Family tax debt, child care, Centenery House, tax policy Wayne Swan - Shadow Minister for Family and Community Services

TV Interview with Paul Bongiorno, Dennis Atkins & Christine Jackman

Transcript - Meet the Press, Channel Ten - 7 March 2004

PAUL BONGIORNO, MEET THE PRESS PRESENTER: Hello and welcome to Meet The Press. Almost 1 million families have been caught in the family benefits debt trap. A leaked cabinet document details new Government strategies. But first - what the nation's press is reporting this Sunday morning March 7. The 'Sun-Herald' in Sydney reports a splinter group of despairing Liberal MPs is urging Treasurer Peter Costello to topple Prime Minister John Howard. In Brisbane the 'Sunday Mail' has a poll that finds the Federal Coalition would have lost six marginal seats in Queensland and a another three would have been in jeopardy if an election were held last week. In Perth, the 'Sunday Times' leads with an argument over a faulty tail light is believed to have sparked a road rage attack which killed a 2-year-old boy. In Adelaide the 'Sunday Mail' says proposed changes to State industrial laws could cost 3,500 apprenticeships. And in Melbourne the Sunday 'Age' reports about 1 million Australians on welfare will be able to cash in frequent flyer-style points as a reward for finding work under a Federal Government scheme. A flood of leaks from Cabinet has painted a picture of the Howard Government grappling with work and family issues. Today, in the latest leak, we get a peek at strategies to fix the debts families are accruing from a system that sees many having to pay back on average $900. Labor's Family and Community Services spokesman, Wayne Swan, meets the press. Welcome back, Mr Swan.

LABOR SPOKESMAN FOR FAMILY AND COMMUNITY SERVICES WAYNE SWAN: Good morning, Paul.

PAUL BONGIORNO: You've seen the latest document. If I could summarise it. The document says to fix the family debt trap, it proposes a new lump sum payment for all families, at the end of the year, a tax credit for debts. Reduce fortnightly payments to families till the end of the year. Check family income estimates. Or go to a claim of benefits through the tax system, say at tax return time. Well, do you think the Government there in that document - which by the way was dated around October last year - do those options fix the problem that you have been talking about?

WAYNE SWAN: They don't fix it entirely but they would go some way towards relieving the burden on families who incur these debts. You see, from these documents we know that these solutions have been on the table since the middle of last year. And we know from these documents that John Howard instructed that they not proceed. So what that means is that around 600,000 Australians who've have had very high family debts have been suffering financial pressure because he has chosen not to proceed with some reform. In fact, this really reminds me, Paul, of what happened just prior to the Aston by-election three years ago, when on the eve of that by-election the Federal Government offered a $1,000 waiver - a $1,000 waiver to people who'd been hit by these debts. Now, I don't think Australians are going to buy a smelly bag of fish like that again, because that's what these proposals smell of - an election-year bribe to take away the problem on a temporary basis which will return after the election should John Howard be re-elected.

PAUL BONGIORNO: But the Government counters that 70% - almost 70% of those receiving this benefit - don't incur a debt. In other words, a majority don't.

WAYNE SWAN: Well, that just shows you how out of touch Kay Patterson and Mr Howard are. Because the fact is 56% of all payments are incorrect. They have not substantially reduced the one third of families who are receiving debts. And in the last full year we have debts of around $900 per family. What we are finding is an increasing number of families are being underpaid. On average about $23 a fortnight.

PAUL BONGIORNO: The Government has got a top-up for that.

WAYNE SWAN: Well, it's a catch up, Paul. It's not a top up. That is, they have been forced to take less than they are entitled to because they fear getting a debt. And that's the problem. So, 56% of families are not getting the correct payment. That means they're not getting the correct payments to feed, clothe and educate their kids.

PAUL BONGIORNO: Well, Labor has got to have an option. Which of those those options is close to Labor's, or have you got another solution all together?

WAYNE SWAN: Oh, look we absolutely thing that the system needs to be based on current income, rather than a projection of income one year in advance. And in fact, so does the Government, because its work and family task force report says this, "By changing the income test so it is more appropriately based on current, that is, quarterly income." We think that's the objective. That's a lasting solution. Because the problem here is not with the families. All the documentation shows that it is the fault of the system, because it is a system which is out of step with the lifestyle of families.

PAUL BONGIORNO: Well, Mr Swan, to back up those claims that the Government has done something substantial - the Government spent $8.5 billion on the family tax benefit. $1.3 billion on child care with the promise of more to come?

WAYNE SWAN: And we've just seen what the outcome of that is. That they can't pay 56% of families the amount that they should pay them. You see, the Government said work and family would be its third term agenda. Its third term is nearly finished and there is no third term agenda, nor is there a fourth term agenda, apart from work till you drop. So I think that what we've just seen from the Prime Minister is the admission that there has not been any substantial movement in this area.

PAUL BONGIORNO: Just before we go in this segment. Centenary House, that's the building in Canberra leased to the Auditor-General, at what Tony Abbott describes "exorbitant rates, the golden fleece", surely this is a cloud over Latham/Labor?

WAYNE SWAN: I don't think so. This is another John Howard diversion away from problems in the family payments system, health and education. Look, we've got nothing to hide when it comes to Centenary House. There has already been a Royal Commission. If the Government wants to have another inquiry - go for it. But people shouldn't be under any illusions about what the Government's doing here - trying to put a smoke screen over their problems in the family payments system and in health and education.

PAUL BONGIORNO: But Mr Latham seems to be taking the high ground on standards and ethics - surely Mr Latham could say to the Labor organisation, "be more realistic in your rents"?

WAYNE SWAN: Look, if the Government was taking the high ground, it would abide by the findings of the last Royal Commission. That's what it would be doing.

PAUL BONGIORNO: OK, time for a break. When we return with the panel, we ask Wayne Swan to show us the colour of Labor's money. What are his solutions?

PAUL BONGIORNO: You're on Meet the Press with Labor's Wayne Swan, and welcome to our panel, Christine Jackman, the 'Australian' and Dennis Atkins, the 'Courier-Mail'. Family and Community Services Minister Kay Patterson is describing Wayne Swan as a policy-free zone and challenges her Labor shadow to fix it this morning. Dennis.

DENNIS ATKINS, THE ‘COURIER-MAIL': The Government's right, isn't it, Mr Swan? You're always out there telling us what's wrong but you are very short on solutions, aren't you?

WAYNE SWAN: No, I think that's a very selective view. I'd just like to run through a few of our positive policies. I mean there's the read aloud policy and parental literacy. There is all of the proposals in early childhood. There is work and family. We've committed to paid maternity leave. We've committed to a right to return - a reasonable right to return - to part-time work for people who've had a child. We've committed to a whole raft of reforms in welfare. We've committed to $4.2 billion worth of fully-funded proposals in the area of health and education. There's a huge modern Labor agenda out there, and that's why you are seeing the fear on the Government's backbench.

DENNIS ATKINS: But on the specific areas you attack the Government on there doesn't seem to be that much detail. For example, one of your biggest criticisms of the Government is about the high effective marginal tax rates. What's Labor's plan to fix that problem?

WAYNE SWAN: Well, the first point is that the Government doesn't concede that high effective marginal tax rates are a problem. We argue they are a huge problem, because you don't get any reward for effort, so we've got to value hard work. What we've said is that when we've funded adequately the health and education system, we'll move on to the tax system. And Mark Latham has identified very high effective marginal tax rates as a significant problem putting financial pressure on low and middle income Australian families. And when we announce our tax policy, Dennis, we'll be dealing with that problem.

DENNIS ATKINS: But there is only a limited number of things you can do about this particular problem in the tax and welfare system. Doesn't the Australian public have the right to know which way you're going?

WAYNE SWAN: Yes, and they will know well before the election. Look, Dennis, I don't pretend this isn't hard policy, but the Government does not even recognise that it's a problem. When we asked Treasurer Costello in the Parliament, he said it wasn't a policy problem. Well, it is a huge problem when you've got a million families out there paying effective marginal tax rates of 60 cents plus in every additional dollar of overtime they earn, putting huge financial pressure on Australian families.

CHRISTINE JACKMAN, THE ‘AUSTRALIAN': They may not have acknowledged it's a problem, but it's been reported this week that the Howard Government will unveil a working credits program which will allow welfare recipients the ability to accrue credits while they are receiving benefits, which they can then cash in to offset that immediate loss of welfare payments. As an encouragement for people to find work by reducing that high effective marginal tax rate they face, you've got to welcome that as an initiative?

WAYNE SWAN: Absolutely, because all they have done is bring back an old Labor policy. What this policy does is in a very narrow band reward people on benefits who are moving into the workforce. Because they face high effective marginal tax rates of 90 cents in every additional dollar they earn. So for a small period of time for a small group of people that will be reduced. But that proposal does not go far enough, because it is not healthy for our system to have people trapped on benefits unable to move into work because they become worse off. This will deal with that in a narrow way but not across the board.

CHRISTINE JACKMAN: The reality is, though, if you have a means-tested system for welfare, eventually you're going to have to get people who are earning money off that system?

WAYNE SWAN: That's right, and that's why tax credits are a very effective solution to that problem. This is a very limited tax credit. A very narrow tax credit.

CHRISTINE JACKMAN: How long do Australians have to wait, though, until they find out what Labor - beyond reading aloud to children - is going to promote?

WAYNE SWAN: Well, they've already heard a lot from Labor, but they've not heard from the Government either. We will not be in a position until we see what the financial position is in the Budget to be saying a lot more about future direction. Because when we put our proposal out it will be fully costed and fully funded. It's the only responsible way to go.

DENNIS ATKINS: Mr Swan, last year when Mark Latham was Shadow Treasurer, you were criticising him for talking about tackling the highest tax rates. He seems to still be quite interested in that idea, but you've gone very quiet. What's Labor's position on that now?

WAYNE SWAN: Well, we have the highest taxing Government in Australian history. So, we're interested in tax reform, because the great burden is being felt by those people on low and middle incomes. So, our position is first thing's first. We have got to be able to fund opportunity in the health and education system and we do need to deal with these very high tax rates of 60 cents and 80 cents in every additional dollar which have been borne by low and middle income earners. But over and above that there is a tax reform agenda and we're looking at all of our options.

DENNIS ATKINS: Is the top rate part of the problem?

WAYNE SWAN: Well, I think part of the problem is the total tax take. The other problem is we've got to reward effort. And when we reward effort we have to look particularly at those effective marginal tax rates as they go up the income scale. For example, the Government's own research show these high marginal rates run between about $30,000 to $80,000 in the income scale. So, it's a complex question, but I'm pretty confident we'll have a very effective solution to it.

CHRISTINE JACKMAN: One of the biggest hurdles that young families face if, for example. mum returns to work, is the cost of child care. It is one of the things that makes it almost impossible for some families to face having a second income, because they lose it all in childcare payments. Mr Latham has ruled out allowing child care to be a work-related tax write-off as too expensive. How do you make child care more affordable for families who need it?

WAYNE SWAN: Well, first of all families who are hit with high out of pocket expenses for child care are precisely those families that are hit by these high effective marginal tax rates. So, dealing with that problem will be a significant initiative. In terms of the number of places and the affordability of child care, they're on the table. We're giving them serious consideration and there'll be announcements on those throughout the year.

CHRISTINE JACKMAN: He's spoken a few times now about increasing the salaries that childcare workers earn. Wouldn't that actually make child care more expensive for the people paying?

WAYNE SWAN: Well, potentially it could have an impact on the cost of child care, but that's an industrial matter. And there's no doubt that childcare workers are very lowly paid given their responsibilities, but we'll deal with it in total.

PAUL BONGIORNO: Mr Swan, before we go in this segment, the Neilsen poll last week had Latham/Labor in a landslide winning position but still trailing the Government on economic credibility. The Treasurer seized on that.

FEDERAL TREASURER PETER COSTELLO (EARLIER MEDIA APPEARANCE): I don't think the polls or anyone shows that people think that Labor has credibility on the economy. In fact, quite the reverse. People remember what Labor was like in Government when we had 17% interest rates and we had budget deficits as long as the eye could see and they built up $96 billion worth of debt. And people remember that. They remember that Labor can't manage the economy.

PAUL BONGIORNO: Well, you are raising expectations here again this morning. If you deliver on all of these the risk is a budget deficit, the risk is higher interest rates. Is economic credibility Labor's Achilles heel?

WAYNE SWAN: I don't believe so. All of our proposals will be fully costed and fully funded. We intend to be very responsible in the way in which we approach the task in putting together a modern and economic social policy for this country. And you will be seeing a lot more from us about the future course in economic policy and what we need to do to lift productivity to generate prosperity for the next decade or so. We're not going to live in the past. And we will have an agenda - unlike Peter Costello.

PAUL BONGIORNO: Will you be hoping that voters have amnesia?

WAYNE SWAN: No, because much of the foundation of our modern prosperity lay in the key reforms of the Hawke and Keating Governments. And that credibility is still there.

PAUL BONGIORNO: We are out of time. Thanks for joining us today, Labor's Wayne Swan.

Ends. E & OE - PROOF ONLY