Event: Interview with Linda Mottram, ABC PM radio
Speaker: Jennifer Westacott
Date: 8 May 2018
Topics: Budget, company tax, Newstart
Linda Mottram, host: Can a budget balance the interests of business and the welfare sector at the same time? In the past we have seen exactly those two interests come together to argue for an increase in Newstart, that has not eventuated this year or in previous budgets. So let's get the report card on this year's budget from the key lobbyists on those two sides. Cassandra Goldie from the Australian Council of Social Service, thank you for joining us this evening.
Cassandra Goldie, CEO, Australian Council of Social Service: Good evening.
Linda: And alongside you, Jennifer Westacott from the Business Council of Australia. Jennifer welcome.
Jennifer Westacott, chief executive, Business Council of Australia: Thanks very much.
Linda: Cassandra Goldie the government promised it would offer tax relief to low and middle income earners before further corporate tax cuts, it's doing that with the changes to the low income tax offset, is that a positive outcome in your view?
Cassandra: No, we don't support it. We said before the budget was handed down that we did not want to see more tax cuts delivered at this time. We're worried about the revenue picture, the big gaps that we've got in essential services and obviously every time we come to the government saying, we need that increase to Newstart, they say 'we can't afford it'. Well, tonight we've got them spending billions in delivering personal income tax cuts, which you know, the detail on this is pretty complex but, you know, our estimate is that if you're earning between $48,000 and $90,000, you'll get about $11 a week. If you're on a much lower income up to $37,000, you will get just $4 a week. The price we pay for that, we'll be paying the price for this for, well, this is a seven year package of tax cuts, and we're saying, where is the seven year plan for funding the home aged care packages? That was a good news story in the budget for the government to fund 14,000 of them but the backlog is 100,000 in home aged care packages. So it gives you a sense of where we've got these gaps in essential services, instead we've given away billions in tax cuts tonight.
Linda: Jennifer Westacott the government has extra revenue coming in. It is spending on some of these sweeteners it seems for an election, tax cuts and so forth, would you prefer that the government spent that money paying down debt?
Jennifer: Well, they are paying down debt, the debt does actually go down if you look at the forward estimates. I mean, this is a pretty good budget, I think. It does deliver on growth, it does deliver on stronger business conditions, on investing in infrastructure and that growing economy has allowed us to give really much needed tax relief to lower and moderate income earners, obviously a seven year package. It's allowed us to do what is a very very good package for older Australians, but I think it absolutely proves without any doubt that it's a strong economy and a strong business sector that allows us to do these things. It's a strong business set of revenues that allow us to put back into the community, so I agree with Cassandra, there are risks here and certainly risks from external factors. But the way we mitigate those and the way we solve this revenue problem, is to grow the economy faster. You look at the company tax revenues, they are the big difference. Over the forward estimates a $15 billion new additional revenue that wasn't forecast. By the end of the forward estimates companies will be paying $100 billion in tax, that's including the tax cut. Now we need a strong economy, we need it to be competitive. I agree with Cassandra about Newstart, she and I always agree on this. I think it is disappointing it's not in the budget. I think it's time we just made this decision. We don't need reviews from the Labor Party. We need to do something about it.
Linda: But as Cassandra says it's not just about Newstart, it's about all those other areas where there are gaps as she refers to and we have just lived through the longest period of good economic times in the country, of very strong corporate profits. Isn't it the case that those areas Cassandra is talking about is where the government should be focussing?
Jennifer: Look, these things are priorities. I would like to see more money in skills, for example, but the point I am making is not disagreeing with Cassandra about essential services, at all. The point I'm making is you can't do any of this if the economy is not growing and it's business which drives the economic growth and surely this budget absolutely proves that. It absolutely proves it.
Linda: Casandra, do you accept that that we've got to keep the economy growing, we're in a very competitive world, the corporate sector is competing against much lower tax rates in other countries, that if we don't keep on top of this there is no way that the sector you're committed to can have the things that it wants?
Cassandra: Look, our view is at this time given we're we've been on the budget, what happened through the global financial crisis, and the risks that we face in the future, the last thing we should be doing is immediately that we're seeing this tick up in revenue and it's partly because of external factors, I think it's really important to highlight that Jennifer, that's what Chris Richardson was saying last week, let's be really careful, this could be temporary what we're seeing here on the revenue trajectory. We have to be really disciplined, now you know, that's why Chris Richardson said last week, don't do personal income tax, do Newstart because it is a compelling case and we really welcomed it. It's been great to see the Business Council backing this in in the same way as groups across the community. I've been really noticing people from community tonight actually on the Twitter feed coming in saying, don't give us that $10 a week, frankly we would rather see an increase to Newstart. And the other part of it of course is where people get pressured is the growing out of pocket expenses on essential services like health, like education, like childcare and of course nothing on housing affordability in this budget and so I think again, this was about for us it was be disciplined. Instead, what we've got is this raft of personal income tax cuts, where there is not a compelling case to do it, the compelling case was to be careful, to fund what was really important and to make sure we're targeting our expenditure really carefully.
Jennifer: Well, I don't think giving people tax relief is a luxury. I think, you know, if you look at those people who are on $41,000 and above to basically avoid them having to go into bracket creep, which is, you know, very debilitating for people. You know, we have to give people tax relief. That the thing we have to do now is to mitigate the risk, there are these external factors, we have to actually make our economy more competitive so that we grow faster, we grow harder, we have a bigger economy that will allow us to do the things we need to do. We won't be able to sustain any of this if the economy is floundering.
Linda: Let me jump in there, Jennifer Westacott, the income and corporate tax cuts proposed are a structural change but the revenue funding them is the result of good economic conditions. What happens when the economy turns sour?
Jennifer: Well, we should make sure we don't have the economy turn sour.
Linda: It's not always in our control, is it?
Jennifer: Well, that's right and that's why we have argued for the company tax [cut]. People keep forgetting Linda, that this is a decade before a lot of the companies get those cuts. But the signal is hugely important, it's the signal that really matters. Now what we have to do is to make sure that we're not as reliant on the terms of trade, that we're driving the productivity, which is driven by investment, which is driven by after tax returns. That we're driving our competitiveness, which is driven by tax. That's why we're hammering on about the tax cut, that this, you know, this is a carefully staged 10-year plan that allows Australian companies to be more competitive, it gives smaller business immediate relief, that is going to underpin a stronger economy. The risk isn't mitigated by doing nothing. The risk actually gets worse.
Linda: The idea of the carefully staged 10-year plan is also subject to political vagaries, who knows where that might end up? Cassandra Goldie can I get back to you. One of the biggest savings measures in this budget is $300 million from social welfare debt recovery. Is that a fair target for the government?
Cassandra: Well, this is the cruelest irony that, you know, what we've got is a government that can find money to invest in more robodebt and pursuing people, of course people should be returning over-payments through the social security system but of course we also don't want to see is this kind of really harsh, you know, the negative impact that is overwhelming be the voice from people affected by this and we're very, as I say, I think it's shameful that the government is finding money to do more of that but not tackling the biggest gap in social security system, which is Newstart. I just really think it is important that we highlight here that for people, when you talk about, we've got a government saying, that we're going to get to surplus pretty quickly now. Let us not forget that part of how we're getting to a surplus is because of the billions that have been cut out of the social security system, central services already. We estimated that it's about $16 billion, and upwards that has been taken out and so this is, the community doesn't forget that. I just think people, it'll be interesting to see whether people go for the $10 a week, you know for people who are in reality on better incomes on then many people in the community, or whether the community is prepared to say, no let's get it right here.
Linda: And I just want to bring in Peter Ryan, our senior business correspondent. Peter you've got a question for Jennifer Westacott.
Peter Ryan, senior business correspondent: Jennifer, a couple a months ago, Ken Henry, the chairman of National Australia Bank, former Treasury boss, said that the only way of getting company tax across the line was to build a social compact in the community. Do you believe that this budget actually builds that bridge and gives you that opportunity to sell that company tax cut because it is very very difficult for you at the moment.
Jennifer: Well, I think what it does is show you that when companies are successful, when they thrive, you can give back to the community. I think what he's talking about is a broader compact that he and I are discussing about what business actually start to offer up in terms of transition to work and so on, all this change that is going to happen in our workplace. And I think business has to own that problem and they have to take responsibility for it but this budget shows absolutely Peter that when business is thriving, the community gets something back for that. They get a lot for that, I mean personal tax relief, it’s huge for some people and you know you're still seeing increases in health spending, increases in education spending. Those things just can't happen if the economy isn't strong, if we aren't having strong business conditions, so you know, this is starting to show what a compact of a growing economy, a strong business community, extra company tax revenue allows you to put back. You know there are always going to be arguments of priorities, I'm with Cassandra on Newstart stuff but this shows you when the economy is strong, when business is strong you can actually put back.
Linda: Okay, Peter Ryan there, Cassandra Goldie from the Australian Council of Social Service, thank you very much for joining us.
Cassandra: Thank you.
Linda: And Jennifer Westacott from the Business Council of Australia as well, thank you.
Jennifer: Thanks very much.