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Transcript of press conference: Monday 14 April 2003: Parliament House, Canberra: tax cuts.

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Subject: Tax cuts

MCMULLAN: As attention is returning to domestic issues and people are focusing on next month’s Budget, it is becoming increasingly clear that Peter Costello should deliver tax cuts to middle and lower income Australian families in next month’s Budget, and that any well-run budget could afford it.

Today we have seen reports of the massive impact of bracket creep ripping more and more income tax out of families. We have seen reports of the massive new levies on milk and sugar, and many other basic products that ordinary Australian families buy, hitting the family budget. We have seen the Australian Industry Group calling for tax cuts for low to middle income families. And we have seen Access Economics pointing out that the Budget is dragging in record high levels of revenue, and should be in a very strong position.

There are only three reasons why Peter Costello may not be able to deliver tax cuts next month - either the economy is much worse than we think it is, he has spent much more than he is acknowledging and he has blown the budget more seriously than we know, or he is trying to save up tax cuts for the election or for when he becomes Prime Minister. None of those are reasonable excuses. A well-run budget should be able to deliver tax cuts.

JOURNALIST: But are tax cuts reasonable or economically feasible considering only a slim surplus has been forecast?

MCMULLAN: Well, the independent observers are suggesting there is probably enough revenue for them to be delivering a strong surplus before tax cuts. In the United Kingdom last week, the Chancellor of the Exchequer, Gordon Brown, was able to fund the much larger British military commitment and deliver tax cuts and deliver a surplus. If a well-run budget can pay for the war, deliver tax cuts and deliver a surplus in the United Kingdom, Peter Costello should be able to do the same.

JOURNALIST: There are also reports today of more money for higher education. Is that more important than tax cuts?

MCMULLAN: There certainly is the capacity in the Budget and a need in the Budget for funding for education and health. I expect the government’s programs in this area to be very modest. My colleagues in education and health

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will be having something to say about that and I will on Budget night when I see the detail. My focus today is on the fact that they are ripping so much tax out of ordinary Australian families. The normally very cautious Taxpayers Australia said this morning ‘this is the highest taxing Government in Australian history’. That is true, and it is time that they gave some of it back to Australian families.

JOURNALIST: The Prime Minister says every Government though is the highest taxing Government because of the nominal dollars. Wouldn’t you agree with that?

MCMULLAN: Now that is the sort of slippery wording that gives politics and politicians a bad name. The Prime Minister himself knows that - just take income tax - that income tax as a higher proportion of the economy than ever, ever before. It is not just in absolute dollars. Of course it is true that we raise more tax every year than we did the year before. He knows that there is more income tax being paid as a percentage of the economy now than at any time in Australian history, and that the five highest percentages ever have all been delivered by Peter Costello.

JOURNALIST: Which levies would you scrap if you were in government?

MCMULLAN: Well, when we have a look at the state of the Budget, we will be very specific about the tax cuts. But I think the priority, first, is to scrap the Ansett levy. We have already called for that. The tourism industry is in crisis - that shouldn’t have to wait for the Budget, that should be done now. But in the Budget, it is income tax where Australian families needs assistance, particularly the low to middle income families who are getting hit by bracket creep, and they are going to get hit every year until Peter Costello steps in and delivers a tax cut.

JOURNALIST: Would you lift the threshold then?

MCMULLAN: Well, I will be making some specific comments about what we should do, but it would be thresholds where I would give my attention and thresholds that would deliver income tax cuts to low and middle-income families. But there are some ways we can go about targeting the tax cuts and that is an issue we have to look at when we look at the state of the Budget. But there is a clear priority - working families out there are getting hit left, right and centre and they need some support from their government and at the moment all the government is doing is ripping more money out of them.

JOURNALIST: What about indexation - get rid of the bracket creep problem altogether?

MCMULLAN: Well, before you can think about indexation, you have to got to get the structure right, because indexation freezes your structure. But you certainly should deal with the issue of bracket creep and that is best done I think by targeting your tax cuts, at least in the first instance, at low to middle income families where the pain is greatest. Access Economics said there is going to be $17 billion worth of bracket creep in the next three years. That should give the government significant capacity to deliver tax cuts.

JOURNALIST: Mr McMullan, as I understand it, the income tax rates are lower than they have been but the tax take, if you include GST, is higher - the total tax take?


MCMULLAN: No, the income tax take is higher as a percentage of GDP than it has ever been before. It has only ever been above 17 per cent when Peter Costello has been Treasurer. No other Treasurer has ever had such a high level, and it is heading back to record levels again if Peter Costello doesn’t deliver tax cuts this year. But you are right to say you have to add on to that the biggest indirect tax in history - the GST - and all those special levies on milk and sugar, on airfares, on everything that goes across Australia’s wharves. All those things are getting hit by special levies and the bad news is, the government has got more special levies in mind.