MCGRATH:
Prime Minister, good morning.
PRIME MINISTER:
Good morning.
MCGRATH:
It's the highest spend, the highest package of giveaways. The Daily Telegraph says it's #8216;payback';, the Herald Sun says 'money galore,' why shouldn't it be seen as a bribe?
MCGRATH:
Well, Catherine, it would be seen as a bribe if it were not sustainable, if it was something that clearly we could only afford this year and would have to claw back in future years but that is not the case because our economy is so strong and it's been so well managed, if I may say so, over the last eight years, that we can afford this. And if you have low debt, if you pay back $70 billion of previous debt, if you have about the strongest growing economy in the western world, if you still have a budget surplus and you've paid for defence and security, why shouldn't you give it back to the families of Australia. It's their money, it's not my money, it's their money.
MCGRATH:
On the other side, though, why has it taken eight years for the Government to discover families?
PRIME MINISTER:
Well, that's not right. We started introducing greater benefits for families as soon as we came to office. Remember in 1996 we ran on a platform called a Family Tax Initiative which began the process which has now culminated with the benefits of Family Tax 'A' and 'B'. We introduced massive additional benefits for families with tax reform in the year 2000. The value of the family tax benefit A is now 100% more in real terms than the equivalent benefit under the Keating Government in 1996. The central promise of my campaign speech as Leader of the Opposition in the Ryde Town Hall in 1996 was, in fact, the Family Tax Initiative which contained the essential elements of what are still Family Tax 'A' and 'B'. So this has been a continuum, it's very strong this year. There are very real and immediate cash benefits for families but we can afford to do it because the economy is strong.
MCGRATH:
Is this a recognition, though, that housing prices have made it so difficult for young people to have families, they can't afford it anymore?
PRIME MINISTER:
It's a recognition that the first call, when the nation can afford it, are the families of the nation because they are our future.
MCGRATH:
Why didn't you give any tax cut to those earning up to $50,000 a year?
PRIME MINISTER:
Well, Catherine, we gave an across the board tax cut last year and we took the view this year that having provided the family benefits, which are available for all families and by their nature they are more generous if your family income is less than $31,000 a year, there are considerably greater family tax benefits right down the bottom. We took the view that the group we had to really target are those hardworking, middle Australians, the police Sargent who might want to do some overtime but doesn't want to go into a 42 cent, or perhaps a 47 cent tax bracket. There are 37% of male, full-time earners in this country, 37% who earn more than $52,000 a year. Forty-nine thousand dollars a year is the average wage for a full-time female worker. For a male worker it's a little over $51,000. In these circumstances for anybody to say that $52,000, or even through to 60 or 70, makes somebody rich shows that they're out of touch with modern Australia.
MCGRATH:
From an equity point of view how do you justify not giving any tax cuts [inaudible] over 50 and if they're single, they don't have children#8230;
PRIME MINISTER:
But from an equity point of view, of course, lower down because we have a progressive income tax system they don't pay nearly as much tax. I'd also point out that the superannuation co-contribution which has been made a lot more generous is skewed very heavily in favour of very low-income earners. I'd also point out#8230;
MCGRATH:
That's not something they'd get now, do they?
PRIME MINISTER:
No but I'd also point out that many single people won't remain single forever. They marry, they have children and that's to be encouraged and hoped for. Many people who earn below $52,000 are part-time workers, many of them are people who have retired and get the benefit of the retired person's tax offset that effectively eliminated taxation for many self-funded retirees under about $20,000 a year. So when you add all of those things up we came to the conclusion that this year the tax cuts#8230;we have to stop people earning what are modest, middle incomes bumping in to a 42 to 47 cent tax bracket. But you cannot clobber hard work and clobber aspiration, it's just not the approach that will build a stronger Australia.
MCGRATH:
But what about those at the top end? I mean, for example, you Prime Minister will probably get around $2000 a year in a tax cut. What about people who are in that lower income bracket who either don't have children and won't or they're older and their families have left? They're struggling too and how do they#8230;what do you say to them today#8230;hang on#8230;
PRIME MINISTER:
If you'd let me, I'm trying to answer that question. I'm pointing out that#8230;the answer I've just given. But obviously higher income earners, whenever there's any tax reduction they always get, in money terms, more because they're paying more tax to start with. I mean, you have to bear in mind that we do have a progressive tax system and you have to try and serve equity but you've also got to deliver incentive and if you don't have an economy that encourages hard work and effort then you don't grow. I mean, isn't it interesting that we have been, in part, able to finance many of these benefits because we have collected far more company tax than we expected despite the fact that we cut the company tax rate down to 30 cents in the dollar. In tax reform it shows that if you give incentive you get a return and that can then be given back to people in a targeted way.
MCGRATH:
So let's look, if we can, at the $600 payment that families will get. They'll actually get twice that this year, 1,200.
PRIME MINISTER:
Well, there's a special one-off bonus out of this year's surplus, which has turned out to be greater than we expected, and we think some of that should be given back to Australian families.
MCGRATH:
Well, Labor says that's cynical because it's just going to reimburse families who've lost out of the family overpayments.
PRIME MINISTER:
No, but hang on, they're getting another payment, they're getting another payment. That is not cynical, it is clean, undiluted, undeducted on top of the yearly amount of $600, which is obviously subject to reconciliation in relation to any family tax benefit overpayments. But that extra $600 is pure, undiluted. Any suggestion that that is any way to be subject to conditionality or deductibility#8230;if you don't have any family tax overpayments subject to filing your tax return for this financial year, say early in July, you will get effectively $1,200 per child if you qualify. If you've got two children it's $2,400. There's no if, buts and maybes about that. And we are able to give the extra bonus because we had a stronger fiscal position in the current financial year than we anticipated and we think we should give it back.
MCGRATH:
So in terms of the next election it's looking pretty good now for an August poll. Ninety per cent will have this $1,200.
PRIME MINISTER:
Look, Catherine, I haven't made up my mind when the election is going to be. It obviously has to be some time in the second half of this year. I mean, it could theoretically be early next year but that's not normal and just exactly when in that six-month period or, I guess, five-month period because nobody likes elections in December any more, I don't know, I haven't made up my mind.
MCGRATH:
But people are still going to have that question mark if they want to vote for you, how long you're going to stay, is actually Peter Costello going to be the Prime Minister soon after the next term, can you tell them?
PRIME MINISTER:
Well, I can say what is the truthful position and that is I'll remain leader of the Liberal Party for so long as the party#8230;
MCGRATH:
But that doesn't help#8230;[inaudible]
PRIME MINISTER:
You asked me to give an answer, please, it's quite important so let me finish. I'll say as long as the party wants me to and it's in the best interests. Can I say in relation to Peter that I think it's a perfectly understandable thing that he should want to lead the party. He's been a great servant of the Liberal Party and of the Government and there's certainly a very general view that if there were to be a vacancy in that position he'd be the logical person to fill it. But for my part, I find this job immensely rewarding and stimulating and I believe I have much to continue to give to the Australian people but, in the end, Catherine, I won't decide my future, you won't, the Australian people will decide whether I should continue as Prime Minister and their choice at the next election will be between a John Howard led Liberal-National Coalition and a Labor Party led by Mark Latham. Now, it's going to be tight for us and at the moment we're still behind and nobody should imagine that we're still not very much the underdog.
MCGRATH:
Prime Minister, thank you very much for speaking to the AM programme.
[ends]