HOST: Prime Minister Kevin Rudd's been good enough to join us. Thanks for your time, Prime Minister.
PM: G'day, Steve. how are you?
HOST: I'm well, thanks. This was a tax review, but on my reading of it we have not had one tax abolished.
PM: Well, I think the key thing here, Steve, is to look at so many of your listeners would be interested in, which is what's happening with superannuation. Many of them are confronted with retirement with not enough super. What we do is therefore close that gap by increasing the superannuation guarantee level from 9 percent to 12 percent, and for all the small business people and tradies listening to your program, this funding an instant write-off for purchase of up to $5,000 in small business, that goes right to the heart of 2.4 million small businesses. We think this is a good step forward but of course there's more to be done.
HOST: The idea for this review, I think, came out of your ideas summit didn't it, in Canberra and I think it was your idea.
PM: Well, actually it came out of the business group of the 2020 Summit. They said we hadn't had a comprehensive review of the overall structure of the tax system in 20 years or so. It was time to have one. We did that and when we commissioned it we said it would provide a long-term blueprint for a basis for reform. What we've done is taken the first step. That's what you see announced yesterday by the Treasurer and myself.
HOST: But it was supposed to be about cutting taxes, scrapping taxes and redefining the tax system. That's not what's happened here, has it?
PM: Well, let's go to the core of that. What you've got thought this package is that every worker, small business and company will be able to pay less tax, but of course they'll be able to contribute to national savings as well. This is very important reform for the future and we think, as I said before, it is an important key step in bringing about long-term tax reform.
Remember, our objectives are to keep government finances strong, protect the future of the Australian economy but also to ensure that working families and small business get their fair share from this nation's natural resources wealth which, after all, is ultimately owned by all Australians.
HOST: But have you dodged the hard recommendations from Henry because it's an election year?
PM: Can I say, Steve, when you set out to impose a Super Profits tax on some of the biggest companies in Australia, this is not an easy move. We're going to cop a lot of opposition to it and I'm sure a very well-funded campaign against us, but that's necessary to so because we need that source of revenue in order to do three things: fund, as I said, better superannuation for working Australians when they go to retirement; secondly, to provide a tax cut and a tax break for our 2.4 million small businesses, but on top of that also creating, for the first time, a new infrastructure fund of some $5.6 billion to build the road, rail and ports that we'll need for the future.
But to fund that means taking on some of the biggest mining companies. That will be difficult, particularly in the year you've just referred to.
HOST: Yeah, but the tradies you talk about and the working families that you talk about, they're unlikely to punish you during an election because you've slapped a tax on rich mining companies because most people see them as being extremely profitable anyway.
PM: Well, let's just look at the notion of superannuation adequacy, which a lot of people worry about, legitimately, in their 50s as they start thinking about, 'have I got enough money to retire on?' Right now we have a system which I don't think delivers enough by way of retirement income for many, many working families.
Now, this has been kicked around the reform debate for nearly the last 20 years, since the superannuation guarantee levy was introduced in 1992. That is, increasing the rate from 9 percent to 12 percent. What we've done is tackle this head-on. We decided that it's time to bite this bullet and get on with it because, as I said, let's just take, you know, an average worker today, say aged 30. Through this change they'll be looking at an additional $108,000 in their retirement super. We think that's an important step forward but, more broadly, to all working families and small businesses this represents real help to the bottom line.
HOST: Why wait, then, to 2013 if going from 9 to 12 is so important?
PM: We've got to make sure that this is all financially sustainable. That's why this is about giving a fair share to working Australians and small business on the one hand, given that we will need to be imposing this Super Profits Tax on some of our largest mining companies on the other.
You see, you've got to do this in a way which is financially sustainable. This new Super Profits Tax comes into operation at about that time. Therefore, on the benefits side, that's when they come into play as well, both for superannuation, small business, but also helping with the building of our long-term infrastructure.
It's been so long, Steve, since we've had any regular provision in the budgets of Australia, Commonwealth and state, for infrastructure - road, rail and ports - and frankly we've got a huge gap in our infrastructure now. We've got to use some of this revenue, about a third of it coming from this new Super Profits Tax on the miners, to fund this as well. Otherwise it comes out of the other resources provided by taxpayers and ratepayers.
HOST: Had you thought about getting to the 12 percent quicker?
PM: We went through all that, but what we're concerned about, too, is getting the balance right. Remember, when you bring in the superannuation guarantee it comes through, of course, contribution from business. They need time to work it out through their industrial relations negotiations with the various unions. Understand that that takes a bit of time, but also we want to make sure that we're also taking some of the burden off business as well. That's why we're reducing the company tax rate from 30 cents in the dollar down to 28 cents in the dollar and, depending on how things go in the future, we're open to looking at further action there as well.
So, what we're doing is on the one hand making it easier for companies to make them more competitive by reducing the company tax rate and phasing in this increase in the superannuation guarantee level over time. These are big reforms, all made possible by a decision which, as I said, won't be political popular with many in terms of this Super Profits Tax on the resources companies. These companies are often capable of fighting very well-funded campaigns against governments, particularly in election years.
HOST: These super changes have to go through the parliament and you are saying that unless the Super, the tax on the mining companies goes through, then none of this will happen. What are you saying to Tony Abbott and the Opposition in regards to their behaviour in the Senate?
PM: Well, we have, I think, at present one of the most oppositionist, blocking political parties in the Senate for 20 or 30 years if you simply count it up, the number of items of legislation that have been blocked so far, but I think it's time for Mr Abbott to stop blocking everything. He's blocked, or he's threatened to block, part of our funding for our nation health and hospitals reform-
HOST: -Well, he's used the words 'deeply hostile' today to the resources tax. That's what he's saying. He says what we've got here from the Government is a tax grab not tax reform. It's a tax fiddle not a tax cut. That wouldn't give you much hope would it?
PM: Well, it seems to me that Mr Abbott is basically deciding that it's more important to protect the super profits of large mining companies than it is to fund better retirement incomes for working Australians, a tax cut to every small business and an infrastructure fund to fund our future rail, road and ports. I think this is actually a good balance for the country's future. Remember what we're talking about is a fair return for our mining companies because it's a fantastic industry, but I think we need a fair return for all Australians - working families as well as small businesses-
HOST: -So if he blocks, it what happens?
PM: Well, that of course lies very much in Mr Abbott hands. What we saw with him last week on the tobacco tax was day one - total hostility, total opposition. Come day two he seems to have back flipped and said that he would cop it. Let's just what happens when he's actually pushed on this question about whether he would seek to block this as well. He seems to be the master of standing on the fence on these sorts of questions.
HOST: Appreciate your time, Prime Minister. Thanks a lot.
PM: Thanks, Steve.