Subject:
Federal Budget
E&OE...
SPEERS:
Prime Minister good morning. The last couple of Budgets we've seen tax cuts targeted at the high income earners. This Budget focuses the tax cuts at the so-called Howard battlers, anyone would think there must be an election on the way?
PRIME MINISTER:
Well not all of previous tax cuts have gone to high income earners but certainly the great bulk, in fact all of the tax cuts for this year are for low and middle income earners and for people up to $40 000 a year income you get up to $21 a week in tax cuts. This will be particularly valuable for a lot of working mothers who are in the workforce part time. You've got to remember that the great bulk of working mothers in the workforce are part time and by definition if you're part time, no matter what kind of job you have, your income on an annual basis is lower. So certainly that group, along with all other groups in the same income cohort, will receive those tax cuts and when you get up to, above that, well it levels out at about $14 or $15. But for this year certainly all of the benefit of the tax cuts goes to people in that group. Of course by lifting the threshold for the application of the 30 cent rate everybody gets some benefit from that, but the focus clearly is on low and middle income earners, but that's 80 per cent of the population and they deserve the bulk of the help.
SPEERS:
Well it's good timing too for the election isn't it?
PRIME MINISTER:
Well it's also fair. I mean nobody goes around trying to deliberately be unpopular but equally you've got to justify what you do on grounds of equity and fairness. And there was a case on earlier occasions to do something about the top marginal rate cutting in at a ludicrously low level. It was cutting in at what $60 000 a few years ago, that's crazy, that is bad for incentive and it's internationally uncompetitive. Now we've righted that to a big extent last year, and there won't be any change on that this year, but then next year it will kick up a bit to commensurate with the change we've made to the 30 cent threshold.
SPEERS:
As a basic economic principle, are tax cuts inflationary?
PRIME MINISTER:
No, it depends entirely on the size. If they overheat the economy they're inflationary, if they don't overheat the economy, they're not, they're what people deserve.
SPEERS:
So tax cuts don't necessarily put upward pressure on.
PRIME MINISTER:
They don't automatically, no, but if they're too big they do because they overheat the economy.
SPEERS:
Are you confident these ones won't?
PRIME MINISTER:
No I don't believe these will overheat the economy, I think our fiscal policy settings are about right and that's the view of most economists.
SPEERS:
On the higher education front, we have seen something of a shift from the Government here. When you first came to office you made some deep cuts to university funding, very heavily criticised for that, are you simply now restoring what you took away back then?
PRIME MINISTER:
No, it goes much further than that. We've never had a $5 billion endowment fund before, this is historic, it's an Australian first. Look, 10 years ago we had to make deep cuts everywhere because the Labor Party left us with a $10 billion annual deficit and $96 billion debt, we had no alternative. That wasn't our fault, we didn't want to do it, the only thing that I quarantined from cuts 11 years ago was defence, and, of course, pensions and income support sustenance. But other areas had to take cuts. But now 11 years on we're in a much stronger position and what was announced last night is way ahead of just a restoration of what might have gone on earlier occasions. It is not only the endowment fund, but we're also increasing payments to universities, we're, in relation to the HECS funded places, we're also giving them a lot more freedom about course swaps and so forth, we are increasing the student assistance provisions, in tertiary education we're introducing a tax free thousand dollar payment for the first and second years of skills-in-shortage apprenticeships, and we're also giving them a voucher of $500 to help with their fees, and we're going to have three more Australian Technical Colleges; and quite a number of other changes as well.
SPEERS:
But on this fund itself, is it right to say that future surpluses, once you've met the Future Fund liabilities, future surpluses will go into this education fund?
PRIME MINISTER:
Well we will make further payments, I'm not going to try and specify the amount. But I want to make it clear to your viewers that $5 billion is only the start. Now there will be more money paid into that fund out of future surpluses, just how much it's impossible for me to say and I'm not going to try and say how much of future surpluses, but there will be payments from future surpluses into the education fund, how much will be determined in future years.
SPEERS:
Is it your aim that it would eventually not only fund capital works for universities, but also other basic....
PRIME MINISTER:
No I want to make the point, this is not designed to replace the discretionary decisions, and we're going to put university funding on a triennial basis, which they will welcome, three yearly basis, they will welcome that very warmly because they've been on a yearly basis for a long time, they don't like that, it doesn't allow planning and we're going to change that. This is a genuine revolution in education.
SPEERS:
Well, of course, that's been Kevin Rudd's slogan, hasn't it? The education revolution that he's promised, are you saying now that you've trumped him on that?
PRIME MINISTER:
No I'm saying we've done something that's good for Australia. Leave aside who's trumped who, that's...people can make judgements on that. But this is a massive investment in Australia's future. We have got world class universities, this will enable them to become even better, it will enable them to compete more effectively, they'll be able to play to a greater extent to their strengths and it really is a wonderful new dawn for tertiary education in this country.
SPEERS:
You've also lifted the cap on full fee places, so more students who can afford to....
PRIME MINISTER:
Nothing wrong with that because that provides more revenue for universities, a greater mix. We're also increasing the payments that we are making to universities for the HECS funded places and we've reorganised, or rationalised the clusters and that will result in some significant increases in payments for courses like maths and science. The money that we pay for the maths and science courses is going to go up and that is a very valid priority in the present circumstances.
SPEERS:
But doesn't this again shift the balance I suppose in the universities to more students who are there because they've got the money?
PRIME MINISTER:
No what...well we are paying the universities more money for the HECS funded places, so we are certainly not short changing that. What we are doing is expanding the size of the university sector, if I can put it like that, and the capacity, and it's no bad thing to simultaneously give the universities a bit more freedom in relation to full fee paying places while at the same time increasing the money we give the universities for HECS funded places and then, of course, on top of that, out of the endowment fund, giving universities access to an enormous new stream of money, which will grow over the years for infrastructure and research. Now many of our university buildings are a bit dilapidated, they do need refurbishment, they do need expansion, that has been apparent for a while and we have found a way in perpetuity of addressing that issue.
SPEERS:
Well education's been one area where Labor's been running ahead of you in the polls, climate change is another. We saw some last night on climate change, but can we expect more once you get your taskforce report on carbon trading at the end of the month?
PRIME MINISTER:
Well you certainly can expect a broader, more comprehensive statement when we do have that report and when we've analysed it; and that is the right way of handling this. David, the core of the way forward in relation to climate change is how we price carbon because you can't begin to reduce carbon emissions in our kind of economy without there being some kind of price on carbon, except by the clumsy method of regulation or some kind of discriminatory tax. So what you need to do is examine what form an emissions trading system might take, how it would relate to the rest of the world and what function it would play in putting the price on carbon that is necessary to effectively, over time, control emission.
SPEERS:
But if you do that there'll have to be some industry support won't there, some financial help?
PRIME MINISTER:
Well let's wait until we get this report. We are very seriously committed to addressing this issue in a sensible way that doesn't damage the Australian economy. We're not going to embrace targets when we don't know what they mean. We're not going to put the cart before the horse like Mr Rudd has. Mr Rudd's adopted a target, now he's asked someone to tell him what it means. Well we would like to know in advance what different targets might mean before we even contemplate embracing them.
SPEERS:
But I'm just wondering if there is to be big spending on climate change or indeed....
PRIME MINISTER:
Look, we've just brought down a Budget, I'm not going to start talking about spending generally or specifically. What I tell you in relation to climate change is that when we get this report and have had an opportunity of analysing it there will then be a significant statement made by the Government about the way forward in relation to emissions trading and climate change, bearing in mind that we've already done a lot. We've invested almost $3 billion in the low emissions technology, we've put money into solar panels, we're making the planting of trees an immediate tax right off so we can absorb more carbon dioxide, the so-called carbon sinks. We are doing a lot of things in this area and, of course, we've got major initiatives on water in the Budget. So there's a lot going on but there will be a broader picture drawn and a bigger throw forward once we get the report of this task group. That has always been my plan, this task group's been working since December. I know there's been a lot of noise on the other side and a lot of targets, arbitrarily adopted, without knowledge of what they mean. I prefer to do this in an orderly way that doesn't damage the jobs of coal miners for example.
SPEERS:
Just finally Prime Minister, I think you apparently said to your party room yesterday that you're facing the most crucial few months since 1996, when you first came to office. Why is it more crucial then previous elections, in particular 1998 where you had a very, very tight election against Kim Beazley?
PRIME MINISTER:
Well we're behind and we have a majority of what, you know, comfortable majority, but it's not huge like it was in 1998. We are behind and we're still behind. I know my opponents getting very cocky, well I suppose if you read the polls you would say that if you were the Opposition Leader. But, I mean, in the end the Australian people will decide who the next Prime Minister is, it's not decided by opinion polls, it's not decided by me or Mr Rudd. But we are behind, I acknowledge that and we have a lot of work ahead of us and I told my colleagues that.
SPEERS:
Do you think this will help?
PRIME MINISTER:
Well that's for the Australian people to judge. It's a fair Budget, it's balanced in the sense that we've locked in the gains, returned another human dividend of good economic management but we're also investing in the future. I mean it is a Budget very much about Australia's future. This education program is a wonderful gift to future generations of young Australians.
SPEERS:
Prime Minister thanks for your time.
PRIME MINISTER:
Thank you.
[ends]