Highest-taxing Government, Labor leadership, nest-egg accounts, Private Health Insurance Rebate, tax policy Mark Latham - Shadow Treasurer, Manager of Opposition Business in the House of Representatives

Radio Interview

Transcript - ABC Local Radio Perth - 30 September 2003

BARTLETT: Mark, good morning.

LATHAM: Good morning, Liam.

BARTLETT: Good to see you here in WA again.

LATHAM: It's great to be back in Perth.

BARTLETT: It's almost becoming a habit, isn't it?

LATHAM: Well the in-laws are here, you see. My wife is from Perth so I'm never that uncomfortable to be here. It's always a joy.

BARTLETT: It's not a hardship.

LATHAM: No, not at all.

BARTLETT: You're saying the right things just in case…

LATHAM: [laughter]

BARTLETT: Now, before we go any further let's talk about these figures that have just come out, being released from Canberra. The Federal Government – as some of our listeners may have heard in the news – delivering a budget surplus for the last financial year. Nearly twice as high as was forecast back in May. Treasurer Peter Costello announcing a surplus of $7.5 billion. That's a big figure.

LATHAM: It is, and it's a product of what we call bracket creep, where as people earn more they go into higher tax brackets and the Treasurer collects more in tax. And I think it also exposes the pea and thimble trick we had in the last Budget. People might recall that the Government gave what was known as a sandwich and milkshake tax cut – just $4 a week. And these figures show they could have given much more, because people are paying more in tax as they move into higher tax brackets. And the Government only gives back a small fraction of that as they did last May. So it's a pea and thimble trick. The Government is collecting a record amount of tax. Since 1996 the average Australian household is paying an extra $8,000 in Federal taxes. That's way too much and we will never get that sort of relief from Mr Costello.

BARTLETT: The Treasurer is saying that part of this result, part of this huge result, is thanks to company taxes. Company taxes are reaping about $2 billion more than anticipated. He said it's turned out to be a very profitable year. Companies have become more profitable, tax receipts have increased.

LATHAM: Well, you'll only get a $7.5 billion surplus on the back of tax, tax and more tax. And people know that they are paying more in company taxes, income taxes, all sorts of Federal Government taxes. There's a sugar tax, there's a ticket tax, there's a milk tax. This Government has just loaded more taxes and levies on the Australian people than we've ever seen in the past.

BARTLETT: How much of this would be a product of the GST?

LATHAM: Well, it would be a component. GST revenues have been strong of course and they're paid through to the States. So, you know, there's taxes, taxes and more taxes being collected by the Commonwealth. Some of them pay through to the states. Most importantly they come out of the pockets of ordinary Australians, who are paying an extra $8,000 in federal taxes since 1996.

BARTLETT: And given that there is now going to be this enormous kitty of money, you'd expect, wouldn't you, from a political strategy point of view, that there would be definitely be tax cuts on the agenda, on the table for the forthcoming election – whenever that may be.

LATHAM: Although, when the Government is collecting more in tax, that is as people earn more they go into a higher tax brackets, they pay at the top rate 48.5 cents in the dollar tax. They should always get tax relief because you're paying more in. So there is always room for the Government to give some back in the Budget. And the pea and thimble trick of Mr Costello is, he only gave a small fraction of that in the Budget we had in May knowing full well, and these figures confirm it, that he was collecting a record amount of tax. He's the highest taxing Treasurer in Australia's history. He only gives back a small fraction of that. It's not the amount of money that people deserve.

BARTLETT: What do you reckon though? I mean, do you have a feeling about this, about what they would use in the lead up to an election, or do you think they would give us the tax cuts next June anyway regardless of when they're going to call one.

LATHAM: Well, normally the Government does try and play this trickery on the Australian people. But it's not really tax relief. You see, if you're paying more through – in the twelve months leading up the Budget – and they only give you a fraction of that back and then you find out a couple of months later in the Budget outcome that there is a taxation bonanza for Mr Costello, well you are short changed. You are no better off. You are worse off.

BARTLETT: You're arguing that you're bringing it back to the status quo of what it was…

LATHAM: Well, not even that, not even that. People got $4 a week in the tax cut in May and these figures show that they paid much more than that amount through bracket creep over the twelve-month period. So if you're paying the Government a record amount and you only get a fraction back – what Amanda Vanstone described as a sandwich and milkshake tax cut – well you're worse off. And that is the reality under this Government. It's the highest taxing Government in Australia's history and people know they are paying all of these taxes. Every time you pick up a carton of milk or use the sugar, and all the items where the GST is levied, and the record amount of income tax. It's horrendous for a lot of people. I mean there's a report out showing that a million Australian families are paying a marginal tax rate of more than 60 cents in a dollar.

BARTLETT: The Prime Minister has rejected that of course.

LATHAM: No, but it's a reality that people…

BARTLETT: Well he argues that those figures are not right.

LATHAM: Well, they're figures out of his own Department. And the marginal tax rate effect is the impact of income tax cut plus the loss of social security benefits as people move onto higher income levels and into higher tax brackets. So the net impact on some families is horrendous. That same report out of the Prime Minister's department showed that for some families on $31,000 a year, when they earn an extra $100 the Government takes off $102. They've got an effective marginal tax rate of 102%. That is, they are $2 worse off.

BARTLETT: Because of these social welfare allowances and what they can qualify for and what they can't.

LATHAM: Yes, exactly. And these higher taxes are just taking away incentives and reward for effort in the Australian economy.

BARTLETT: You can sit here and pontificate about them being a high-taxing Government, but what about Labor's record? It hasn't been terrifically good when it comes to tax relief, has it?

LATHAM: This is the highest taxing Government in Australia's history. That tells you one historical fact, that they're a bigger taxing Government than Labor ever was.

And we certainly have a record of providing tax relief. We brought down the top marginal rate quite substantially during our time in Government, and we were never collecting the sort of revenue and never had the array of taxes that Mr Costello has.

The Costello trick has been to double the tax base. You've got the income tax base, and near doubled it with a second tax base through the GST. On top of that you've got all these extra levies that people pay. That why he is the highest taxing Treasurer in Australia's history.

People need relief, and we are working away on tax-relief policies. We've already announced a policy on the superannuation tax cut. The input tax for super is an horrendous tax, and we are committed to bringing it down. We will have further policies giving working families taxation relief in the lead-up to the next election.

BARTLETT: We were talking to the Prime Minister earlier this morning, Mark. He had a couple of calls to the program about the health issue, because of Tony Abbott's new portfolio. One of them mentioned the Private Health Rebate again. It often comes up, this situation with the Private Health Rebate. Do you think it needs means-testing?

LATHAM: No, Labor is committed to keeping it, but it is part of our policy review. And Julia Gillard, our shadow spokesperson, will be saying some things about what we plan to do to improve the effectiveness of the rebate, but we are going to keep it.

BARTLETT: You made that commitment during the last campaign.

LATHAM: Yes.

BARTLETT: So that remains in place as of today, does it?

LATHAM: Yes, it does. The most important thing, though, is to keep bulk billing. That is the thing that has people worried, when you see these Medicare changes the Government is trying to get through the Parliament, and you've got the prospect of paying $20, $25 to see the doctor. That is the thing that scares people.

It goes to this heart of economic management. If they're taxing so much, collecting so much money, where is it all going? Because on top of all the taxation that is being paid, they've got a plan to make people pay up-front at the doctor, talk of $100,000 university degrees, Costello is always banging on about the need to lift pharmaceutical prices so people pay more when go to the chemist. So where is all this money going to? It's certainly not going to the benefit of Australian workers and Australian families.

BARTLETT: When you say Julia Gillard is looking at changes, do any of those changes include the possibility of means-testing the Private Health Rebate?

LATHAM: Not that I'm aware of, but there are different ways you can improve any aspect of Government policy. We're keeping that rebate, but obviously we're aiming to improve its effectiveness to make sure we've got a better health system in the future.

BARTLETT: Would you consider that possibility?

LATHAM: Well, it's not my patch, you see. Julia is working away on ways in which she can improve this policy, and I'm not aware of any plan to means-test it.

BARTLETT: Let's take some calls this morning. Hello, Hugh, good morning.

HUGH: Good morning, Liam. Good morning, Mark. On Sunday I saw Simon Crean on the Insiders program. [inaudible] secured an appointment with Megawati, [inaudible]. But as it turned out, he didn't – [inaudible].

LATHAM: I'm not too sure he was gloating on Sunday, and the Prime Minister himself has said that any Australian political leader who can meet with the Indonesian President, that's important because we want to be partners with Indonesia in winning the war against terror. If you can work with Indonesia to clean out the terrorist networks in their country and other parts of Southeast Asia …

HUGH: Besides all that, [inaudible] he was making such a big issue about it.

LATHAM: I'm not too sure Simon was rubbing Howard's nose in it, and John Howard said yesterday that he wouldn't rub Simon Crean's nose in it because the meeting had been cancelled. She was back from an overseas trip and apparently cancelled all her commitments.

But, yes, sure it's disappointing and I agree with you it's not a tennis match, it's not a sporting contest to see who can have the most meetings with Megawati. It's about good foreign policy and the best arrangements for Australia in our national interests.

HUGH: That's precisely what it should be about, not about political point-scoring.

BARTLETT: Hugh, I'll leave you there, mate. I've got to keep moving. I've got a full board. Hello, Frank.

FRANK: G'day Liam, Mark. With the surplus the Government has put forward, does that take out the cost of this war in Iraq?

LATHAM: Part of it. There is an ongoing Australian financial commitment, but this is the Budget outcome for the last financial year. So it would include that large expenditure, and there are further costs because Australia makes a contribution to the reconstruction of Iraq. So part of those costs would be included, and there has been a big increase in Defence spending as a product of Australia's commitment there.

FRANK: Mr Costello, when he predicted a surplus of whatever it was, and now it turns out to be nearly twice as much. [inaudible] which he had known about when he forecast the surplus.

LATHAM: There is extra Defence expenditure, but what it tells you is that the Government is swamped, that Defence expenditure was extra taxation. The surplus has gone up because of the extra taxes they've collected, so it just gives you guide as to how deeply he's got his hand in your pocket. They've spent a lot more, but they've taxed so much more and collected so much more revenue that they can report a bigger surplus than anticipated.

FRANK: Yes, it'd be nice to be able to run a business like that.

LATHAM: It'd be nice to have people guaranteed to pay you money, which is what happens through the Tax Office year by year. That would be nice, and this is the reason why Costello taxes so much.

BARTLETT: Thanks, Frank. Good on you. Hello, Hamish.

HAMISH: Good morning. I've got a very important question. I believe that one of the problems we've got in this country is it seems to be that husbands and wives are split and divided, because of the tax system. I can't see any reason why we shouldn't have income splitting between husband and wife. This would allow mothers to stay at home and care for their children. It would reduce the total amount of tax payable, and it would bring families closer together. There seems to be the common splitting up of families, and I know, I believe in Germany income-splitting between spouses is part of their legislation, their tax legislation. I can't see any reason why we don't have this right now. You talk about putting your hand out to social security, saying, [inaudible] and they give you money back, because they say they're going to give you money back because they're taxing you too much. Why don't they give back to the man a bit of respect and let them say, I can provide for many family but I shouldn't be paying this much tax. All I want to do is put it to Tony Abbott [inaudible]. You've got to go with your hand out, begging, you've got to do all this paperwork. It's just a paper nightmare, and they're just collectors of information and personal information. We shouldn't have to go… no one should have to go for a handout. What you earn should be enough to live on.

BARTLETT: What do you think of the idea of income-splitting, Mark?

LATHAM: It's something that John Howard has promised in the past but never delivered on, and the basic reason is that it's always been seen as too expensive. The Government has got a family tax benefit there that is supposed to provide some sort of relief for families where there is one income-earner, but it's not making up for the big tax increases that all people are experiencing.

BARTLETT: Because it's means-tested, and many of the people who are still earning the money are paying the top marginal rate. Have you crunched the numbers on income-splitting?

LATHAM: No, that's not something the Labor Party has supported. We've looked at it in years gone by and everyone has agreed it's far too expensive and you've got to find better ways of putting some more incentive into the taxation system.

One of those is to lower the marginal tax rates that we were talking about earlier on. Another is to bring down the superannuation tax, which is a Labor commitment. Also, we are looking at ways in which we can provide people with a bit of taxation relief if they save for the future, particularly for the future of their children.

So there are many areas where you need to provide a bit of relief. You can't do it all, and income-splitting is not something that even the Government is willing to support.

BARTLETT: Alright, Hamish, thanks very much for your call this morning. Hello, David.

DAVID: Good morning Liam. Mark, I'm curious. You're quite confident that Crean will lead Labor into a new Labor Government, aren't you?

LATHAM: Yes, that's right, David.

DAVID: Could you elaborate on that? Blind Freddy would realise he's not going well in the polls. Could you just once again – I've heard you several times sounding the, how shall I put it, your encouragement to him.

BARTLETT: Being loyal, I think, is how you want to put it.

DAVID: Do you honestly think he's going to pull it off?

LATHAM: Now you mention polls, there is one out today – the Newspoll, which everyone looks at – and it's 50:50, Labor 50, Government 50. And you don't get any closer than that.

BARTLETT: Two-party preferred.

LATHAM: Yes, that is the thing that decides an election outcome. In any case, we're not following the polls; we're following our beliefs. We're putting out Labor policy to make education more affordable, to restore bulk billing, to do good things to save the environment, to provide a bit of tax relief.

So we're interested in good policy rather than the beauty contest aspect of politics. What normally happens is you get into the election campaign where, for the first time Simon Crean gets equal air time with John Howard and the Opposition leader, who is a good campaigner, can normally lift in terms of polling and other measures.

And Simon Crean is a very good campaigner. We saw that in the leadership struggle against Kim Beazley. We've seen that in past Federal election campaigns.

BARTLETT: I though he'd want less air time, not more – 16%?

LATHAM: There has never been an Opposition leader who hasn't been written off. Look at Geoff Gallop, Mike Rann, Bob Carr, John Howard himself. I mean, it's the stock-in-trade in Australian politics that if you're not struggling away as Opposition Leader and written off by some of the pundits well something is wrong in the system. It's just one of the rituals of Australian politics and we're very confident that Simon, with the policies, with the convictions, the beliefs we're putting forward we've got some good answers for Australia's future.

CALLER: Is it a question that there isn't somebody else at the moment?

LATHAM: No, it's a question in terms of our arrangements in the Labor Party Caucus democracy. We've had two leadership votes inside our Caucus. One after the last election, more recently Simon Crean versus Kim Beazley. And at the end of the day you've got to respect the will of the democratic majority and get on with the job. That's what we're aiming to do. And that poll today 50-50 an improvement in our standing, is certainly encouragement that our policies and our approaches are resonating with the Australian people.

CALLER: Can I just ask you this. In due respect, if Simon dropped dead tomorrow who would lead the Labor Party?

LATHAM: Oh well, you'd have to have a ballot. But he's not dropping dead. He's in pretty good nick. I saw him down at the parliamentary gym not long ago and he was on the treadmill there, pounding away. He's in pretty good nick. So don't wish that, don't say that.

CALLER: I wanted you to speculate.

LATHAM: Well, I'm not going to speculate on Simon Crean falling off the twig.

BARTLETT: Good try though.

LATHAM: That's not a very nice thing to think about early in the morning.

BARTLETT: There are still people in the Party running around aren't there? I mean Wayne Swan for example. I saw him on the TV on Sunday morning talking about how the Party needed to do things differently. I mean there is a chief backer for Kim Beazley. And then he's on the AM Program yesterday hosing down your matched savings plan. When will these people stop running around the place undermining your leader?

LATHAM: Well, it's true, there are people out there with a bit of advice. But the best advice that Wayne and others can give of course is: support the leader, unify the Party. That's the best advice that they can give – and follow.

BARTLETT: But when are they all going to jump on the same train?

LATHAM: Well, I think people do need to respect the will of the majority in our Caucus and when you've got the policies and you've got the capacity to campaign on the issues the first thing you need to do is support the leader, unify the Party and get on with the job. And Liam, there are many many Labor supporters who come up to me and say, "listen, Howard is on the nose you've got all these problems, all these issues that are running against the Government, people want a change in this country, they want a better direction for the future". Labor's got to get around Simon Crean, support a unified approach and get on with the job of changing the Government.

BARTLETT: But you've still got to win it, don't you. You can't rely on him losing it.

LATHAM: Sure, but you've also got to recognise that you've had two leadership decisions since the last election inside our Caucus. How many do people want? Three, four, five, six? I mean, there's a point where in any sensible organisation – whether it's your family, your workplace, your sporting club down the road – where you've got your leadership, and you've got to get on with the job of trying to beat the other mob. It's no good having four or five tussles in the space of a term. It can make you look like a rabble and we don't want that.

BARTLETT: What about you? We talked about this matched savings plan on the program last week on the phone. Have you got anything else up your sleeve for later on this year in terms of savings plans or incentives or…

LATHAM: Yes, we've also commissioned research into what we call Nest-Egg accounts. That's a plan where families will be given some good incentives to put money aside to save for the future needs of their children. That might be their education, home ownership, we do need to build a new savings culture in Australia and I think we need three or four important national policies to do that. Matched Savings Accounts would start as a pilot scheme. We are yet to announce our final policy but we are starting small in that regard. But Nest-Egg Accounts give families a reason, an incentive, to save for the future needs and expenses of their children. I mean, that's backing the natural urge of parents to want to leave something better for the next generation. We don't get any of that assistance out of Canberra at the moment and the research we've commissioned is looking promising and we'll have that out by the end of the year.

BARTLETT: Is that modelled on anything overseas, Mark?

LATHAM: There's a British plan where they call it the Baby Bonds or Child Trust Fund. It's something like the youth equivalent of superannuation. We've got a system there, where people save for their retirement years. What about a system where we save for the needs of our children? And, quite frankly, kids need to have some money in the bank starting their adult life if they're to get into home ownership given the prices that people face at the moment. So, leaving something better for the next generation, building a savings culture among our youth and helping young people, the next generation, realise the great Australian dream of home ownership; they're pretty good things to do. And the research that we've commissioned is coming out well.

CALLER JUNE: [… Private Health Insurance …] I'm an aged pensioner earning $414 a fortnight and out of that I pay $50 a fortnight in private health. So I think I do my bit to help the medical situation and I don't have to stuff up the public hospitals. I think I'm doing a damn good job of it and I work very very hard. So are you planning to keep that?

LATHAM: Yes, we're planning to June. We've got no intention to do otherwise and your circumstances obviously give a good reason why we should keep that rebate but also recognise that the public health system and improved investments and saving Medicare and Bulk Billing, they're also very important things to do as well.

ANGELA: Liam and Mark, I'd just like to get Mark's opinion on, I don't know if he knows anything about this, personal services tax that's applied to companies where …. and they contract out to companies…we recently had quite a lengthy audit of tax on our company. We thought we were doing the right thing …[inaudible]

LATHAM: There's a threshold rule if you take more than 70-80% from the one source then you're taxed at the personal rate rather than the company rate.

ANGELA: [inaudible]

LATHAM: There's a lot of rules in the tax act. It's like a couple of telephone books. That's the problem.

ANGELA: Yes, this one, that was one the things that they looked at. But they were saying if you bring say $100,000 into the company on any financial year after your company has spent it you have to draw the rest of the money out of the company as your personal salary because then you'll be paying a marginal tax rate. It's almost like you're trading as an insolvent because they want to you to pay the high tax rate. It doesn't seem quite right or fair.

LATHAM: Well there is a lot of complexity in the system because we've got a personal rate of 48.5% and a company rate around 30%. So, that big gap causes a lot of complexity in the tax laws and a lot of hassles for people like yourself. And if you talk to the tax experts, they say that gap is one of the structural problems in the tax system. So, we're developing a tax policy, I can't announce it here today, but these are important issues that both sides of politics should be looking at. But in your individual circumstances it's a particular problem. If you think you're being hard done by by the Tax Office the best thing to do is visit you local Federal Member of Parliament and they can make some representations on your behalf to the tax office to get you some fairer and more just treatment.

ANGELA: I think that's where we're going to be going.

BARTLETT: That's a very good idea.

KEVIN: I want to find out….in the world, we're about the 22nd, exactly where do we stand on the grading of it, can you tell me that?

LATHAM: Well, that depends how you measure it because you've got to compare apples to apples and every system is different. We've got, for instance superannuation contributions here that people pay through that in other countries would count as a tax and make Australia even higher in the rankings of taxation nations. So, it just depends how you measure these things. But certainly we've got the highest taxing government in Australia's history here and if you include a lot of the things that are off the Budget such as the superannuation contributions we're even higher in that list the number 22 I can assure you.

KEVIN: Well if you look at the superannuation we put the money in and they're getting taxed on it again. I can't work this out.

BARTLETT: Well you're dollar gets hit two or three times doesn't it?

LATHAM: Yes it does and that's the problem. I think it's one of the worst taxes where you pay tax on the money going in which keeps down the amount of money that you can take out. So if the whole purpose is to encourage people to build their retirement savings you want to reduce that tax on the contributions on the way in. That's Labor policy and we're looking at ways of bringing it down as far as we can because that's a very punishing tax. It's a double, triple taxation system that takes away the incentive to build up proper retirement savings.

BARTLETT: Thank you for coming in and talking to us this morning.

LATHAM: A pleasure, thanks Liam. Thanks for having me.