2 April 2015
Transcript - #2015022, 2015

In the role of: Parliamentary Secretary to the Treasurer [23 December 2014 - 20 September 2015]

Interview with Kieran Gilbert and Jim Chalmers MP, AM Agenda, Sky News

SUBJECTS: Tax debate, pensions, GST

GILBERT:

With me on the programme this morning, the Parliamentary Secretary to the Treasurer, Kelly O’Dwyer and Parliamentary Secretary to the Opposition Leader Jim Chalmers. Good morning to you both. Kelly, where is this debate at, how seriously should the Government be looking at this reining in particularly the part-pension for those of upwards of one million dollars in terms of assets, beyond the family home?

O’DWYER:

Well certainly we have said with the tax debate that is currently going on at the moment, you will recall we released a tax discussion paper earlier in the week, we are going to consider all of the options available. We are not going to rule anything in or out. We believe that it is the right time now to look at every aspect of the tax system holistically. We know that on the current projections our tax system is not sustainable for the years ahead. We have got 125 taxes at a state, territory, federal level and around 115 of those taxes raise about ten percent and the remainder raise the final ninety percent. Now clearly there is a problem with our tax system. So we have said we are going to look at all of that. But at the same time, there is not just one part of the equation here of  ever increasing taxes. You also have to look at the current trajectory of spending and we have also said that we are going to continue to tackle Labor’s unfunded promises that they made before they left office that do need funding, such as the National Disability Insurance Scheme. We want to make sure that good schemes like that will be funded into the future. When we talk about the age pension for instance, we know that the age pension is going to go up anywhere between two point seven percent of GDP, which it currently is at the moment, to more than three point six percent of GDP, around that figure. And that’s around $14 billion. Now that $14 billion would fund the full NDIS, and we have to make sure that we have a sustainable budget that can fund all of the services that need to be delivered.

GILBERT:

Jim, Jim on this issue, I guess only in the context of what Kelly just said there, is it sustainable to have a system where people can receive the part-pension when they have one point one million dollars in private wealth in addition to the family home and still qualify for a part-pension?

CHALMERS:

Look Kieran, there are a whole lot of important issues at play here when it comes to the pension and its interaction with the superannuation system. Of course Tony Abbott promised absolutely no changes to the pension on the eve of the election and many times before and since. And the only policy that is on the table from the Liberal Government right now is a cut to the indexation and we remain opposed to the cut to that indexation. Our view on these broader issues Kieran is if you want to make the age pension more sustainable, the best way to do that is to fix the superannuation system to make sure that more Australians can fund the good life in retirement themselves and not rely on the pension system. That’s why we think it is really important that we have a proper national conversation about superannuation particularly the unfairness at the very top of super because we think if you want to make the pension system sustainable, that means improving the superannuation system. Unfortunately the Abbott Government has frozen increases to the superannuation guarantee and cut the low income super contribution, which goes against that really important objective.

GILBERT:

This seems to fit in though with Labor’s broader view about these matters, when you talk about the unfair treatment of super for the wealthiest individuals, the exemptions and so on that the same principles you would think would apply when it comes to the issue of the part-pension, which I think would surprise many that couples, pensioners with upwards of a million dollars in private wealth, in addition to the family home are still receiving a part-pension.

CHALMERS:

Well it’s worth reminding ourselves Kieran that the current Government policy is to cut the indexation of the pension, which will hurt millions of pensioners, people who are doing it tough, battlers in our community. That is the existing policy of the Government, that’s the one we are opposing. Beyond that we think if you want to make the entire retirement incomes system more sustainable, which is an important objective we should be looking at the superannuation system. More broadly you are right to say that when we oppose parts of this failed budget, we have applied the principle that the people who are the poorest in our community, the people on low and middle and fixed incomes, shouldn’t be carrying the can for this so called budget emergency con that is being pushed by Kelly and Tony Abbott and Joe Hockey and others. We are up for a proper conversation about tax reform. Kelly referred before to the tax reform paper that was released. Chris Bowen, Bill Shorten and others have indicated that they are up for a proper discussion particularly about superannuation but across the tax system and we will participate in that conversation. We will lead it if the Government fails.

GILBERT:

Kelly O’Dwyer on a couple of those issues you can respond to Jim Chalmers, and I guess specifically on the superannuation debate that the thing I guess needs to be addressed here is, if these exemptions are reined in, that the revenue is still going to come into the Government because people won’t necessarily keep shovelling their money into super will they. High wealth individuals if the exemptions are removed entirely, they will simply look for other asset classes to put their money.

O’DWYER:

Well obviously you make a good point there Kieran, but first let me just address a couple of the points that Jim raised. The first is he says, like Labor, that there is no budget emergency. Now it is not just the Coalition who has been saying this, it’s not just the Coalition who has been pointing out that the current trajectory of spending is unsustainable. It has been pointed out by a number of Treasury Secretaries, Martin Parkinson, John Fraser the current Treasury Secretary, it has been pointed out by Glenn Stevens the Reserve Bank Governor, and none other than the former principle economic advisor to Paul Keating, Dr John Edwards, who was appointed by Wayne Swan, Jim’s former boss, to the Reserve Bank Board, who said that there is a budget emergency. So let’s not pretend that there isn’t an issue here. There is an issue we need to deal with. We have said we are going to deal with it and that’s what we were elected to do. The second point I’d make is in relation to pensions. Now Jim wants to claim that somehow we are cutting the pension, that is not the case at all. There have been pension increases every year twice a year and will continue to be so going forward. We just had one in March. That has meant that there is an extra $51 in the hands of pensioners per fortnight, an extra $78 for couples who are also receiving the pension per fortnight. Now if he wants to talk about the change in indexation arrangements there is one thing he hasn’t mentioned and that is changing from the Male Total Average Weekly Earnings (MTAWE) to the Consumer Price Index (CPI), at different times different indexation rates are better for pensioners. Now if we had, if you stick with the male total average weekly earnings in more recent times that hasn’t been as good as the consumer price index which is what we are moving it to. So I just won’t let the Labor Party get away with making a statement like that. Finally on superannuation, as we have said we will look at all aspects of this discussion and we do want to make sure that the system that is in place is fair to everybody. That also means that those people who have made arrangements based on existing rules need to be dealt with fairly if there is to be any consideration of any change to those rules. But the one thing you will never hear Labor talking about, they will always talk about increasing taxes but you will never hear them talk about where they are going to reduce spending. They don’t even accept that there is a problem and that is what I would I like to hear Bill Shorten and Jim Chalmers talk about.

GILBERT:

I guess the question is how committed is the Government to this bipartisanship that Mr Morrison wants on this issue, given yesterday, you had a bit of a dig there, that yesterday the Prime Minister was saying that Labor goes straight to higher taxes. It doesn’t sound like a Prime Minister extending the olive branch of bipartisanship but you know Kelly I will get back to you on that to respond to it, but Jim to you how significant, you’ve watched these areas for a long time now. To get reform in these very difficult areas, how important is it Jim Chalmers to have bipartisanship so that these things aren’t tweaked down the track, for certainty for the pension for super as well?

CHALMERS:

Yeh, just to correct two factual errors in Kelly’s answer. The first thing is there are cuts to the pension, that’s why her own budget papers identify billions of dollars of savings out of the pension. That comes out of pensioner’s pockets. Second thing is she said earlier the NDIS the disability scheme wasn’t funded, it was. To move on to your question Kieran, it is important that the political system as a whole both major parties where possible come to some sort of agreement on the direction of the country. That does make as Joe Hockey has said, as Chris Bowen has said, as Bill Shorten has said, that does make it more likely that changes to the budget and changes to economic policy can be enduring. You were right to point out to Kelly that we have got a big problem on the Government side. We have Joe Hockey saying he wants a conversation about tax and we have got Tony Abbott within 24 hours showing that he is not prepared to have that conversation. I think that Tony Abbott’s response to the tax paper shows why he is failing as a national leader. It shows, it proves to the Australian community that when he is given the opportunity to try and build a consensus and help improve the budget, he would prefer to have a brawl and attack people on low and middle income earnings. And I think that’s why the majority of his own backbench don’t support him and I think that’s why the Australian community have lined up to oppose this Prime Minister and his unfair budget.

GILBERT:

Okay, Kelly your, to wrap up, your reaction to that but also I guess on the Government’s approach here, you’ve got Scott Morrison saying that he wants a broad agreement, a broad deal done, but how much incentive is there for the cross bench and particularly the opposition to get on board when Mr Abbott this week has had a crack saying their first inclination is to go for a tax grab, now you want them around the table to do a deal on the pension.

O’DWYER:

Well, well everyone on the Coalition side has been consistent in saying that we want to do two things. We want to make sure that we address the budget situation that we inherited. We are going to do that in a very calm and methodical way and we are going to do that by actually having an open discussion with the Australian people. But you can’t only address one aspect of this problem and that’s the point the Prime Minister has made, that’s the point the Treasurer has made, that’s the point Scott Morrison has made. We also have to look at the current trajectory of spending. Everybody has made this point including Glenn Stevens, the former Secretaries of the Treasury and as I said Dr John Edwards. This is not a new concept it just seems to be very difficult for the Labor Party to understand it, because in understanding it they have to accept a very strong measure of responsibility for the situation we currently face. Now the people who are going to be most hurt if we find ourselves in a situation where we have uncontrolled spending and we have an economic shock to our country is going to be those people who are the most vulnerable in our community. So I won’t have any crocodile tears from Jim Chalmers, we are looking to protect those very people by making sure we have a strong budget that can fund the services that Australians expect to be delivered by Government.

GILBERT:

Kelly and Jim we have got to take a quick break, back in just a moment we are going to look at the Defence shake-up and some comments on the GST the Prime Minister has made this morning.

GILBERT:

This is AM Agenda with me this morning is Kelly O’Dwyer and Jim Chalmers. The Prime Minister has been discussing the GST and the possibility of any change to it this morning. He was on as I say the Alan Jones programme on 2GB, lets recap a bit of what he had to say.

PRIME MINISTER:

When it comes to the GST we can’t change the GST without the agreement of all the states and territories and we couldn’t change the GST without a consensus in the Parliament. So really it is up to Mr Shorten to tell us what he wants to do because he is the man who controls the GST effectively.

GILBERT:

Kelly O’Dwyer, the Prime Minister washing his hands of this issue saying it is Bill Shorten who controls the GST despite being in opposition.

O’DWYER:

Well the Prime Minister is simply making the point that in order to change the GST you do need the agreement of the states and territories and you do need the cooperation of the Labor Party in order to get any legislation through the Parliament. It’s pretty much a statement of fact. So for the most part I don’t see this as particularly remarkable.

GILBERT:

Well my understanding is that the Government can legislate to override all of that and the Federal Government can still pursue this if they want to but Jim Chalmers Labor is not going to countenance any shift in the GST in broadening its base or lifting its rate despite the urgings of many many economists, who believe that this is part of a broader tax reform that is needed.

CHALMERS:

Oh look, this isn’t the first time Kieran that Tony Abbott would prefer to be the Opposition Leader of this country rather than the Prime Minister of this country. You are right that we have made our view very clear we don’t agree that the best tax reform is to jack up the GST and to broaden the base for a very simple reason and that’s because doing that would hurt the most vulnerable people in the community the most.  That is why we have said we are not in the cart for an increase in the GST or a broadening of its base. But what the tax discussion paper that was released earlier this week showed and I think it is an important point is that there are other avenues for tax reform. The GST hike that the Government wants that they have made very clear over some time now they’d like to see, is not the only way to improve or change the tax system in our community. And what the Government did is they took $80 billion out of schools and hospitals, it is on page seven of their budget overview. $80 billion, in the desperate hope that the only way to fill that hole would be with a GST hike. But what the tax discussion paper shows is that there are other avenues, we’re up for a conversation on those other avenues, those other opportunities for tax reform, whether they be superannuation, whether they be multi-national tax, all those of other areas, and we want to play a constructive, leading, responsible role in that important tax conversation that the country should be having. But we are not in the cart for hurting the most vulnerable people, especially given all the damage done to those people by the Abbott budget.

GILBERT:

This is something that your former boss Kelly O’Dwyer, Peter Costello, he also doesn’t believe there should be, he doesn’t see the case for an increase in the GST, certainly not on its own. He says it needs to be a much more comprehensive reform of the tax system if a Government was to go down that path.

O’DWYER:

Well certainly when he introduced the GST he got rid of a whole host of other taxes, so it wasn’t simply a matter of just raising taxes, it was getting rid of a whole host of taxes that were inefficient and were really not enhancing competition. And it has meant that we have been able to benefit now from that change, and the State Governments have been able to benefit because every single dollar raised by the GST goes to the states and territories, to fund their programmes and their services and their infrastructure. We saw huge windfalls go to the states and territories in order to do just that. Now some people may argue that perhaps they didn’t always spend that money wisely and we are seeing some of the fruits of that today with the lack of infrastructure development that now requires the Federal Government to step in with one of the biggest infrastructure spending programmes that has ever been. More than $50 billion that we injected in the last Federal Budget in to ensuring that we have the sort of infrastructure that this nation needs. But look there are a lot of people with a lot of views on the GST. We welcome that, that’s what this debate is all about. It isn’t true for Jim to say that in our last budget we were cutting hospital spending and health spending and education spending.

CHALMERS:

It’s in your own budget papers Kelly page seven.

O’DWYER:

No, we increased over the forward estimates, we increased spending to all of those [inaudible]

CHALMERS:

It says $80 billion out of schools and hospitals in your own budget paper, page seven of the budget overview.

O’DWYER:

Jim, I listened to you very quietly, over the forward estimates we actually increased spending to all those areas and Labor left huge holes. We know just with Gonski for instance they had unfunded in education $1.2 billion that we had to find the money for and we did.

GILBERT:

Jim in terms of the, just to wrap up on this debate, the GST, I am a little bit, I know Labor consistently says that the poorest would be worse off, but if you look at the welfare proposals under previous GST increases, there have been accompanied by compensation and further reductions, like the Carbon Tax for example. When you introduced the Carbon Tax Labor, you had parallel compensation to help people because that was a flat tax. If it’s more efficient why doesn’t Labor even consider it?

CHALMERS:

I don’t think the Abbott Government with the form they’ve shown on their budget decisions so far, would ever adequately compensate people on low and middle and fixed incomes. They have gone out of their way over the last 18 months to attack those members in the community, people who live week to week and so I don’t believe that they would ever be properly compensated. But there is a broader principle at stake, we do want to talk about tax reform, there are other fairer, more efficient, more worthy ways to skin the tax reform cat and we should be talking about those. We’ve been honest and put our cards on the table about the GST.

GILBERT:

Guys we are out of time unfortunately. Thanks so much Jim Chalmers, Kelly O’Dwyer have a good day, happy Easter.

O’DWYER:

Pleasure.

CHALMERS:

Thanks guys.