Budget 2004 Simon Crean - Shadow Treasurer, Deputy Manager of Business in the House

Press Conference

Transcript - National Press Club Address Question and Answer, Canberra - 19 May 2004

JOURNALIST :             Mr Crean, as you mentioned the polls are showing that Australians and especially Labor voters would prefer more spending on health and education in preference to tax cuts.  Are you ignoring that majority, especially Labor’s core constituency with your pledge for broader tax relief or will you be announcing further spending initiatives on health and education before the election?

CREAN:           We say, and the speech makes the point, that you can do both.  But you can only do both if you’ve got the fiscal discipline to fund the spending initiatives.   We have already done more on the services front in both of those areas that you’ve talked about.  We actually have a plan to save Medicare and restore bulk billing to over 80% of the workforce.  It was very interesting the other day that there was, for the first time ever in this Government’s reign, a lift the numbers of people being bulk billed.  But the target of the people who lifted it were the pensioners and kids.  The people who have got the targeted measured under their package.  We’re directing that target to everyone.  The $5 rebate which we talk about, goes to the whole of the workforce.  If it works for kids and pensioners, why not put it in there for everyone?  That’s our plan.  And it’s fully costed and funded.  We’ve also got a national dental plan.  Which they haven’t got.  And if you look at our spend in terms of education we get better bang for the buck and a better outcome.  On education, we’ve funded and costed those measures too.  Instead of having to hike the fees for students by 25%, I don’t know how many universities have picked these up now but everyone in Victoria has as of the end of last week - how do young people actually afford to go to university?  How do they start a family, buy a house, if they’re going to be saddled with this crippling debt of the cost of education?  Well we say it is not necessary.  We say that you don’t only not have to put the cost back onto the students, we can fund 20 000 extra university places, 20 000 TAFE places.  And no doubt, there will be more to say in relation to these key areas.

But the discipline that I have talked about in this speech will be paramount in determining the extent to which we can go.  On the taxes front though, I think it is a very interesting point.  You talk about our core constituency - our core constituency didn’t get a tax cut at all.  And these were the people that were John Howard’s battlers.  These were the people he’s prided himself as having clawed back.  The more I’ve looked at this budget, the more I‘ve looked at the details of the finances, I just can’t understand the fundamental flaw in the politics of that.  I can’t understand why a Prime Minister, who prided himself on getting to power by bringing in the battlers, ignores them totally in terms of any tax cut at all.  4 out of 5.   I think it is a shocking miscalculation.  I called it a fatal flaw.

A fundamental point of my address today is to show Matt, that you can do both.  You can do both with the right discipline.  We’ve demonstrated that discipline.  We’ll maintain that discipline.  And you’ll just have to wait and see what it is we announce by the way of the tax package.

JOURNALIST :             Mr Crean, you made no mention of the GST.  If it’s untouchable, what would a Labor Government say to those community groups who will continue to argue that it’s just not fair to levy a tax on something as basic as teaching kids to swim - those sorts of arguments?

CREAN:   Well we say to them, what we said to them before the last election, and the election before.  That this is a bad tax.  And you had your chance to stop it.  It was a chance that was almost, it almost materialised.  I mean the 1998 election was very close and it was the biggest loss of seats that a Government has ever experienced.  So, this argument that they won with bold reform - the reality is, they almost went down in a screaming heap.  But we made it absolutely clear at the start, that whilst we would do everything to stop it to impose that extra burden, once it’s in you can’t unscramble it.  That’s a position we’ve consistently held and do hold.  But it is the increasing cost of the GST that is adding to that financial pressure on families. 

It’s the reason why, despite all of the arguments about taxes versus services, people do need tax relief.  Because it is the highest taxing Government in our history.  It is reefing off lots of money in terms of bracket creep.  But most importantly it’s putting people under enormous financial pressure.  Now just as they’ve put them under the financial pressure, by taxing them more and charging them more, we want to do the reverse and we’ve demonstrated we can do the reserve.  We can deliver tax relief and we will deliver tax relief but we can also cut the cost of the services too.  And I might say, that’s not just a benefit to the families as important that is.  It is also, in a lot of the areas in which we’ve made these investments, a benefit for the nation.

JOURNALIST :             John Howard is about to celebrate 30 years in Federal Parliament, given his rollercoaster ride in politics and yours as well, do you find him an inspiration?

CREAN:           I love that rollercoaster ride.  I mean I don’t think there is too much of a similarity between the two of us.  The one thing that I think that we do have common ground is that neither of us give up.  And I think persistence is important, but persistence with a purpose.  And that’s why I’m doing this job.  And it’s why I’m committed to it.  Because if I can’t, if you like, lead the Labor Party.  I want to be part of a team that leads us to victory.  I’m comfortable with that.  I’ve never had an obsession with the leadership per say.  I’ll play whatever role I can constructively play.  But I’ll tell you what it’s about, it’s not about me.  It’s about what we can do for the Australian people.  And you’ll always find me on their side.  Always have been and always will be.

JOURNALIST :             Mr Crean, Krista Hughes, AAP.  Two questions if I may.  Firstly, can you clarify whether Labor in Government would support the four pillars policy preventing the big banks from merging?  And secondly, Mr Latham when he was Treasury spokesman, said that having the Treasury Secretary on the Board of the Reserve Bank was a conflict of interest, that he should be dropped and that the Reserve Bank Board and the composition should not be so skewed towards business.  Do you agree with those views and is that a policy that Labor will be taking to the next election?

CREAN:           Well the four pillars of course, does remain. That’s clear.   We’ve indicated a number of areas of change to the Reserve Bank, we obviously ensure it maintains its independence and in particular in the setting of interest rates.  That goes without question.  We’ve argued in the past that the Reserve Bank should be more forthcoming at times in which it chooses not to move interest rates.  It should give reasons for that.  Not just reasons at the time that it does move them up or down.  We had toyed with the idea I think at one stage, of the minutes of the Reserve Bank being made public.  I think that on reflection we’ve moved back from that position - that might hamper the nature of the discussions that need to take place.  As for the Secretary of the Treasury, I mean, I think there are different views about this.  I personally believe that Secretary of the Treasury should be there, but I don’t think it’s fundamental in terms of the issue itself.  But it’s a matter that if it becomes important we’ll resolve.  I don’t think it’s a huge debate within the Labor Caucus.

JOURNALIST :             Louise Dodson, Sydney Morning Herald, Mr Crean.  You said that Labor will pass the family benefits package of the Government’s in the Budget.  Do you rule out changing any in future when you are doing your tax and family package - do you rule out changing the Government’s budget tax and family benefits?

CREAN:           Look we said on Tuesday night, we’re going to pass their package.  The first test of that came on Wednesday.  We passed it.  If they put up their tax package, which they will do when Parliament goes back next week, we will pass it.  Our commitment is one that is fairly simple.  We will make the tax package broader and fairer.  And we’re going to target more effectively those problems that are disincentives for people to work harder.  We will be putting out our alternative.  We will put it out in due course.  But so far as the package that the Government has put forward we will be passing it.  We said so on Tuesday night.

JOURNALIST :             David Uren from the Australian, Mr Crean.  The Secretary of Treasury, who presumably would be your Secretary of Treasury if you win Government, said yesterday that the core policy priorities to deal with intergenerational change was to cut taxes further and to move to a less progressive system of both taxation and social welfare - less means tested.  Do you agree with that?

CREAN:           We’ve acknowledged, and that’s why as I have said in answer to the previous question, we’ve been prepared to pass their package.  We’ve always acknowledged that something needs to be done at the top end because the rates have been cutting in too low; there hasn’t been the effective adjustment; and something needs to be done.

I think what was interesting in the Secretary of the Treasury’s comments yesterday about less progressivity, that’s another away of saying, and I think it’s a kinder way of saying that the interaction between the tax system and the family tax benefit system has created crippling high effective marginal tax rates and that they need to be targeted.  We believe they need to be targeted.  The budget started to target them.  I think there’s the cut from 30 down to 20.  But you’re still going to have because of the focus, the preponderance thrust through family tax benefit B, you’re still going to have this problem existing.  Now we think that there was an opportunity in the tax package to do something better, to take those disincentives away.  And that still remains a challenge.  I agree with the Secretary of the Treasury, it does remain a challenge.  I think what the Government’s done has made it harder, but it nevertheless is a challenge that has to be met.

There’s no point saying to people you’re better off staying at home.  If what our whole approach is with an ageing population is to encourage more effective participation from people, not at the end of their working life by making them work till they drop, but actually get them early in the piece.  Train them, equip them, develop the skills and encourage them back into the workforce.  That is a huge challenge for the nation.  But if you’ve got a tax system working against them, it’s not going to happen.  And so our commitment is not only to look at this question of relief for families under pressure, but to put the incentive back into work.  And I think we can do that.

JOURNALIST :             Mark Riley from the 7 Network, Mr Crean.  I know you said this isn’t about you.  But it’s obvious from what the Government’s been saying over the past few days they’re going to make this about you in the election campaign.  They are going to man up on you, they see you as an electoral weakness.  The Prime Minister yesterday twice made a point of saying that the choice before the people will be the Howard-Costello team on the economy, as opposed to the Latham and Crean team, with the emphasis on you.  And I guess the unspoken slur is that you’re from a trade union background and can’t be trusted as a Treasurer, how do you counter that attack that is obviously coming your way?

CREAN:           Well let me just say this about the team.  If we’re supposed to be so experienced, how come they’re copying everything we do?  How come having set the agenda in terms of health and restoring bulk billing they were forced to follow?  How come, they’ve had to adopt our Baby Care Payment?  How come they will adopt our plan to vaccinate all the kids to prevent them for pneumococcal disease?  How come they’re going to cop all of the things that we’ve put in place?  There’s got to be a fair bit of experience associated with having thought those initiatives up and promoting them.  The difference was we’ve found money.

If I can just go to the second point, about me.  Do I get the Prime Minister right?  I’m unpopular therefore I’m a liability.  But Peter Costello who is also unpopular he’s an asset.  I’ll tell you this, there are a lot of differences between me and Costello, but there’s one important one.  I’m not running for Prime Minister of Australia, he is.  And as I said before, I’m happy to play the team role.  Always have and always will.  And I think what the Labor team, me aside, Mark aside, what it represents is the combination of experience and youth.  I was the one that argued for the regeneration.  I was the one that insisted that we got that balance right, so that we could present ourselves, as fresh, stable, solid, all of those things.  I think the Australian people will make up their minds about us in due course, but I think they’ve already started to make up their minds about them.  And they don’t like it.

So we’re going to reinforce them in that view and part of that reason of being here today is to demonstrate that the economy for us, under us, will be in safe hands.  We’ve set the discipline, we’ve set the benchmarks, but importantly we’re doing it for a purpose.  Not just tricks up the sleeve.  Not just spend money when there’s an election around the corner.  But actually plan over the period of time.  And actually have people in mind, not personal ambition.  That’s what Labor stands for.  That’s what Labor has presented to date and it’s what we’ll continue to present as a team.

JOURNALIST :             Mark Metherell from the Sydney Morning Herald, Mr Crean.  You spoke of Labor’s plan to be fiscally rigorous.  At a time when the Government introduced even more measures to check on the living arrangements of social security beneficiaries, we have reports of fairly loose approach to the travel arrangements for people accompanying MPs, do you think there is a need for tighter rules governing travelling companions for MPs travelling overseas?

CREAN:           Well I think that there should be tight rules associated with them.  I think if MPs go and it’s an entitlement for their spouses to be with them, that’s a fair enough thing.  It’s what happens in business. But obviously it shouldn’t be abused.  I don’t know the circumstance of this, I must say it hasn’t been upper most in my mind in my reading today, but of course everyone should abide by the rules, and if there are loopholes in there that create bad circumstances, they should be changed to pick them up.

JOURNALIST :             Leonie Mellor, Network 10.  This weeks petrol and oil prices now at record highs.  How do you see that affecting some to the fundamental assumptions in the budget - are they now wrong?

CREAN:           Well I heard in that speech that I’ve already referred to, that the Secretary of the Treasury was still holding to the forecasts and the parameters.   We can do nothing but go on that.  We have to accept what the Treasury has not only said to the Government, but what it has put out in the public domain.  The big problem for petrol of course is that people have to pay for it.  And we know how volatile that was some years ago, so there are some issues I think on the ground associated with it.  And I think we need to look at more effective ways in which we may be able to give some to relief there too.

JOURNALIST :             Michelle Grattan, The Age,  Mr Crean, two questions, firstly can we take your remarks about incentives before as suggesting that you would think that family tax benefit B which is directed to single income families needs an overhaul and will you be looking at that?  And, secondly, we know there is going to be no Accord with the Trade Union Movement in a future Labor Government, but could you spell out how you see that relationship working?  What you think the obligations of the union movement will be in terms of economic management, and whether you as Treasurer, would take a primary role in running that relationship as did Paul Keating as Treasurer?

CREAN:           Well on the first part of that question, Michelle.  You shouldn’t be reading into it any suggestion that we get rid of family tax benefit B - my point was that we have a complex system.  A very complex system and those of you who have tried to analysis it just know how complex it is.  And what it does, by virtue of the A and B component is it does lead to two big problems  The high effective marginal tax rates and the debt trap.  Now these are both areas in which we have to address policy reform.  There’s no point going every election to do the compensation top up because people are caught in the debt trap and complaining about it for three years, only get fixed up when elections are around the corner.  As I said, John Howard, before the last election promised that when he did that $1000 waiver it would be the last.  That they would fix the policy problem.  They haven’t fixed it.  So there’s no value, in my view and in the Labor Party’s view, in continuing to have to fork out money when correcting the policy could fix it.  And so far as the interaction of either of the two payments with the tax system, the impact on the high tax rates, the disincentive to work, that’s clearly the policy area that has to be addressed.  And that’s also interestingly what the Secretary of the Treasury talks about.

So far as the relationship with the trade union movement is concerned.  It will always be an important one for us.  I mean they represent a lot of working people.  For those who argue that their influence is diminished, I think you only have to understand that the growth in industry superannuation funds and the membership of them is essentially the basis of a union membership list and it applies to the whole of the workforce.  The benefit, I think the trade unions have a critical role to play in nation’s future.  Because if you can’t get the cooperation - the partnership - between labour and capital; if you can’t encourage the circumstance in which the workforce adapts to the new technology; if you can’t get the workforce to embrace the importance of training and skilling, not just at the beginning of a job career, but during it; and if you can’t develop the resources by which you facilitate that, then we miss out on that next step up in productivity.  We have to treat the workforce and through their representatives the influence of policy we have to address those sorts of issues.  So there’s a whole raft of them.

Quite frankly in the 1980’s the key in terms of the relationship was ensuring that when we did get onto a growth path, the benefits of it where not dissipated in competing wage demands.  And the huge success of the Accord in the 1980s was cementing the low inflation environment for this nation.  Now if you can actually marshal the relationship, if you can turn it to the nation’s advantage, then of course we should be developing positive constructive relationships with them.  There is a whole raft of agendas that we need to tackle.  And most importantly I think the issue of superannuation and retirement incomes.  Because increasingly with the ageing of the population, more and more people are going to have to make choices between income in work and income in retirement and we need to find a way in which we address the adequacy of that income in retirement.  That’s what a real intergenerational challenge is.  So I see big opportunities, big challenges, but big opportunities in talking to people who are sensibly committed to this path of reform.  And rather attack them, this is the John Howard-Peter Costello mode and I think it was the thrust of Mark’s, that unions are bad, you know, they’re a terrible blight on the society.  Why don’t people ever try to find good things in people?  Why don’t they ever try to and bring out the best in them?  We’ll I’m committed to trying to find that, its hard with some of the people I have to deal with, I am committed to that path, and I’ve had some of my biggest arguments with colleagues in the trade union movement, about issues.  I had to have big arguments with them to start superannuation, way back in the 80s.  But if you’ve got to have the arguments to push the case, I’ll do it if the case is right.  If it is good for the country and if it’s good for them in my view.

JOURNALIST :             Josh Gordon from the Age.  You’ve promised to pass both rounds of tax cuts and you’ve also promised a broader and fairer tax relief.  I’m just wondering how you will deliver that broader and fairer tax relief, given that Mr Latham the other day, appeared to rule out raising the lower thresholds and he also ruled out a system of tax credits.  So how is Labor planning to deliver broader tax relief?

CREAN:           Well I think in terms of the tax credits, what he actually said was that tax credits were not the most effective mechanism for giving tax relief to everyone.  But you know, you ask us how we’re going to do it.  Wait and see.  You know, I think it has been said before, we couldn’t fund health, we couldn’t fund education, we couldn’t fund the baby care fund, the Government was going to use up all the surplus, they would snooker us.  We’ve done all of those things.  The challenge now for us, is to give tax relief, in a way which is broader and fairer and addresses those disincentives.  That’s our challenge and I’m sure we’ll rise to it.

JOURNALIST :             Jim Middleton, ABC Television.  Mr Crean, just on the question of a family tax benefit top up, the two $600 payments.  I just want to get this quite clear, are you saying that a Labor Government would not tamper in anyway with the family tax benefit B, until the 2005-06 financial year, or will you be altering it, or would you be altering it if you came into power in that first, next financial year?  And secondly, you and Mr Latham have more than once criticised the Government for failing to return all of  bracket creep.  Are you prepared to give a commitment that a Labor Government would introduce tax indexation, which is the only way you can guarantee tax payers get all, well  the Government doesn’t keep any bracket creep?

CREAN:           Well the first part of the question.  We will pass the package that they’ve put forward and we’ve got no plans to change it.  Simple as that.  On the second question of bracket creep, indexation is not the only means by which you can return it.  I know there are people who advocate it.  But there is a fundamental flaw in it, if the system itself is already out of whack.  But we do not believe that tax indexation is the only means by which it can be addressed.  Our commitment has been, and we’ve said it before and we remain committed to it.  We will return bracket creep, but we reserve the right to choose the form in which that return occurs - either in terms of tax cuts or improvements to services.  And as I say, it’s a continuing battle.  Don’t just think that families are under pressure because of high taxes - they are for that reason, but they’re under pressure because there’s higher charges.  And if what we’re doing is actually lessening those charges, cutting costs of education, cutting the costs of health, that’s really what people want, because in the end it’s disposable income.  That’s the test.  It’s what people are left with.  And we say you’ve got to tackle both.  You’ve to attack both and tackle both, and we’ve been doing that pretty successfully on the services front.  We’re well ahead of the Government.  We’ll continue to stay ahead of the Government and nice try in terms of the continuation of those questions, you can keep asking them as long as you like, you just have to wait and see, when we come out with our tax package and we’ll announce it a time of our own choosing.  It’s important to get it right, it’s an important part of the equation.  And we will be having something more to say on it.

JOURNALIST :             Cherelle Murphy from the Financial Review, Mr Crean.  You said that in dealing with the pressures of an ageing population that you supported the idea of the intergenerational fund.  But where would you get the funds from?  Does that mean that today’s tax payers would have to pay more than their fair share of tax?

CREAN:   No, you would … obviously the investments that we’ve made in education, in training, the commitments we’ve made in terms of competition, research and development - all of these are factors that will produce a stronger economy than we are.  The dividend from the stronger economy is better surpluses.  Now if what you can do, out of that dividend, is actually identify the ongoing need to address these issues over the longer term and put aside today for either investments that make economic sense today, that get a better return that just sticking it in the bank, that makes sense for the economy doesn’t it?  I mean, that’s what a family would do.  If you can get a better return from something than just holding it in the bank, that where you’d invest it.

And I think that quite frankly what we’ve got to get beyond  in this country is the debate about the short-termism.  We’ve got the think longer term and we’ve got the think about savings and investment.  It’s what we’ve done for superannuation.  Getting people through compulsion to save for their future.  Why shouldn’t it be the same so far as Government?  I think it is an important discipline.  It’s not one that this Government has taken to itself.  It’s one that the Treasury keeps saying that we need to face up to and produced the report - a very good report about it.  What I want to do is have the opportunity to implement it - that report.  And there are a lot of good ways that this could be done.  Learn from what other countries are doing.  Learn from where other people are saying the new direction is.  That’s where Australia’s future is, being ahead of the game, not just waiting and taking the easy options out.   Not just waiting until an election is around the corner to think you’ve got to spend some money.  But actually invest it over the longer term.  That’s what good governance is about, it what good government will be about.  And it’s what you’ll get under a Labor Government

Ends. E & OE