KENNEDY:
Welcome to the programme Mr Howard. $21 billion in tax cuts - would you agree that that's really what you have in a pre-election Budget and today you've delivered a Budget that is not one that you usually see first year after an election?
PRIME MINISTER:
This is a Budget that reflects very directly the philosophy about Budgets that I've outlined and the Treasurer has outlined over a number of years. First you provide for health, education, training, defence, security - all of the things that are essential. Then you make sure you have a strong surplus so that you don't put upward pressure on interest rates, and if there is anything left over you return it by way of tax cuts to the people who own it and that's the Australian people. In that sense this is a very predictable, a very orthodox and a very consistent Budget and one that does reflect a consistent, steady approach to the management of the economy that this Government has displayed over nine and a half years.
KENNEDY:
When did you decide to deliver the across the board tax cuts? Just last week when you returned...
PRIME MINISTER:
No, that's not right. Peter and I in fact had a discussion fully three to four weeks ago before I went overseas - a general discussion about the likely position of the Budget - and we decided then that there would be scope for taxation relief and he worked on some proposals and we had a further discussion last week. So this business about it being hurriedly cobbled together at the last minute, that is all absolute nonsense. But could I put these tax cuts in perspective? I don't normally quote the National Secretary of the Australian Workers Union, but I will on this occasion. Bill Shorten, who is regarded as a future Labor luminary incidentally - that's why his philosophy on these things is different from that of Mr Beazley and Mr Swan - in an article in the Australian on the 3rd of May he said "the top marginal income tax rate threshold should be raised to create a fair, productive and competitive tax system". He said he knew steel workers who stopped working overtime because they were pushed into the 47 cent tax bracket which came in at too low a level of income. Now can I simply say Bill Shorten has said it all and in many respects the changes to those thresholds are a response to the needs of Bill Shorten's steel workers. They're not a bonanza for the rich; they recognise the reality of hardworking aspirational Australians.
KENNEDY:
You've produced tax relief, not tax reform and you've done nothing to shift the tax scales; some say this is a missed opportunity.
PRIME MINISTER:
I don't agree with that on either count. I think to list the thresholds the way we have done it is major reform. To cut the bottom rate from 17 to 15 and Mr Beazley, let me say on this, Mr Beazley and Mr Swan said last night that they opposed the tax cuts. Does that mean they're going to vote against the reduction from 17 to 15 cents in the dollar, because for that to come into operation before the 1st of July it has to pass the Parliament while the Labor Party and the minor parties still control the Senate. So I'd like to know where Mr Beazley stands on tax cuts.
KENNEDY:
But you'd have to agree that people earning over $52,000 are a lot better off given, putting steel workers aside, people earning over $52,000...
PRIME MINISTER:
Well you can't put anybody aside if they're...
KENNEDY:
...a lot better off from these tax cuts than those earning less.
PRIME MINISTER:
But Stephanie, people earning higher incomes pay a lot more tax and they will pay a lot more tax after these changes because we have a progressive tax system. People earning high incomes do not get family tax benefits, although people earning quite strong incomes do, but once you get over $100,000 very few people are entitled to family tax benefits. So there are swings and roundabouts and you need a tax system that looks after the low income earners and if you're a single income family with a couple of children and one under five you can go to effectively about $41,000 a year without paying any tax. So we have, very generously, provided for low and middle income families. But you've got to have a society that encourages effort and hard work, you've got to have a society that rewards success, you've got to have a society that has a sufficiently competitive and incentive driven tax system to retain the brightest and the best in this country. If we want an illustrious future then we need to have a tax system that does reward that bit of extra effort and does make sure that Bill Shorten's steel workers are encouraged to work overtime and not discouraged.
KENNEDY:
Well some would also say you need a society that looks after less well off...
PRIME MINISTER:
Well we do, we have that...
KENNEDY:
... onto the welfare to work programme, why did the Government exempt the 700,000 people currently on the disability pension and won't you end up with two systems and is that fair?
PRIME MINISTER:
Well are you suggesting, or our opponents suggesting, we should have included the existing people? I would have thought it was a compassionate, fair, reasonable thing to exempt people currently on the benefit because their expectation when they went on it was that it would continue.
KENNEDY:
But was it going to be too hard to include those people, were you afraid of a fear campaign?
PRIME MINISTER:
It's always difficult with reforms of this kind to get the right balance between change and also not unfairly interrupting people's expectations and we thought the best way of doing that was in fact to leave the existing group of people where they were and to apply the new system to people newly applying for the disability support pension. It's always a balance Stephanie, you need reform but you've got to do it in a measured, incremental way so you carry the public with you. I've never pretended that reform is something you ram down people's throats. Reform is something that has to be explained, the national interest has to be illustrated and it has to pass the essential test of fairness. And to say to people who have an expectation of continuing to receive a benefit gives expression to that test of fairness.
KENNEDY:
How many people do you think the welfare to work programme will move into the workforce? And when you do expect to see some results?
PRIME MINISTER:
I think it'll take a while. I mean the treasury estimates are over a hundred thousand over a number of years but just exactly how many it's difficult to pin down. This is not a cost-cutting exercise; it's going to in fact cost $2 billion in extra training and things like that over a period of four years. So anybody who sees this as a harsh cost-cutting measure is wrong.
KENNEDY:
Why did you have to increase the threshold for the Medicare Safety Net, given you've been able to afford $21 billion in tax cuts and you've still got a $9 billion surplus? Couldn't you have afforded to have left those thresholds where they were?
PRIME MINISTER:
Well you could have in the short term but that was a long term measure - that was something for the long term. Let's understand what's at stake with the threshold. The Labor Party would abolish it entirely - the Labor Party would abolish the Medicare Safety Net entirely. What we have done is to restore the safety net to the levels originally proposed.
KENNEDY:
But you did break an election promise?
PRIME MINISTER:
Well in relation to the level of the threshold, there was a change but the main debate in the election campaign Stephanie, was not about whether the threshold would stay at 300 and 700 - the main debate was whether the safety net would stay at all.
KENNEDY:
Alright.
PRIME MINISTER:
Labor will abolish the safety net; the Howard Government will retain it.
KENNEDY:
Alright. Well there are also increases to the thresholds for the pharmaceutical benefits scheme and some people say that a lot of people will loose their tax cuts to pay for the increased drug costs, isn't that right?
PRIME MINISTER:
No that's a total exaggeration of the average cost to people of pharmaceuticals. Once again and here is a very modest change; you've got 52 scripts carrying the co-payment, which is what, $4.60 for pensioners and $28 or so for the rest of us and then 52 and then you go onto the free for the pensioners and you go onto the lower level for the rest of the community. But what we're proposing is for each of the next 4 years that 52 goes up by 2 each year-very modest change designed once again over the longer term to preserve the sustainability of our system. Now those who criticise these things have the obligation of saying well what would they do as an alternative? It's alright to oppose and I know that Mr Beazley will run around opposing everything in his normal, opportunistic, opposition for its own sake approach but there's an obligation on those who oppose these things to say how they would do things differently.
KENNEDY:
Alright. Just quickly on the Future Fund. The Government plans to put future surpluses into it and also the proceeds of the full sale of Telstra, has that been approved by Cabinet? And won't you have problems with the National Party?
PRIME MINISTER:
Well I don't think we're going to... look the Future Fund's mandate is (and that's the rules under which it's going to operate and the details of it will be finally resolved and announced soon), but what is good about the Future Fund is that we are making provision, as the name suggests, for the future and it actually involves the tightening of fiscal policy because what we're going to do is invest the proceeds if the Future Fund back into the fund itself and not bring those interest payments into the Budget and that's another reason why this Budget won't be exerting upward pressure on interest rates.
KENNEDY:
Alright. There's also $200 million in this Budget for the 2007 APEC Summit in Australia, will you be around to host it?
PRIME MINISTER:
Look it'll be hosted by the Prime Minister of Australia. Stephanie, I'm not going down that path.
KENNEDY:
Has that been a distraction?
PRIME MINISTER:
The APEC?
KENNEDY:
The whole leadership issue?
PRIME MINISTER:
Well Stephanie I'm not making any comment on that issue.
KENNEDY:
Could you just briefly tell me, there have been tensions over the last 10 days, over the leadership issue? How would you describe the relationship with Peter Costello?
PRIME MINISTER:
Our relationship is very good. I think he's done a wonderful job as Treasurer of this country and we worked together in very close professional harmony in preparing this Budget and I think what you saw last night is an illustration of how closely and how effectively we continue to work together.
KENNEDY:
Thank you for joining AM Prime Minister.
PRIME MINISTER:
Thank you.
[ends]