HAMISH MACDONALD, PRESENTER: Shadow Treasurer Chris Bowen joins us now from Parliament House, good morning to you.

CHRIS BOWEN, SHADOW TREASURER: Good morning to you Hamish.

MACDONALD: We understand Shadow Cabinet decided its tax policy last night. What will you be recommending to Caucus this morning?

BOWEN: Well Hamish with all due respect you're not a member of the Caucus , I will be making a recommendation to Caucus this morning, I'm going to pay them the due respect of letting them hear it first. But we've taken our time to work through the issues very carefully, as the alternative Government should do. I'll be making a recommendation to Caucus which reflects our values, which reflects our principles and also reflects fiscal responsibility. Now I still believe in fiscal responsibility, the Labor Party still believes in fiscal responsibility, the Government thinks it can have unfunded tax cuts on the never-never and we don't know what the economy will be like in seven years time. But they say we can lock these tax cuts in. I have a different approach to these matters but I will be making those recommendations to the Caucus as I made them to the Shadow Cabinet last night.

MACDONALD: So you are talking about that in the context of seven years, how about five years?

BOWEN: Well the same principles apply Hamish, again, I'm not going to run through the details, Bill Shorten and I will be saying more after the Caucus meeting. But we owe it to the Caucus to talk them through our recommendations first.

MACDONALD: Sure I understand that, values and principles though, you can certainly spell those out for us, what are they?

BOWEN: Well the values and principles are that the tax system should be fair, it should be progressive, and it should be responsible. It should be fiscally responsible. Now the stage two tax cuts and their interaction with both the Government's stage one and our 2019 tax cuts, which we would bring in if we were in office, and which we will push in the Parliament is an important one to consider. As is the fiscal implication. Stage two is about $80 billion out of the $140 billion over the decade of this entire tax scheme. Weve taken our time to work those issues through, I'll be talking to the Caucus about all the permutations that they're in, and Bill Shorten and I will be making a recommendation to the Caucus.

MACDONALD: You were talking yesterday about the long term fiscal drag caused by the Government's addiction to tax cuts into the future which aren't funded. Can you elaborate on what you mean by fiscal drag there?

BOWEN: Well what I mean is the long term fiscal impact. So take for example, stage three of the tax cuts and the Government's big business tax cuts. You put them together Hamish, and when they're fully implemented it costs Australia $25 billion a year. Now this is a very expensive little exercise the Government is undertaking. Now I want to ensure strong and healthy surpluses and I want to ensure that we have the money necessary to fund important investments in health and education. I want to ensure that the Government of the day has the fiscal buffer necessary to respondto changing international circumstances. And of course I want to ensure a fair tax system. So that's why our -

MACDONALD: Can we just try and understand though, where you think stage two would have a similar impact on long term fiscal drag?

BOWEN: Well as I've said to you it's an expensive part of the tax scheme that the Government is putting forward and you need to look at the interactions with stage one and with our proposed tax cuts which benefit Australians earning less than $125,000 are delivered sooner than the Government's and are better targeted. This is an important point Hamish. We are not just talking in isolation here. We are not just talking about the Government's plans. We are also talking about our own plans. I mean we are more than happy to go to the Australian people with a competing set of plans if the Prime Minister -

MACDONALD: So at the moment what we are discussing is the Government's income tax package stage ones, two, three -

BOWEN: In fairness Hamish we are also talking about Labor's income tax plans as well.
MACDONALD: Well you are, that wasn't the question I asked though.

BOWEN: Well we are the alternative Government we are entitled to put our views as to our plans that we will take to the election and we are entitled to press those views in the Parliament as part of the same debate.

MACDONALD: The Government already appears to have the numbers on the crossbench to pass phase two if the legislation is split. Doesn't that ultimately mean that your position on phase two is meaningless?

BOWEN: Well you can argue that the position of the Opposition is meaningless. I would beg to differ.

MACDONALD: I mean if they can get it through by splitting it doesn't really matter what you say to Caucus today.

BOWEN: Well as I've said to you before in other contexts I've been around long enough to know that in this Senate in particular, anybody who makes predictions is a very brave person. I don't hazard a guess, I don't hazard a prediction as to what the Senate will do. I suspect there will be a fair bit of brinkmanship and we may not know the results until the division bells are ringing in the Senate at whatever time of the day or night that occurs. We are at that sort of point in the Parliamentary cycle where there's late night sittings, there's debate, there's negotiation, there's to and fro, and indeed changes of position. We've seen it all before. So all I can talk about is the Labor Party's position which I will be talking about later in the day with Bill after it's been approved by the Caucus which will reflect the very careful consideration we've given these issues, will reflect our values and will reflect the approach we've taken over the last five years of fiscal credibility, making difficult decisions because we believe in Budget surpluses which are sustainable and healthy.

MACDONALD: You heard a little bit of the Prime Minister at the top of this interview, you no doubt heard him yesterday in full flight, it must be said. He was saying that if Labor blocks both stages two and three it would be a blow to the aspirations of people who want to work hard and earn more money which puts them into higher tax brackets. This package is not a permanent solution, obviously, to bracket creep, but it does do something. The Prime Minister has a point that surely you must agree with?

BOWEN: Well Hamish, a couple of points. A couple of points to make. Firstly, what he's talking about is on the never-never, I mean it's at least one election away, and in many cases two elections away in terms of stage two and three of the tax cuts. Seven years away. I mean this is a world away. I think the Australian people seem pretty cynical.

MACDONALD: You say never-never but people do think that far ahead.

BOWEN: Well I can tell you Hamish, having spent a fair bit of time traveling around the country. People see this very cynically. They know the promise of a tax cut seven years away is a very cynical exercise. And they suspect, rightly, that if Malcolm Turnbull happens two win the next two elections and the economy turns down internationally, he'll come back into the Parliament and say 'oh look, I really wanted to deliver these tax cuts but they are not affordable now, we are going to have to change our plans' it's the old fistful of dollars. You know, after the elections it will be all different. Now, what we are doing -

MACDONALD: But couldn't you do the same thing? I mean couldn't you let this go through Parliament now, and if you won Government after the next election or the one after that, say we are not going to proceed with these tax cuts for higher income earners.

BOWEN: My recommendation and the Labor Partys position as I said reflect our views. Were not going to play some tactical game, what we going to do is reflect our views. Now I just say this Hamish everybody supports stage one of the tax cuts except for the Greens and they are entitled to their different view but the Government and the Opposition support stage one of the tax cuts. If Malcolm Turnbull and Scott Morrison want to play brinkmanship and say we are not delivering tax cuts to those Australians who are low and middle income earners on 1 July 2018 because we cant get through the tax cuts that come in 2024 let them make that case and they can make that case right up until the next election if they really want to hold those tax cuts hostage then lets have that debate. Were more than happy to have it.

MACDONALD: But we heard what they are going to argue on that very point. Scott Morrison taunted you yesterday saying Are you for higher taxes or are you for lower taxes?

BOWEN: I didnt feel particularly taunted. The Labor Party has a tax plan which is fairer, better targeted, bigger, better, fairer tax cuts earlier than the Government is presenting, but fiscally responsible ones Hamish because they are better target, fiscally responsible ones but better ones and on a believable time frame, on a believable time frame. 2019 not 2024, 2019.

MACDONALD: But ultimately you and the Government go into this next round of super Saturday by-elections potentially a federal election squaring off on this very point and the Government saying to you, you are standing in the way of low and middle income earners receiving tax cuts right now.

BOWEN: If the Government wants to have an election, by-elections or a general election, based on competing tax plans and Budget plans, bring it on.

MACDONALD: And you are happy to continue making this argument, that you are happy to stand by the idea that people shouldnt get the tax cuts now?

BOWEN: Im happy to stand by the idea that our tax system should be fair and that it should be fiscally responsible. Weve shown Hamish that we are willing to make big calls. Now when we made those big calls there have been plenty of commentators who have said Oh jeez, the Labor Party is taking a big risk here. Negative gearing reform. Dividend imputation reform. Capital gains tax reform. Family trusts. Oh the Labor Party has gone too far this time, there will be an election based on this.

We have stood true to our values on every single occasion and frankly we have won or are winning those debates in my view and I am more than happy to take this debate up with the Government. Im happy to debate the Treasurer during an election campaign as many times as we can on these competing plans, on our better plans for the Budget, on our better tax plans and if they want to threaten an election about all these things well then the Prime Minister is the one who can call an election, not Bill Shorten, not anybody else. He can go down to Yarralumla and call an election. If he wants to play the bluff and bluster game, hes got a card in his deck which he can play but we will play the cards based on our values and our policies and will argue the case and I am confident we can win the case.

MACDONALD: Alright. On franking credits we saw the Treasury costing Labors plan to end cash refunds for excess franking credits. It uncovered a $1 billion shortfall in your policy rising to $10 billion over a decade but Treasury has since accepted that the costings were not actually of Labors policy per se. Your response?

BOWEN: Well the Government played a silly smear game here and it backfired spectacularly. Firstly, the Parliamentary Budget Office which costed our policy issued a statement saying and I quote We stand behind the PBO estimates that had been published by the ALP in relation to this policy. We stand behind it. Thats the independent, statutorily independent Parliamentary Budget Office.

And then secondly the Treasurer said yesterday that the Treasury had conducted this costing on Labors policy with an external review. Thats what he said. I found that unusual, I wrote to the Treasury Secretary, I rang the Treasury Secretary and I sent him a detailed letter with questions. He was good enough to respond quickly and fully which I appreciate and his letter to me said there was no external review despite what the Treasurer had said, and thats a direct quote. There was no external review and he also said We were asked by the Government to cost a policy relating to the denial of refundability of franking credits and he went on to say the costing was produced on the basis of policy specifications provided to the Treasury by the Treasurers office.

I mean this was a stunt. Scott Morrison should stop trying to politicise the Australian Treasury. I have the greatest respect for the Australian Treasury but Scott Morrison is trying to transforming it from Australias premier economic institution to the Governments advertising agency. He selectively gets them to model Labor policies and then selectively leaks that alleged modelling to journalists and he has been caught time and time again lying about it and he said it was an external review. I wrote to the Treasury secretary, the Treasury secretary wrote back to me and said there was no external review.

I mean he should concentrate on getting his own policies right instead of playing these stunts.

MACDONALD: Is your allegation though that the Treasury has been politicised?

BOWEN: By this Treasurer. This Treasurer constantly attempts to politicise the Treasury, its got to stop.

MACDONALD: But has he done that? Has the Treasury department been compromised in that way?

BOWEN: No, the Treasury, let me be very clear, the Treasury officials are professional non-political and I have the greatest respect for the Treasury with whom I work with in various portfolios including Treasurer over the years. But this Treasurer tries to use the Treasury as a battering ram. Let me make it very clear, the Charter of Budget Honesty is there. The Parliamentary Budget Office is a coster of equal status to the Treasury, it is used by Opposition. It was used by the Liberal Party in Opposition. We use them. They are independent. They are ferociously independent and we have a system whereby we use the Parliamentary Budget Office to cost all our policies and I have a panel, we have set up a panel of eminent Australians, Professor Bob Officer, Dr. Mike Keating and Mr. James McKenzie to review those costings and satisfy themselves as to the veracity of our process.

Thats more rigor than you get from most Oppositions when it comes to policy. I will stand by our costings and our policies. Of course the Parliamentary Budget Office will update our costings after every Budget and economic statement to reflect the new parameters but if Scott Morrison wants to have a costings argument again, more than happy to have it but stop fiddling with the independence of the Treasury and abide by the Charter of Budget Honesty as I am doing on behalf of the Labor Party. I am more than happy to have this argument. Scott Morrison wont even release the ten-year costings of his company tax plan and he spends Treasury resources trying to get ten-year costings of our plans.

MACDONALD: We are out of time. Chris Bowen as always its a pleasure.

BOWEN: Always a pleasure Hamish.