MCGRATH:
Prime Minister, good morning.
PRIME MINISTER:
Good morning.
MCGRATH:
Lots of giveaways last night. People are happy; baby boomers ecstatic.
PRIME MINISTER:
Well, returning people's money to them through tax cuts is not a giveaway, it's their money. I do operate on that old-fashioned principle that it's not my money, it's not Mr Costello's money, and if after you've provided for a surplus and you've looked after the necessaries like defence and education and health and roads and medical research, then you should give the money back by way of tax cuts.
MCGRATH:
With a Budget surplus like this, though, what about health, education?
PRIME MINISTER:
Well, health, for example six weeks ago I announced a $1.8 billion investment in mental health. A lot of those announcements are made outside the Budget, and although they're referred to in the Budget papers they don't go into the Budget speech. I mean, that's the biggest additional provision for mental health that this country has seen in years. And over the past two or three years, outside the Budget, we have made a whole range of announcements. The Medicare Safety Net, which is a wonderful underpinning for Australian families, that was announced outside the Budget. So you've really got to look beyond the Budget to gather up all of these areas.
MCGRATH:
Nevertheless, last night was about giving money back in tax cuts. That was a lot of it. Is that what great governments and great Prime Ministers should be doing?
PRIME MINISTER:
Well, I think good governments are about a number of things. They're certainly about meeting immediate needs and also about long-term planning. And the biggest problem that Australian families have at the moment, immediate problem, is high petrol prices. And the best way to help them with high petrol prices is to give them immediate dollars in the pocket, immediate tax relief. That's far better than fiddling with the petrol excise or mucking around with some Mickey Mouse subsidy scheme. The best way to help the average family with that extra $15, $25, $30, $40 a week, in some cases, petrol bills, is to give them some tax relief. And we've done that. Now, that's the immediate. Now, the long-term, let me take you to superannuation. This is the biggest positive revolution in superannuation in...
MCGRATH:
I'd like to move onto that in a minute.
PRIME MINISTER:
...decades.
MCGRATH:
Interest rates first of all, though. Tax cuts in the pocket; interest rates, though, possibly a danger down the track. This morning bond yields are up six basis points on three-year bonds. The market gives that a 75 percent chance of a rate rise.
PRIME MINISTER:
Well, if you follow closely what the Governor of the Reserve Bank has said you shouldn't believe for a moment that this Budget will add to the pressure on interest rates.
MCGRATH:
The market's talking, though, isn't it, already?
PRIME MINISTER:
Well, I prefer to look at what Mr Macfarlane says. And Mr Macfarlane said a couple of things. He said that we could afford tax cuts. He made that very clear. He said, of course, that he wanted a strong surplus, and we've delivered that. And he also said the thing he was most worried about in relation to the surplus was sharp variations, unpredictability. Now, this Government has been a model of predictability, indeed over-predictability, if I can put it like that, in relation to the surplus we have. Thank heavens we have a conservative Treasury that, if it gets its estimates wrong, it's always on the upside. So...
MCGRATH:
All right, but...
PRIME MINISTER:
On those scores, we should not be concerned about upward pressure on interest rates.
MCGRATH:
Right. Well, you talked about Ian Macfarlane. But he, like everyone else, would have been surprised by the scale of the tax cuts...
PRIME MINISTER:
Oh, well, I don't know...
MCGRATH:
The top rate's coming down.
PRIME MINISTER:
Well, look, obviously governments keep their own very close counsel when it comes. But I do not believe that this Budget in its overall scope would be a surprise to the Governor of the Reserve Bank. He would see that big surplus. He would see the value at a time of high petrol prices of people getting a bit of extra money in their pocket from tax cuts. And he would understand that the pressure point on inflation, which in turn becomes the pressure point on interest rates, is wage inflation. And if you are providing tax cuts to average wage-earners, that reduces the pressure for unaffordable wage increases but doesn't deny wage increases based on productivity. And that, of course, has been a feature of this Government, where real wages have risen quite dramatically over the 10 years we've been in office. So if you look at the logic and the cause and effect in relation to interest rates there is no additional pressure on interest rates coming out of this Budget.
MCGRATH:
Whose idea was it, yours or the Treasurer's, to cut those top two rates?
PRIME MINISTER:
Look, I do not go into these things. The Treasurer is the principal economic spokesman for the Government...
MCGRATH:
But he's the one who's been saying that the settings were about right.
PRIME MINISTER:
I beg your pardon?
MCGRATH:
He was the one saying that the top rates were not uncompetitive for example.
PRIME MINISTER:
Look, Peter and I work together in very close professional harmony on these things and you're not going to get me saying, you know, this was somebody's and that was somebody else's. We don't operate that way. This is a team effort and he's the principal economic spokesman for the Government.
MCGRATH:
Superannuation. The biggest shake up since the Keating years.
PRIME MINISTER:
Fantastic.
MCGRATH:
Baby boomers jumping for joy this morning, probably.
PRIME MINISTER:
Well, I'm technically not one of them, so I can sit back...
MCGRATH:
You're jumping for joy too?
PRIME MINISTER:
... and give an objective judgement. Look, I think what this has done is dramatically simplify the system. It will encourage people to remain in the workforce to at least 60, and one of our biggest workforce participation problems is the astonishingly high number of people in Australia who retire between the age of 55 and 60. We have very, very high levels of people leaving the workforce in that age cohort. And it'll simplify. But the other big thing about it is what it does for self-funded retirees. It effectively halves the application of the pension assets test. And that is a terrific step forward at a time of asset inflation, which has rendered many of the assets test rules unfair and harsh on a lot of people who are living on quite modest incomes in retirement.
MCGRATH:
Let's look at what some groups who are normally supporters of the Government, you know, interest, business groups, etcetera, have said. Heather Ridout from the Australian Industry Group is very disappointed. She believes that you've dropped the baton on skills. She says skills, quote, "is fairly underdone" in this package. One of the biggest crises, isn't it, facing the country?
PRIME MINISTER:
Well, I don't know what else Heather has said, but I would point out to her that the alteration in the depreciation schedules would be...
MCGRATH:
Well, let's talk about skills...
PRIME MINISTER:
No, no, no, but I mean...
MCGRATH:
... it's something Labor says as well...
PRIME MINISTER:
Well, they're all, It's all...
MCGRATH:
I mean, she's talking about...
PRIME MINISTER:
I mean, business is...
MCGRATH:
...skills.
PRIME MINISTER:
Business is, can I tell you, business talks to me as much, if not more, about depreciation than anything else. And the changes, which will cost about, I think about $3.7 billion over four years, are of enormous benefit to manufacturing industry, which is still the principle constituency represented by AIG, which is her industry organisation.
MCGRATH:
But skills is one of the biggest crises the Government faces, the country faces.
PRIME MINISTER:
Well, we announced a lot on skills, once again outside of the Budget process. The Australian technical colleges announced in the last election got more support than any other individual policy initiative during that campaign. So I do encourage people not to see the be-all and end-all of what governments do as contained in the Budget speech.
MCGRATH:
Alright. Peter Hendy, the Chief Executive Officer of the Australian Chamber of Commerce and Industry, co-author of your international, the Treasurer's international tax survey, says that the Government is giving back what it's taken away in tax. These guys are rolling in money, he says. Expenditure's not being cut.
PRIME MINISTER:
Well, I said right at the head of the program that governments only have your listeners' money to spend. It's their money. And I've always operated on that philosophy. The truth is that if you look at the tax system, let's take the top rate, and I know Mr Hendy's interested in the top rate. A couple of years ago it cut in at, what, $60,000. From the 1st of July it will cut in at a lower rate by two percent at $150,000. That second rate, at a lower rate again at 40 percent, will cut in at $75,000. That now cuts in at $63,000. A few years ago it cut in at a much lower level. So these are monumental changes and we now have a simplified set of thresholds. The 30 percent rate applies at $25,000, and that goes right out to $75,000 before it goes to 40, and then out to $150,000 before it goes to 45. These are big changes and they do meet the concern of people about more incentives.
MCGRATH:
Prime Minister, just in closing, the commodities boom has delivered much of this, but economists are warning that is going to end and the Government's not prepared.
PRIME MINISTER:
Well, Catherine, the commodities boom has not delivered all of this. That's a mistake. One of the things that has delivered a lot of this is that we have more people in work than ever before. And when you have more people in work you are paying lower unemployment benefits and you're collecting more tax. And the commentators keep forgetting the contribution that 30-year lows in unemployment have made to our expanded revenues. And if we can continue to run a strong economy we will continue to get the double benefit of that, of more tax revenue and fewer unemployment benefits. The commodities boom is going to last for a significant time but we have a buffer. We have a huge surplus, we have a Future Fund and we have a great buffer, so we've got the balance right.
MCGRATH:
Right. What do you say to critics this morning who are saying that you are simply paying your way out, buying off Australians, to take the wind out of Kim Beazley's sails, end any attempt by Labor?
PRIME MINISTER:
Look, this is designed for the benefit of the Australian people. The political consequences of it is something people will make a judgement on at the end of next year.
MCGRATH:
Prime Minister, thanks for your time this morning.
PRIME MINISTER:
Thank you.
[ends]