Topics: Federal Budget, tax, intergenerational equity
E&OE
Patricia Karvelas, Host: Michele O’Neil, Bran Black, welcome to the program.
Michele O’Neil, ACTU: Hi, Patricia.
Patricia: We are just a couple of hours away from the Budget being officially released, but we have had the Government tell us broadly what their ambition for this Budget is: a reforming Budget and a message about basically getting the pace of change really accelerated tonight. Bran, beginning with you, is that the right message for these times?
Bran Black, BCA: We think the message has got to be focused on resilience. We’ve got real challenges that have been exposed through the Straits of Hormuz crisis, which is still ongoing, but those challenges reflect issues that have been very much at the forefront of our thinking now, for a number of years.
We saw supply challenges during Covid, we’ve had the imposition of tariffs by the United States, and, again, different types of supply challenges with the straits. So our message is, let’s focus on resilience but in doing that, we see the Budget as an opportunity to address two core components of that.
The first is making sure we’re fiscally strong and we need to be much fiscally stronger, particularly given the uncertainty in the world around us. And the second point is we have to make sure that we’re doing everything that we can to drive up living standards, and that comes down to how effectively we can deliver productivity improvements through increasing business investment.
Patricia Karvelas: Michele?
Michele: Well, I think it’s really important that we see a Budget tonight that makes Australia fairer, and that’s what working people are looking for, Patricia. We want to make sure that we have a fairer system, a fairer housing system because way too many workers are being locked out of housing, not being able to afford to live near where they work or in their own communities.
And young people, particularly young people, are just locked out of the housing market, rising costs and rent. So having a fairer system for housing, which can really make sure that it’s more affordable and more accessible, is a critical thing.
The other thing is, we want to see some cost of living relief. It’s a difficult time for people, and they’re bearing the brunt of Donald Trump’s war. And we want to see something that comes to workers to recognise that.
And then third thing I’d say is we want to make sure that Australia is more secure in terms of fuel security. So what the Government’s already been doing, leaning in to making a difference in terms of making sure we’ve got the fuel we need. We’re happy to see that there’s going to be more efforts. It’s what we want to see, you know, more efforts to make sure, because you know why, they’re job-saving measures. That’s what it is. If we’ve got the fuel we need, the fertiliser we need, that saves jobs.
Patricia: So there’s a few things we do know that property taxes will be changed. The extent and exactly how that looks will be revealed very soon. But Bran, do you broadly think there is a case for changing those property taxes?
Bran: Well, what we’ve said consistently is certainly with respect to CGT reform on property, we’ve said that we would like to see that type of reform occur in the context of much broader tax reform that incorporates the consumption, the company, individual and, of course, the state taxes as well.
We’ve said that in any case, what we should be looking at, and this is how we’ll be assessing any CGT reforms that are confirmed in this evening’s Budget. They shouldn’t be applied retrospectively. They shouldn’t come at the detriment of investment in new housing, and they really do need to make sure that if there are revenue gains that accrue to the Commonwealth, they should be pumped back into tax relief or alternatively, some productivity-enhancing measures. So that’s what we’ll be looking for tonight.
Patricia: On these tax reforms, Bran’s not the only person who’s been making the case, Allegra Spender too, that perhaps you need to deal with these structural issues and the income tax system. So you link the two. Are you looking for broader reform like that?
Michele: Well, we really want to see urgent reform about these taxes, that really affect housing and people’s access to housing. It’s so long overdue. I mean, we tax workers more than we tax wealth, and housing is a critical example of that, and it’s an example, because if you take Sonia, she’s a nurse, she gets a $90,000 salary, she pays $25,000 of that in tax.
Her landlord, Malcolm, he gets $90,000, the same amount in income, and pays $2000 in tax. Now that’s fundamentally unfair. We need to have a system that says that you shouldn’t be able to advantage people that have more assets and more wealth over working people who pay their fair share of tax.
Patricia: Okay, so let me go with Sonia. Should then Sonia, who sees a reformed system, also see more income tax relief through a different taxation system?
Michele: Well, we’ve got income tax relief coming on the first of July this year and next year, and we’re hoping to see something in the Budget tonight. We’ve seen some reports about other tax measures that will help with cost of living, so we really want to wait and see what that is in the Budget. But I think something that rebalances the system and makes it so that some working people don’t pay such a disproportionate share is a good thing.
Patricia: Bran on that issue of the sort of workers and the tax system itself, using Sonia, cause I’m stuck on Sonia now and the landlord because there are real people like this throughout the country. Is that what you’re talking about, tax relief for those kind of workers?
Bran: I think it’s a really good point because I don’t think anyone would argue with the idea that there are intergenerational issues in Australia, there really are. What we see though is that, if you really want to try and categorise them they come down to two broad areas. The first is that young people particularly feel as though they can’t get ahead because of cost of living challenges. And the second, which is of course, connected with the first is the young people don’t feel as though they are ever going to get a toehold into the housing market.
With respect to that first point, we agree that it is entirely the case that people are going backwards, they feel as though they haven’t been able to get ahead, they feel as though, at the end of week, they have less money in their back pocket. The solution to that is driving up productivity. That is not just business rhetoric –
Patricia: And there will bea productivity package. Obviously, I don’t know the details but you’re looking to that as the enabler.
Bran: It has to be part of the enabler, very much so, but if we can get that productivity improvement, as the Reserve Bank of the Treasury have shown, that’s how we lift real wages. On the second point in terms of housing, we think that we’ve really got to inject more effort into supply.
So we’re hopeful that we see in this Budget confirmation of the utilisation of the National Productivity Fund. We’ve heard the Treasurer speak to investment on connecting infrastructure and also more work around getting the states to be accredited on EPBC reform. That stuff really makes a big difference day to day, because that’s how you get more supply.
Michele: Can I just pick Bran up on the productivity point. Of course, we want to see improved productivity, but what we know is that that theory that somehow productivity goes up and workers get a fair share of that is no longer the proven case in Australia. In fact, even with modest or small productivity growth, workers have been getting a less and lesser share of that.
So productivity growth has been going up slowly, but workers’ real wages, they’re four and a half per cent behind where they were in 2021. So it’s not this magic trick that productivity goes up and working people see their wages increase. We need to do everything possible to lift wages as well, and not just assume that that’s the fix. And of course, businesses need to invest more in skills and training and equipment and the things that are going to make the difference for productivity.
Bran: I would disagree with that characterisation, because I think what we’ve seen very clearly over the course of the last decade is that productivity just hasn’t risen. It’s been point three of a per cent against the long run average of 1.2 per cent.
So if we are looking at trying to make the case for what we can do to improve the lot for workers, which is really what the overarching objective for all of us should be. We need to make sure that we’re delivering those productivity improvements that come about by having more competitive business settings.
Michele spoke about how we go about making sure that we get businesses to invest. Well you do that by giving them an incentive to do that. We’re not asking for cash handouts, we’re asking settings that set us relative to our global peers.
Patricia: Final thoughts from both of you. You’re both going to pour over the Budget before Australians even get to see it and make an assessment. What’s the one thing you’ll be looking for Michele?
Michele: Fairness. We want to make sure this is a Budget that’s fair for working people and that rebalances the system towards them.
Patricia: How about you Bran?
Bran: I’ll be looking for the future and what that means is making sure that we are delivering on our fiscal needs, making sure that we don’t leave a budget or debt that’s unsustainable for future generations and making sure that we set them up with productivity-enhancing measures that give them a chance to realise real wage growth.
Patricia: Alright, well they’re the two tests you’ve set. Let’s see later on if the Government manages to meet both your expectations. Thanks to both of you.