Event: Interview with Fran Kelly, ABC RN Breakfast
Speaker: Jennifer Westacott, Cassandra Goldie, Chris Richardson
Date: 9 May 2018
Topics: Budget, Newstart allowance, income tax, company tax
E&OE

Fran Kelly, host: Jennifer Westacott from the Business Council of Australia, Cassandra Goldie from ACOSS and Chris Richardson from Deloitte Access Economics. Chris, you were saying you think we could describe this as a victimless budget?

Chris Richardson, partner, Deloitte Access Economics: Because the economy for the first time in a long time, has been pretty friendly to the budget. Better news on jobs. Profits gave the government $35 billion extra to play with and they've spent about $15 billion of that, pretty much, on tax cuts, very closely targeted at middle income earners. 

Fran: Okay, Cassandra I'm waging that you don't see it that way.

Cassandra Goldie, chief executive, Australia Council of Social Services: Well no, this isn't a budget for people on low incomes and it certainly isn't going to guarantee us essential services. I mean the big, you know, if you're going to do something for people on low incomes, you would have lifted Newstart and the government has chosen, again, not to do that and instead given priority to these personal incomes tax cuts which will cost the budget a lot and they are spread right across the income scale. So, high income people are going to get a tax cut and we've done nothing to tackle poverty in disadvantaged areas in this budget. 

Fran: If the government had increased Newstart, would you have signed off on the rest of this budget, this tax package?

Cassandra: Well the other part of it, of course, is the essential services. I mean, aged care is good what we've got - 14,000 new home aged care packages.

Fran: $1.6 billion in there.

Cassandra: But the backlog is 100,000 Fran. So, it highlights for us...

Fran: But you can't do everything all at one.

Cassandra: No but what it highlights for us it the discipline we need to ensure we've got the revenue to cover essential services and we're worried that if this story on revenue isn't permanent, there is a big risk here that we'll be back in one or two years again with a so called horror budget because we're trying to cut away again, to uh, because we've handed out tax cuts. It's far too soon.

Fran: So just to be clear, ACOSS is not supporting this tax package?

Cassandra: Not at this point.

Fran: Not any of it?

Cassandra: Not at this point, no way. If you earn $37,000, you're lucky you might get $4 back but out of pocket costs, health, education, childcare, all of those, the trajectory we see if more out of pocket costs for people.

Fran: Jennifer Westacott, is there enough discipline in this budget? It's a lot of money going out on tax cuts.

Jennifer Westacott, chief executive, Business Council of Australia: Yeah I think so. I mean, it's pretty well calibrated. I mean, it kind of builds over seven years. It starts with low income earners, it's like the company tax stuff, you start with small business, you give them cash flow benefit, you send the signal to bigger corporations. So, I think the kind of, you know, urge to do something huge, quickly, has not been taken. I think it's pretty carefully thought through. And I think it is big reform. I mean to take out an entire tax bracket, one of the, kind of, most incentive sapping arrangements in our tax system. Where people who are working hard go into these new tax brackets, that's big reform.

Fran: Is it reform? I mean it's reform, but is it, is it regressive reform? I mean, when you look at it by seven years out, people on $200,000 will be getting tax back of over $7,000. Those on low incomes, $40,000, they'll be getting $400 back. 

Jennifer: But you've got to, kind of, remember we've got a progressive tax system here. Someone who earns $50,000 is paying $7,000 in tax. Someone who earns $200,000 is paying $60,000 in tax. That's with the tax cut factored in. I mean, that's what a progressive tax system is. 

Fran: Yeah but doesn't this make it less progressive if flattening it out?

Jennifer: I don't believe so. I think, this is what Ken Henry called for. A, kind of, simplification of the system, a kind of, making sure that some of these brackets were removed. Because, someone on $41,000, you know, someone on 50, 60, they suddenly go into another bracket. People tell me all the time, you know, I don't want to get that extra job. You know, we've got to reward people for doing more and, to Cassandra's point, you know, this story of this budget, Fran, is the story of when the economy is working, when business is successful, you can put back. Now, have we prioritised everything? Well these are choices government make and we would like to see some other things in there. But, you know, this nonsense about trickle-down economics on company stuff. You know, you've gone from $70 billion to $87 billion in company tax receipts. You're going to $100 billion, $100 billion at the end of the forward estimates including the tax cut. I mean, this is about business working and successfully driving economic growth which allows us to put back. 

Fran: If you're at the very bottom of that trickle-down though, you're not getting anything, and you're not getting anything from this tax budget. The ones who get, as Cassandra was saying, are those who earn $18,000. They get nothing. 

Jennifer: Well they don't pay tax.

Fran: You've been calling for... no but out of this budget, I mean, not from the tax package. I mean from this budget. 

Jennifer: Well, you know, we are getting extra money to help and we are getting extra money to education.

Fran: It's not so much.

Jennifer: There are...

Fran: University funding is frozen again. 

Jennifer: We are seeing, you know, a really good skills package. We're seeing a very good aged care package. Look, I'm in agreement with Cassandra about Newstart, you know that. 

Fran: You all are, in fact.

Jennifer: Well yeah, Chris is the same, this is a missed opportunity to do something on Newstart. I think we can do a bigger skills package. I think there's a lot of people now who are going to be transitioning in the workplace, we need to make sure we can help them find extra work. But, you know, my message is simple. I mean, governments make choices but this time they've had choices to make. If we see those company tax revenues, if we see the economy faltering, in four years' time if we don't have $100 billion, we've got 80, we're going to have a very different discussion about the budget. 

Fran: If we see the economy faltering in four years' time, we are going to have a different discussion because they won't be able to deliver these tax cuts, that's for sure, because they're predicated on strong growth. Now, Chris, you've been saying that the forecasts are relatively robust, you don't have an issue with the growth forecast. Little issue around the wages forecast, what about productivity though? As Jennifer mentioned, the basis of the argument for the company tax cuts is to boost productivity. Ken Henry says, as you know, the key to growth is productivity, participation and population. Productivity is forecast to grow by four times in this budget. Where's that coming from, that boost in productivity growth?

Chris: Partly because the nation has invested and is now getting back to investing at a faster pace again. That is helping productivity growth. But you're entirely right around the choices. You know, the government has prioritised tax cuts, then they've prioritised budget repair, way back at the end of the queue, still with nothing are the unemployed. I must admit, I would do those prioritised a little differently. I do think it's time to do something for the unemployed after that I would do budget repair, after that I would do tax cuts. Given, however, they're behind in the polls, the election isn't that far away, I guess, I understand where they are headed. Two risks. Risk number one is China? Will the economy keep delivering them the wriggle room to do what they would like to do? And risk number two is Canberra. You know, here we are, day after the budget and the windfall of the moment has only been partly spent. Will it be all spent? And will we have no buffer to China and other risks by election night?

Fran: So when you say you understand, given they're behind in the polls, you understand why they've delivered the budget they have. What do you mean by that?

Chris: So I absolutely that they've delivered personal income tax cuts.

Fran: A cautious handout budget.

Chris: Yeah, and it is cautious given the backdrop. Given the, in many ways, dangerous backdrop of sudden money for a government behind in the polls. I was actually surprised that they didn't spend more.  

Fran: But, to Cassandra's point, spending it on tax cuts, not spending it on services. Is that a roadmap for the future?

Chris: Look, there remains one absolute fairness fail right now and it's Newstart, unemployment benefits for the poorest of the poor in Australia. We have been doing relatively worse for a quarter of a century. You know, and the way we've set up the system, it gets worse. Tomorrow it gets worse again, the day after that, I'd love to see that. It's not the only thing. There are a bunch of other things but that is the standard.

Fran: You're listening to RN Breakfast. It's nine minutes to nine. Our guest in the parliament house studio this morning, Jennifer Westacott from the Business Council, Chris Richardson from Deloitte Access Economics and Cassandra Goldie from ACOSS. Cassandra, I can see you jumping around wanting to have something to say.

Cassandra: Well I do. We can't call this a victimless budget. I mean, that's an absolute misnomer. I mean, we just heard it, that the people who are the furtherest behind are at the back of the queue here. Nothing is being done for people on the lowest incomes. But the other part of that, is, I think the community... it will be very interesting to see the community reaction to this. We've got these promises of, you know, if you're lucky, as I say, it's $4 a week, maybe. If you get into the middle income brackets you're getting maybe $10 back in the tax cut. What people know is that if you don't have the revenue for essential services, the community have been paying already, big increases in out of pocket costs for health. If you're going to the doctor, childcare etc. Now, the public have heard, I've seen what's it like when there is a risk in the economy. Chris has talked about that and we're saying, we should not be, immediately that we've got some good news story on revenue, handing out all these tax cuts without the confidence that we've got the revenue we need for essential services. If you're serious about the cost of living pressures for people, you would have been disciplined. We shouldn't have done the tax cuts, we should have made sure that we had a plan, a seven year plan, for funding homelessness services, for dealing with rental affordability, with people living with the real risk in the community. 

Fran: People might think that or they might think, oh I'd like that money in my pocket. And this is a pre-election budget, no doubt about that but people would prefer wages boost. There's a three per cent forecast of wages growth, a lot of people questioning that assumption. Where's it coming from? But, Jennifer, do you seriously think that this $140 billion for personal income tax will persuade the public, let alone the senate crossbench, to support the 80, $65 billion, whatever figure you want to... the large, very large, company tax cut, given what we're seeing in the Royal Commission and given wages growth, has not been delivered yet.

Jennifer: All the things that people are talking about here, so if you want revenues to grow, the best way to get them to grow is the economy grows, and surely there is not more stark reminder of that then this budget, when you see those company tax revenues growing. Now we have to lock them in. We have to protect companies from the pressures that Chris is talking about. We have to, kind of, deal with that productivity issue. We're still totally reliant or too much reliant on terms of trade. The only way you can get wages to rise, and I'm talking incomes here, not just, you know, awards changing, is to have better business activity, stronger business activity, to have more people working more hours. To have people getting different jobs. To having unemployed people getting a job and that is about business investment. So, if we want those wages to go up, which I do, then we have to get the economy singing. And then, we can lock in the things that Cassandra is talking about, which I agree with. But can I just make this very quick point.

Fran: Briefly.

Jennifer: If we are to do public policy on the basis of forecast, you do nothing. You wouldn't do the NDIS. You would do almost no public policy in this country. You've got to say, we're making that assumption, which Chris says is broadly realistic. Now you've got to back in the economic activity. 

Fran: Okay, on that note, we will leave you all. Thank you so much for joining us this morning after the budget. Cassandra Goldie, Jennifer Westacott and Chris Richardson.

Jennifer: Thanks very much.

Fran: Jennifer Westacott from the Business Council of Australia, Cassandra Goldie from ACOSS and Chris Richardson from Deloitte Access Economics. You're listening to RN Breakfast. It's five minutes to nine.