ALAN JONES, PRESENTER: Chris Bowen, good morning.

CHRIS BOWEN, SHADOW TREASURER: Good morning, how are you today Alan?

JONES: I'm not too badly thank you, I am a little confused I have to say.

BOWEN: Well you wouldn't be the only one mate.

JONES: Right. No. Well there are headlines everywhere about tax reform, I don't want to be uncharitable but when is a tax cut not a tax cut? Now there is no tax cut.

BOWEN: When it's six or seven years away Alan, I think it's not a real tax cut.

JONES: Well we've got to be clear here, this is not a tax cut is it? There is a rebate at the end of next year. Nothing happens tomorrow, next month, or next year, there will be a rebate next year of $10 a week.

BOWEN: That's exactly right.

JONES: That's the highest?

BOWEN: That's the Government's tax cut which they say comes into force on 1 July 2018. You won't actually get anything until 1 July 2019 when you do next year's tax, that is true. What you are saying is right Alan.

JONES: Now then there's another change effective next financial year in that the 32.5 per cent marginal tax rate threshold will go from $87,000 to $90,000 that's also effective from July 1. And so in that little gap between $87,000 and $90,000 they will pay 32.5 cents not 37 cents so that represents, I don't know, a couple of bob a week or something, $2.30 a week.

BOWEN: That's right. It's a very small part of the broader tax cut., which we support of course. We support those tax cuts this year and then we would if we were in office have bigger tax cuts, almost double, the year after. That's right.

JONES: Right. Now. You then were opposed am I right in saying, to phase two and phase three, just for the benefit of my listeners, phase two is where the 32.5 per cent tax bracket won't begin until $41,000 instead of $37,000 and the 37 per cent tax bracket would extend to $120,000. This gets very foggy when we are talking figures. But nonetheless, that wouldn't come, now that it's all been passed, that is not effective anyway until 2022.

BOWEN: That's the key point Alan. I mean this is a Government which last year told us we needed to increase tax to pay for the NDIS. This year they say, don't worry about that, we've got plenty of money in fact we can give you $140 billion worth of tax cuts but not until six years and seven years time. Now that is a long way away, and everywhere I go Alan, people tell me how cynical they are about this approach, that somehow the Government knows exactly to the last dollar, what they can afford to give in tax cuts in six or seven years time. I mean we don't know what the economy is going to be doing then. We don't know what's affordable. We don't know whether tax cuts at that point might put massive pressure to increase interest rates if the economy is going very well. At that point the Reserve Bank might say 'well these tax cuts mean we have to increase interest rates'. I mean you've got to calibrate these things very carefully, and you should do them when you know what the economy is going to be like. Now we think these tax cuts are badly designed. We think they are pretty cynical, to say to people 'we will give you some small tax relief next year, but we will give higher income earners big tax relief in six and seven years time, but we are going to hold this modest tax relief of ten dollars a week' which as you says comes as a rebate in 2019 'we are going to hold that hostage and we are not even going to give you that unless we get these tax cuts through which will happen on the never-never'. It's all pretty cynical to be honest Alan.

JONES: Taxes of course are necessary to pay for expenditure. For the battler out there who is on even $43,000, you are paying 32.5 cents in the dollar. That trips off the tongue. But basically that means that's a third. One dollar in three, a third, which means these poor coots are working all January, all February, all March, and all April before they get to keep a quid. When is someone in Government going to say this is just not an incentive to work?

BOWEN: Well Alan of course just to be clear, the first $18,200 -

JONES: Is tax free, $18,200.

BOWEN: That's right, $18,200 just to be clear. But you're right. I mean these people on the median Australian income and below and around that, and a bit more than that, they do deserve this tax relief. That's why we say the tax relief the Government has in 2018, fair enough we'll tick that. We are not going to stand in the way of that. But we want to see better tax relief the year after which is almost double the Government's. So if we are in office in 2019 we will be legislating for that. That means every Australian earning less than $125,000 gets bigger tax cuts under Labor.

JONES: Just on this thing next year which has got me fogged I have to tell you. The maximum is $10 a week. Now some people are not going to get anywhere near that and they don't get it until well, whenever the tax commission looks after them, til next year. So there are no tax cuts. I mean it's all this business about carbon tax which is really a carbon dioxide tax. And tax cuts which is not a tax cut it's a rebate.

BOWEN: Yeah well that's right. Apart from that $87,000 to $90,000 change that you mentioned, everything under the Government's plan doesn't come in until 2019. So the average worker won't see any increase in their fortnightly or monthly pay. They will get a rebate equivalent as you say at a maximum of $10 a week on 1 July 2019. But there's no immediate relief for people that is absolutely true.

JONES: That is correct. Now just in principle, just forget the politics of this at the moment. In principle, removing the 37 cents in the dollar tax bracket, this is what is now in the proposal, well it's now legislated, but 2024 it wouldn't happen until. So that everyone between $41,000 and $200,000 will pay the same marginal rate. They won't pay the same tax. 32.5 cents in the dollar. In principle are you in favour of removing that middle bracket?

BOWEN: Well in principle I support tax relief when it is affordable. In principle I support sure it's fair when you do it. Now as you said it would mean that somebody on $41,000 would be paying the same marginal tax, not the same amount of tax but the same marginal tax of someone up to $200,000. Now I'm not convinced that's the best way of going about it. I'm not convinced it's affordable, I'm not convinced that we know exactly what we can afford in 2024, now in 2018. I'm not convinced that's a responsible way of managing the Budget. Alan, you and I have had plenty of conversations about the state of the Budget and we have to protect our national finances very carefully. And for the Government pretty seriously to say 'vote for us this time, vote for us next time and then we will give you a tax cut and this is down to the last dollar what it will look like' I mean they must think we are all mugs Alan frankly.

JONES: The reason I am speaking to Chris Bowen that if you believe the polls which have gone on now for 34 or whatever this man could well be the next Treasurer of Australia so can I just make the point to you that this tremendous emphasis on personal tax, which I find quite punitive, but then what the battler out there has got to grapple with is that after that he pays or she pays the GST, there's a tax on their beer, there's a tax on their cigarettes, there's a tax on their petrol, there's a tax when you buy a house, there's a tax when they buy insurance. How on earth are we going to provide legitimate relief to people out there?

BOWEN: Well I think what you've got to do is you've got to design a policy to try and make the tax system fairer. We've done that and we've had some discussions about that and no doubt will have more about the policies we've implemented to make the tax system fairer, and that then creates room to provide real tax relief, as our policy is, in 2019 which is almost double the Government's. Now I'm not saying that solves all of the problems Alan of course but what it does do is provide more substantial relief earlier under us. You will get tax relief the same as the Governments in 2018 and you get much bigger tax relief in 2019. And then Im saying, well in 2022 and 2024 we would look to see what we could responsibly and reasonably afford and do and what would be the right thing for the economy. Im not Nostradamus, I cant see what the economy is going to be doing in 2024, Scott Morrison and Malcolm Turnbull pretend that they can and I think your listeners are entitled to be pretty cynical about that.

JONES: But if I could just take the point of principle about removing this 37 cents in the dollar, the middle bracket and drop that to 32.5. Now I was reading last night an economic analysis from Treasury, based I think quite optimistically that is on a wage growth of 2 per cent as opposed to the wage forecast growth of 3.25 per cent. We dont want to get tied up in figures here, it drives people nuts but it would mean if you chopped out the 37 and brought it back to 32.5 it would mean that people like school principals to police chiefs, managers could be slugged up to $8000 a year more because you are refusing to support this third stage of abolishing the 37 per cent bracket. If it comes back to 32.5, they are $8000 a year more off or the analysis covered 30 job descriptions and they range with professions, trades between $41,000 and $200,000 and if they only paid 32.5 cents in the dollar marginal tax rate a mid-level school teacher in New South Wales for example, a $103,000 would pay $600 more a year under your plan because you are leaving the 37 in there as opposed to abolishing and coming back to 32.5. So there is a lot of benefit to the battler out there if you cut the 37 back to 32.5.

BOWEN: Well Alan let me just make a couple of brief points. You raise an important point about wages growth, as you said lets not get into the details of the figures but you mentioned those figures of 2 per cent and 3.5 per cent. Now the Government thinks that wages growth is going to magically get past 3 percent again, its been nowhere near that for some time now. Now if it does not, if they are wrong about that we are going to be in a much tougher budget position. The Budget will potentially be back in deficit and we will be having a very different conversation. So they are banking everything on wages growth and they have no plan to get it going. Thats the first point, thats very dangerous, very fiscally irresponsible this policy they are engaging in.

Now secondly, in relation tothat we do want to see tax relief but youve got to prioritise and make sure it is carefully designed . Now the median income in Australia is around $54,000. Now these are the people who desperately need tax relief now. Thats what they need now. Now yes of course when and if the Budget allows it you can look at tax relief at different levels, you can carefully design it so that it is fair, it is targeted but Im just not going to pretend Alan that I am sure that we can afford a big tax change like getting rid of the 37 per cent threshold, that bracket now seven years out.

JONES: Nonetheless, it is a powerful political point for the Turnbull Government to argue that if they abolish the 37 cents in the dollar as I understand it 94 per cent of Australians wont have to pay more than 32.5 cents in the dollar for any extra dollar between $41,001 and $200,000. Thats pretty significant tax relief isnt it?

BOWEN: Well on your point Alan about a powerful political point, let me just tell you we are more than happy to have an election based on our competing tax plans and economic plans. If Malcolm Turnbull is serious about this, hop in the car and go down and see the Governor General and call an election. We will be up for it, we are ready. I mean we have got different plans. I say that every Australian earning less than $125,000 is much better off under our plan. We have a different set of plans, our plans are more responsible, better for the Budget and they are fairer and we are happy to have these by-elections around these issues and Im more than happy and Bill Shorten is more than happy to have a general election anytime the Prime Minister wants, lets have the arguments.

JONES: Alright, okay, well now last time we talked I said I wanted to talk to you about dividend imputation and in the meantime this legislation has passed the Parliament so we dont have time this morning to talk about that but I hope we can talk about that next week. But before you go today can I just ask you about the CFMMEU, the extra M for Maritime. Theyve got assets of $310 million, annual revenue of $146 million. 70 of its officials are currently facing court over 39 matters, it has been fined over $5 million for lawlessness and 24 hours after the CFMEU boss John Setka boasted about the union lawlessness he said We get fantastic pay rises and good conditions for our members because we fight outside the law. Our members pay us, they are our bosses they expect to be serviced and looked after. Thats our job and if sometimes that brings us to the wrong side of bad law and there are bad laws then so be it. Now Bill Shorten has made it clear that Labor will continue to accept donations from these people. Is that a position you agree with?

BOWEN: Well Alan, we dont agree with breaking the law. We believe that anybody, whether they are a business person or anybody else who breaches the law should be dealt with. Now Ive never met Mr Setka so I cant vouch for what he has said but we believe that there are good trade unions doing good work and there are good trade unionists standing up for their members and thats their job, its an important part of society. They shouldnt be demonised and people who are breaching the law should be dealt with and I dont care whether they are union officials or they are employers, the law is the law and it should be complied with and thats a pretty.

JONES: But is the factor in Bill Shortens support relating to the fact that in the leadership contest between Shorten and Albanese the CFMEU backed Shorten. I mean Peter Beattie says I wouldnt take their donations because I think at the end of the day you pay too much of a price for it. Bob Hawke last year called for Labor to disassociate itself from the CFMEU and lobby for its deregistration. One of your ALP frontbenchers said the CFMEU doesnt hand out ice creams for free. This is worrying the electorate, do you understand that?

BOWEN: All I can say to you Alan is that as a member of the leadership group and the Shadow Cabinet, we make our policy decisions based on merits and on good policy. And of course businesses are entitled to put a case to us, unions are entitled to put a case to us. We hear all those cases, we weigh it up and I have never seen any indication of anything else than good policy and weighing up the pros and cons of anything that is put to us. And that is the way it should be for any Government or Opposition.

JONES: Yeah but thats not the point, thats not really the point is it? Here are lawbreakers, these are professional lawbreakers Chris. 70 of their officials are currently facing court. 70 of them. They have been fined $5 million for lawlessness. You take their dough, this is virtually a condoning of their behaviour.

BOWEN: Well Alan there is a court process underway, some of those court processes were discontinued a couple of weeks ago because there wasnt any evidence. Now if there is evidence they should be dealt with under the full force of the law. Absolutely, absolutely and that is the case whether they are a union official or anybody else. Thats the approach I would take as Treasurer and Labor would take in office.

JONES: Okay, well now next week we will talk about dividend imputation, if I could give you a heads up to start with because in 1999 when this proposal was introduced Simon Crean said about dividend imputation We have no difficulty supporting the proposal because it is our policy. You have obviously changed that policy, I want to ask you some questions about that next week if we could?

BOWEN: I look forward to it Alan.