out of 10 families are going to be better off with the family tax package, who are the one in 10 and why won’t they be better off?

LATHAM: You can see those in the tables but an obvious area is that, with our replacement of the FTB B, you’ve got high income, single income families, because our single payment is means-tested, then obviously there are people affected there and that’s set out very clearly in the tables. And that’s only fair.

JOURNALIST: [inaudible]

LATHAM: We’ve got a sensible and very fair means testing measure here and that's why we’re providing such substantial benefits to middle Australia, easing the squeeze, taking the financial pressure off. That’s our

priority. What we're doing in that area is consistent with the things that we want to achieve for families that are struggling so much with their household budget.

JOURNALIST: How can you say that the $600 payment is not real when there are families who don't have debt and that you can't guarantee people will still have debt under your system and that you will still take back overpayments through the tax system?

LATHAM: If there's a problem in the integrity of the way in which it's done, of course any Government would take it back - that’s only fair and reasonable. But, in relation to the $600 supplement, for so many families it is eaten up by the debts and, as we know, the Government snuck in a sneaky one in its legislation to move from wage based indexation to CPI. The NATSEM figures show that over time there is an erosion of the $600 to zero. And it’s also not real if you were waiting, fortnight after fortnight, for some financial assistance to pay the bills when they come in on a fortnightly basis.

The real life circumstance is that families manage their budget on a fortnightly basis. They sit around the kitchen table, work out the bills, and work out the income. I’ve seen them do it. It is on a fortnightly basis. It is not some sort of accounting practice where at the end of the year people try and reconcile the household budget and work it out that way. Real life is fortnightly experience in making the household run and making the sums add up. That's the real life experience and that's why the Government's $600 payment, combined with the debt problem, the indexation problem that they haven't corrected. That’s why it’s full of holes.

JOURNALIST: There seem to be a lot of families in this package earning $30,000, combined incomes, on an annual basis that are actually worse off. How do you explain this and how can you say this is helping struggling families?

LATHAM: It's on a weekly basis and, if you look at the tables, and you see the benefits that are provided. It is consistent with the argument that I’ve been making. Even if you take the annual assessment and the Government at face value, the vast majority of Australian families are better off. And that’s clear from the tables. If you want to focus on the annual ones that’s clear as well.

JOURNALIST: Even taking the weekly tables, you've got sole parents on $65,000.

LATHAM: Which page are you on?

JOURNALIST: Eight. Sole parents $65,000 -

LATHAM: Sole parent; which type? How many children?

JOURNALIST: One child under five gets nothing. Do you agree?

LATHAM: Yes, that's what it shows.

JOURNALIST: Couldn’t that be one of your struggling families? Because someone who was in a job that [inaudible] effort to earn that money would surely have quite a lot of costs to keep going.

LATHAM: They are no worse off than the Government. But look through the table, particularly when you get to $40,000 a year. They are $46 a week better off under us. At $45,000, $66 a week better off under us. So,

too, at $55,000, $41 better off. At $60,000, a sole parent is $20 a week better off and you don't actually get into negative numbers until you get down to $95,000 in private income per year. So you can see in the totality of our treatment of sole parents that they are a mile ahead under our package compared to the Government, on that weekly comparison.

JOURNALIST: Are you seriously saying that to families trying to sort this out that a family with three children who would get $1800 from the Government that’s not real, don’t take that into account?

LATHAM: Families are saying it's not real, if it's eaten up by a debt.

JOURNALIST: But it’s not.

LATHAM: Well, if it's not, it is going to be eroded over time by the indexation problem that the Government has caused. If you want to go through the annual tables, they're there. Dual income couple with one child aged under five years, fifty-fifty income split, under Labor, annual, all in the positive. Dual income couple with two children - one aged under five, and one aged 5 to 12 years, fifty-fifty income split, other than the zero number, all in the positive. That pattern, broadly, is repeated through the remainder of

the tables, where you can see the vast majority of family types, even on the annual comparison, are better off. But in the real life circumstances, where the bills come in fortnightly, where the supplement is eaten up the debts, where the supplement is eroded over time by the shift to CPI indexation - in real life circumstances, on a fortnightly basis, the gains for Australian families are absolutely substantial.

JOURNALIST: What you do say to the losers who are considering whether to vote for you? What is your message to those who do lose?

LATHAM: You've got to consider with some of those negative numbers that I just mentioned at the lower income level that Labor's approach is not permanent welfare: Labor's approach is welfare to work. For any of those so-called losers, as you describe them, at the bottom end, our future for those families is participation and work. Not a life of welfare. Not of life of relying on Government transfer payments. That’s why our substantial incentives and reduction of effective marginal tax rates at the bottom end, the movement of people from welfare to work, combined with our Families in Work initiative, the $248 million package, the extra training places, the child care assistance, this is the best way of helping people, in tandem with our heavy commitments in health, education and housing, the social wage, that is so important to low income Australians. I've seen these areas and lived through them. I tell you what: long-term welfarism is not a future, especially when it passes from generation to generation and the second and third generation lose sight of the value of real life work and the positive role model and impact that that has on their young minds in the future.

JOURNALIST: How does slowing down tariff cuts in the TCF and auto industry contribute to productivity and economic reform?

LATHAM: We see it as a more structured approach to industry policy. It's the same policy goal; we just take longer to achieve it. That's something that we have practiced in the past in Government to do these things in a structured, gradual way, rather than the one big leap down that the Government proposes for those industries. So we see it as a better balanced approach. At the bottom line if you are talking about one per cent changes in tariff compared to exchange rate variations and the like - as a trained economist, you can see yourself that you are talking about absolute things at margins.

JOURNALIST: But would you maintain the two industry assistance programs for those sectors?

LATHAM: Yes, there is no change in the industry programs that we are proposing. We believe in the industry support and the tariffs are coming down, just over a slightly longer period of time.

JOURNALIST: Peter Costello said in the budget that the baby payment was designed to get Australians to do their patriotic duty and have more babies. What do you think the impact of your policies will be on family behavioural patterns? Is it encouraged for people to have more babies? Is it designed to have any effect on people’s behavioural patterns?

LATHAM: We regard our baby care payment as superior policy. There has been a public concern about the lump sum maternity allowance encouraging teenage pregnancies. In terms of behavioural effects of this policy you are better off, again, paying it on a fortnightly basis, which is the nature of our baby care payment versus their lump sum maternity allowance and that of course is the substantial public policy [inaudible]. As for more private matters, we’ll leave those, I think, in the private domain.

JOURNALIST: As somebody who is presenting themselves to the electorate as proponent of openness and accountability in Government and in the political process, you sound like somebody trying to avoid scrutiny with your view on the Charter of Budget Honesty, at least to delay analysis of your package by Treasury?

LATHAM: [inaudible] scrutiny where you've had these independent assessments by our peak modelling organisations in Australia - NATSEM and the Melbourne Institute.

JOURNALIST: But you haven't released the NATSEM one. When are you going to release that so we can actually read it? You keep saying, in terms of openness, you keep quoting from it -

LATHAM: It will be available

JOURNALIST: When?

LATHAM: It should be available today.

JOURNALIST: It hasn't been available.

LATHAM: I wasn’t in the lockup but possibly the idea is to let you absorb the policy changes and the quite substantial policy document that has been circulated and then good policy wonks like yourself can get into the detail of the Melbourne Institute and NATSEM report.

JOURNALIST: But they’re not Treasury, Mr Latham, are they? They don’t hold the weight of Treasury. Why are you avoiding Treasury scrutiny?

LATHAM: NATSEM obviously does work for Government and their model is part owned by the Commonwealth. If you want to argue about Melbourne Institute, you’ve got a whole series of Government Ministers who

go there and, without naming names, feed out stories to certain journalists in

the national broadsheet to get a splash if something is going to be done about welfare to work. I wish I had a dollar for every one of those headlines that Tony Abbott fed in and nothing ever happened. He's been turning up the Melbourne Institute conferences talking about this stuff. We're acting on it. We’re actually doing it and we're doing it with the independent assessment and analysis of the peak modelling organisations, forecasting organisation in this area of expertise.

JOURNALIST: Mark is right, isn't he? Treasury and Finance are the accepted arbiters on both sides of politics. In the interests of good public policy and transparency with your voters, why won't you submit this?

MARK LATHAM: We will. I’ve answered that, in terms of complying with the Charter of Budget Honesty.

JOURNALIST: At what stage?

LATHAM: When we were doing it, we'll let you know, but it will be submitted.

JOURNALIST: Mr Latham, the Government is obviously going to attack you on the use of behavioural dividends, is this going to be only you are going to use or are we going to see a lot more of those?

LATHAM: No, it’s the only one we've had in the pipeline and if the Government attacks us on that they are attacking themselves because they did the very same thing with Australians Working Together and behavioural effects and bonuses were identified in the Ralph Business Tax Reforms and the ANTS GST package. So, if they're attacking us on this, they're attacking themselves.

JOURNALIST: What are you going to do with your $1.8 billion in the PEFO on Friday?

LATHAM: We made some comments about that in relation to health policy yesterday. But, as I also said yesterday, we don't take Mr Howard at face value all that often in our understanding of PEFO. We’ll actually look at the figures in a considered way on Friday and make our appropriate public policy responses, consistent with our budget pledge and good, lean, efficient Government.

JOURNALIST: Are most of your so-called savings to fund this actually, including the tariff slow down, new taxes?

LATHAM: There are some taxation increases, increases in levies, but we believe they are being done in a fair and reasonable way, with the overall net benefit of driving down Commonwealth taxation revenue. And the overall economic reform benefit of economic incentives for people under

$52,000 a year, the economic reform benefit of participation, [inaudible] - participation, participation and more participation, getting people out of poverty traps and poverty ridden public housing estates and into real life Australian opportunity. They are big economic reforms that are beneficial to this nation. I believe in an economy based on incentive, reward for effort, and an economy that provides people with the chance to participate and take up

their best opportunity in life.

JOURNALIST: Are you expecting the Coalition to counter today with its own extra set of tax relief?

LATHAM: On yesterday’s form, they’ll be out at 3 o'clock.

JOURNALIST: How do you help families by making their clothing more expensive for longer by increasing the cost of one of their few luxuries - the cigarette; awful thing that they are. Even increasing the departure tax -

JOURNALIST: He’s recently reformed.

LATHAM: Recently reformed.

JOURNALIST: I am thinking of the poor devils that do smoke.

LATHAM: You should stay that way, Malcolm, because on the serious side 19,000 Australians are killed by smoking related illnesses every year and this has a social cost on our community of $21 billion. This is a modest increase of three per cent on a packet of 25 cigarettes. In terms of a disincentive to smoke, I think that's good health policy and, in this package,

good financial policy as well. On your first point, the tariff changes obviously provide Australians with a very good incentive to buy Australian and to assist Australian industry. As I pointed out in Mark’s question, in terms of the amounts we are talking - one per cent variations compared to exchange rate movements, we’re not talking about anything that could be regarded by trained economists as substantial.

JOURNALIST: Aren't you sending mixed messages here, though? You say you believe in the tariff reforms, but you are also saying - and this is just a small thing at the margins to raise money - that slowing it down is incentive to buy Australian. Which message do you send?

LATHAM: Well, the mixed message is what you are hearing from the Government. When a Treasurer on Sunday says that any running down of the surplus would put upward pressure on interest rates and the very next day that’s what his Prime Minister does, with unfunded $1.8 billion commitments in health. That's a mixed message. What are they on about? That's not a path that we take. We have fully costed and fully funded this package.

JOURNALIST: What about your mixed message?

LATHAM: What's the point? I was focusing on the mixed message of the Government. What is the point you're making about the policy? I've answered that in terms of two or three questions.

JOURNALIST: You say you believe in lower tariffs on the one hand and that this is just a temporary slowing but on the other hand you are saying this is also an incentive to buy Australian, which is [inaudible] direction.

LATHAM: It is obviously some incentive to buy Australian and, in terms of the reductions, we achieve the policy goal in a longer time frame.

JOURNALIST: Mr Latham, you once said that Australians would be able to save more if they didn’t spend so much on luxuries like cigarettes so you've obviously built in a savings incentive here by making ciggies more expensive. But what about your other savings initiatives that you’ve talked about in recent years? I’m talking about the matched savings accounts. What’s happened to those?

LATHAM: We've been analysing those and we'll have things to say further in the campaign to stick with our financial pledges. Our commitment is to good economic policy and if you are talking about the life opportunities that come out of those type of initiatives, this is the nature of this package as well. This is the nature of life opportunities through participation, lifting people out of poverty, lifting them out of a life of being outside the system and getting them into participation opportunity, extra services, training, child care, a real chance to advance themselves in life and, most importantly, give the demonstration effect to their children that the future lies in work, not welfare. If the Federal Government could only understand the corrosive impact of long-term welfarism on families. If only they could see what they've done by leaving so many people outside the Australian circle, the winners circle of participation and opportunity. If only they could see what they’ve done. I know they don’t visit public housing estates or put poverty on the agenda, but this is a national problem we need to take seriously: 800,000 Australian children growing up in jobless families -800,000. Without the demonstration effect, the positive role model of work. We've got to do something about that.

JOURNALIST: Does that mean matched savings accounts might have to go?

LATHAM: I’ve answered that.

JOURNALIST: You haven't actually. You talk about your possible priorities.

LATHAM: My friends, having fielded your questions for three or four months about when I'm doing my tax and family policy, and standing here in front of you today, maybe we can just not start to get into the next round of when are you going to do something stuff. Because, as you well know, all will be revealed during the course of the campaign. So, fair crack of the whip, fair crack of the whip! We’re here today with this initiative. Let's not get on to the merry-go-round of speculation about what comes in the coming weeks.

JOURNALIST: Can I just get you to run through the thinking behind the $5 a week tax cut at $80,000 and above but a zero dollar outcome for people on $60,000 and $70,000? You were talking about filling the gaps but you’ve left that group.

LATHAM: We are paying in full the Government’s measures from the budget on those income ranges and our purpose, in stepping up to the $85,000 threshold, is to give Australia a more internationally competitive tax system. We all know that we run the risk in this country of a brain drain. We lose our very best people who go to more favourable taxation regimes. If you look at some of the comparisons on an international scale - in Canada, the top threshold, the top rate is $111,000; Germany is $90,000; Italy is $120,000; Singapore $333,000 and Japan $234,000. The step up is appropriate. Our policy actually jumps us over France. It has been at $81,176. As a measure that continues the drive towards a more internationally competitive tax system. That’s the reason we're doing it. I have made a lot of focus about that in the past and the importance of it.

JOURNALIST: [inaudible] close to one million people on that band as well. You're picking up a lot of them with family payment changes but there are few single families there who would look at your tables and wonder why they didn’t get included.

LATHAM: I believe international competitiveness is good for all Australians under the conditions where a Government actually gets the competitiveness of productivity in the growth and then has participation and opportunity policies to ensure all Australians share in the benefits. And that is,

in a nutshell, that nature of the Labor package. Growth, productivity and competitiveness, underpinned by important participation and opportunity reforms. So we're getting the total economic framework right, mopping up in so many areas and resolving problems that have been sitting there, left unattended to by the Howard Government for years.

JOURNALIST: Is there a danger that voters won’t understand the package?

LATHAM: No, I think people can understand the package. What they can understand at the moment, of course, is the family debt crisis, impacting on 600,000 Australian families - an average debt of $1,000. I tell you what they understood on budget night: I reckon it took everyone under

$52,000 about five seconds to understand that they missed out on a tax cut. So the understanding is in the quality reforms and repairing the neglect of the Howard Government. And I think, again, and with my faith in the good judgment and capacity of the Australian people there will be a good understanding of what we're trying to achieve.

JOURNALIST: Do you think people on $65,000 a year are going to accept that international competitiveness is better than a tax cut, which they’ve missed out on and, depending on their family situation -

LATHAM: Well, they earn $65,000 a year. The tax reduction is in the May budget.

JOURNALIST: How does that fit with your ladder of opportunity, if there is nothing for that group in particular, $50,000 to $80,000?

LATHAM: You can see from the table if they’ve got children the extra benefits that flow from the better family payment system, not just in dollar terms, but helping people overcome the anguish of these debts so they've got a life and it’s not involved in perpetual argument and worry, arguing the toss with Centrelink. When you can actually get on with a bit of certainty and simplicity about how the family payment system works, it's not going to leave you with unexpected debts that tip your family budget off the table and over the edge. So in terms of peace of mind and financial support there are huge benefits, plus, coming back to the first point you discussed, the benefits of weekly and fortnightly gains as the bills come in - the real-life circumstances. Our policies are pragmatic. They match up to the circumstances that middle Australia has been facing. The financial squeeze, the family debt crisis and the lack of substantial quality reform.

JOURNALIST: What level do you think unemployment would have to fall to, to supply those 72,000 jobs and battle that terrible entrenched poverty?

LATHAM: They’re coming into the labour market. This is a measure about participation. You can see the different estimates by the Melbourne Institute and our commitment to provide 80,000 training and child care support services for the people who come in to participate. And overseas experience, I understand there is an example in Britain, where they had a low to medium estimate, 75 per cent range, of how many people would get a job and it ended up being close to 100 per cent. Once you provide the services and the opportunity and demand the responsibility and provide the incentive to move from welfare to work you get fantastic results. Anecdotally, from my own experience, the people in public housing estates are not wanting to be on welfare. They're not wanting to pass on welfarism from one generation to the next. They don’t want their children to have a life that is disconnected from work. People - human nature in my experience in this country - want to work but they're caught in poverty traps. They're caught in disincentive effects. They’ve lost touch with the opportunities that come from

participation. We want to reconnect them with those real life opportunities and experiences. I think they will respond in a very positive way. Our estimate is conservative. They’ve taken lower range estimates from the Melbourne Institute. I think it’s possible, looking at international experience, that there will be a better result in terms of prudence and a conservative approach in this documentation; we’ve set it out at 75 per cent. But with the services that come in it is good to have participation and it is good to have more Australians actually wanting to climb the ladder and do better for themselves and, most importantly, do better for their children.

JOURNALIST: Sole parents with two children, I know you say you have it on a weekly basis -

LATHAM: Which page?

JOURNALIST: Page 16. Annually, they're worse off until you get to $40,000.

LATHAM: This is the point we make about the real life weekly and fortnightly impact of what we're trying to achieve. In terms of transparency and disclosure we are providing this material but our argument, overwhelmingly, is that the real life impact for people is fortnightly and weekly and that's the way in which we’ve framed our benefits for the Australian people - matching up what we're trying to achieve to the circumstances that they live out on a daily basis. So there's no attempt here to hide away what would be regarded by the Government - I can hear Peter Costello talking now - through the annual tables as his preferred measure. But his problem is that he’s got an indexation flaw. He’s got a lump sum payment that for so many people it’s just bandaid compensation for the debts and, he must know in his own life that the bills come in fortnightly and that’s when the families need the assistance. He’s got major problems in that regard and we’re in the problem solving business, and the real life comparisons that make best sense for the benefit of Australian families.

JOURNALIST: What was the nine out of 10 families are better off figure that you’ve used fall to - it would obviously fall when you do take the annual comparison. What would it fall to? How many out of 10 would be better off?

LATHAM: We've provided the tables so that people can make the comparisons. These are the actual annual measure that a strong majority of Australian families are better off. Families receiving family payments are better off. I’m here as an advocate for our approach. Our approach is based on the fortnightly comparisons that much up the real life circumstances and in the real life that Australian families live, nine out of 10 currently receiving the family payments will be better off and that's very, very clear from the tables.

JOURNALIST: But just because they budget on a fortnightly basis doesn’t mean that somehow a year doesn’t exist.

LATHAM: Just replay to yourself what you’ve just said - just because people budget on a fortnightly basis. They don’t wait a year. It is not like Christmas comes around and you knock over the finances. People budget on a fortnightly basis. This is real life Australia. This is the suburbs and the regions.

JOURNALIST: [inaudible]

LATHAM: I think you’ve just answered it with the starting proposition in your question - people budget on a fortnightly basis. Isn't that the real life comparison that you want? That's what people do. This is not

some abstract sociology tutorial about what might happen at the end of the year. It is real Australia. We’ve produced a policy that’s good for middle Australia, easing the squeeze, taking off the financial pressure in the circumstances they have - not on their annual budget what they actually do, which is their fortnightly budget.

JOURNALIST: But you put in your tax return at the end of the end of the year.

LATHAM: I’ve answered your question. I think you answered it with the starting part of your question. Thank you very much.

[Ends]