19 December 2017

HAMISH MCDONALD, PRESENTER:The Shadow Treasurer is Chris Bowen, hes here with me in the studio. Good morning and welcome to Breakfast.

CHRIS BOWEN, SHADOW TREASURER:Good to be here in person Hamish.

MCDONALD:Its good to see you in the studio. We heard there from the Treasurer saying the tax cuts for middle income owners could happen from next year. We are still on track if we believe the figures for a surplus by 20 21. Its good news isnt it?

BOWEN:Well of course its good that the debt is increasing at a slower rate than previously predicted, the Government was spinning that debt was coming down. Its not, its actually continuing to grow of course, and hit $583 billion which is a very substantial amount. Thats less than was previously projected. Of course we are in the face of a quite synchronised global upswing for the first time in a long time. The global economy, United States, Europe, Asia all showing very strong and positive signs. And of course that shows some flow through to Australia. But of course growth was actually marked down in yesterdays update by the Government and thats largely being driven by, as the Treasurer honestly admitted, disappointing consumption figures and that is largely being driven by low wages growth. And in fact wages going backwards for many people including many working on the weekends.

MCDONALD:What do you put that down to the slow wages growth, because weve had the Treasurers explanation for it now, do you agree with that?

BOWEN: Well I think there's always a number of factors, and Im not going to hold the Government responsible for all of them. I'm going to hold them responsible for some of them.

MCDONALD: Which ones?

BOWEN:Most particularly the cuts to penalty rates. I mean its hard to grow wages, when wages are being cut. Its pretty straight forward. And the Government says increasing wages is one of their priorities. Well they are standing by and watching the wages of people who work on a weekend be cut. Now that is the opposite of the sort of approach we need in Australia at the moment.

MCDONALD:But the reality is weve got corporations making a lot of money, great profits, really good employment figures why do you think that weve got this very stagnant wages growth, it cant be put down to what youve just described?

BOWEN:No as I said, I don't do that, I do think again you are seeing international circumstances where the economic growth that we are seeing around the world is being poured more into employment growth than wages growth. We are continuing to see considerable underemployment in Australia in particular. I think thats a result of a number of factors including continuing global uncertainty, and uncertainly about business decisions. I do think theres a case to be made for ensuring that particularly where governments can have an influence, we are not seeing wages go backwards.

MCDONALD:Given the reliance of the Australian economy on us, on the consumers, do you think therefore there is a strong case to be made in the next year for some income tax cuts?

BOWEN:Well I think there is a strong case for not increasing income tax on workers and thats what the Governments policy is. Now the Government talks about personal income tax cuts. Page 1 of the MYEFO yesterday, page 1 of the document confirms they are increasing tax on 7 million Australians. Thats everybody who earns between $21,000 and $87,000 a year Hamish. They are increases we oppose. We don't think they are justified. Now I do I think it's a particular..

MCDONALD:But hes talking about the year ahead and the next Budget, he said the Prime Minister set him a very clear task of finding ways to do that.

BOWEN:A particularly politically cynical exercise to cut tax after youve increased it. I mean its like Arthur Daleys car yard. You know, you put the prices up one day and put them down the next day and say its a sale.

MCDONALD:But you would support them in the next Budget?

BOWEN:Look what we say is we oppose the increase in personal income tax, which Scott Morrison is imposing and Malcolm Turnbull is imposing despite the rhetoric. Now of course we will wait to see the updates and we will wait to see detailed policies. We are not going to respond to thought bubbles and shiny look over here things as a distraction from the Governments political travails which their current rhetoric, and its just rhetoric, its a thought bubble about personal income tax, currently is.

MCDONALD:But you have the opportunity here to tell us whether or not you support the idea in the next Federal Budget next May of some income tax cuts.

BOWEN:Well we havent seen any income tax cuts happening, so Im not going to respond to something which doesnt exist.

MCDONALD:You dont want to put any pressure on them to do that?

BOWEN:With respect, Im not going to respond to this thought bubble which is hey one day we might like to cut personal income tax. I mean thats the degree of the analysis and the rigour which has gone into what Malcolm Turnbull and Scott Morrison have said so far. There's not one job, not one word of personal income tax cuts in yesterdays official Government fiscal update.

MCDONALD: Some of the savings that weve heard about yesterday will come from new measures, thatll see new migrants wait longer, three years before being able to access welfare payments. The Government says thats a push towards self-sufficiency. Would you agree with that description of it?

BOWEN:Weve got some concerns about that measure. There were quite a few measures announced yesterday, which to be clear Hamish we will take our time to work through, as you would expect a responsible Opposition to do. Theres measures relating to family day care for example, a sector I know very well, my mum was a family day care worker, it used to be a community service based sector, its become much more profit based. And you know I think theres a legitimate issue to look at making sure there isnt abuse of Government funding there. With after-hours doctors we will take a good look at that. We dont believe in cutting Medicare but we will look in good faith at those measures. The migrant measure does concern us.

MCDONALD:Why? Specifically?

BOWEN:Well when you look at what looks like a quick and easy cut from the Governments point of view, its likely just to put pressure on community groups, on migrant resource centres, on charities. I represent a very multicultural area, I see both the opportunities and challenges which go with newly arrived migrants. There are huge opportunities.

MCDONALD:What are the practical outcomes then, that you think we might see as a result of those kinds of cuts?

BOWEN:Well it will increase the pressure on migrant families and increase the pressure on community services. I mean people have to eat.

MCDONALD:What does that lead to though?

BOWEN:It can lead to all sorts of implications including you know increased levels of financial pressure and increased pressure on already stretched community service organisations. Now again we only saw this yesterday. Weve not been briefed by the Government. Well go through it. Well talk to those effected, and the groups representing those effected. But I am flagging considerable concern from my point of view, at this point.

MCDONALD:Theres a two year freeze on the Commonwealth grant scheme payments to universities, a cap on funding for students places. The measures will result in $2.1 billion in savings and from 2020 growth in university funding will be based on performance. Whats your assessment of these measures?

BOWEN:My assessment is that this is just a backdoor road of doing what the Government has attempted to do since 2014. Its been blocked in the Parliament of cutting university funding. Pure and simple. Theyve gone down this road because they can do this administratively without Parliament. So the Labor party and the other parties have combined to block their cuts, and now theyre saying aha, we have a very cunning plan, a very clever way of doing it, well do it without the approval of the Parliament. But the implication of that, it effects people, particularly people from lower socioeconomic backgrounds and who have had university open to them more and more in previous years and that is something again which we are extremely unhappy about it.

MCDONALD:But doesn't this ultimately come down to how the universities respond to this?

BOWEN:How are they meant to respond to this Hamish, with respect?

MCDONALD:I mean the Federal Government is saying things like expensive advertising campaigns should be cut.

BOWEN:Seriously, I mean the universities who will most be effected by this are regional universities and I those who have opened up to people to people from low socioeconomic backgrounds. Take the University of Western Sydney for example, Western Sydney University as its now called. The universities that are spread around regional Australia who are doing great work. I mean these arent the universities Hamish which have huge advertising budgets, or huge real estate portfolios at their disposal where they can just sell a bit of land. These are universities who are efficient, who are doing good work, who are engaging in very important education, not always in the traditional fields, but in cutting edge fields which are important to regional economies and to opening up opportunities to people who would previously not have been at university.

MCDONALD:But there is a clear philosophical difference between you and the Government on universities here. They are saying they want to link funding growth to performance outcomes, they dont appear as necessarily interested in getting large numbers through the doors, they want more focussed process around universities.

BOWEN:I dont believe that Australia faces a choice between excellence and equity in universities, in fact, I think they go hand in hand.

MCDONALD:But its not just about the number of students?

BOWEN:Its about excellence and equity. I mean of course its not just about raw numbers, but the Government seems to think theres a choice. You can have good universities, or you can have universities which are open to more people than they previously have been. That is a fundamentally false premise and frankly I find it a bit offensive. I mean many of us are the first in our families to go to university, which is one of the great social improvements in Australia over recent decades. I dont think university has necessarily become less excellent because more people are going to university. I fundamentally reject the premise that somehow that is a binary choice.

MCDONALD:Scott Morrison says the Coalition is still hoping to deliver company tax cuts. This obviously comes in the context of US tax cuts. We know that we are in a globally competitive environment in this, the US, the UK, France, all lowering corporate taxes. Do you acknowledge that? Do you think that Australia does need to move in the same direction as these other western developed nations?

BOWEN:Well Hamish, the point I make is that we still have a significant tax ahead of us in Budget repair. I mean even the Budgets own numbers, the Mid-Year economic forecast numbers yesterday presume a very significant return to wages growth, which we talked about before. Which is, you know, optimistic. We are not yet in Budget balance and we still have a considerable tax ahead of us. We cannot afford $65 billion over the next decade. You can believe in Budget repair or you can believe in a big company tax cut, but you cant believe in both. Budgets are about priorities.

MCDONALD:How do we compete with these countries?

BOWEN:I believe we will continue to be a very attractive investment destination. Companies do not make investment decisions based on tax rates alone Hamish. They make them on a range of circumstances of which tax is but one. Now of course weve had higher tax rates than many other countries for a long time. I mean we are never going to have similar tax rates to some of the countries in Asia for example. But we also have other benefits which attracts investment and attracts important economic activity in Australia. Now of course youve always got to have a view.

MCDONALD:What are those benefits that we present that the UK, the US, France, dont?

BOWEN:Well Hamish, youve got to compare apples with apples. Now in Australia we have dividend imputation. No domestic investor pays corporate tax in Australia, in effect. It gets refunded. Now that doesnt exist in the United States, that doesnt exist in Europe. So lets make sure we are comparing rates. We dont have state based corporate taxes in Australia. Some countries do. So lets make sure that we are having this debate properly. Of course we need to have a view to our competitiveness, but our competitiveness is not just about headline tax rates. In the United States, for example, there are a whole range of different deductions. Australia has different deductions. Its about the average tax rate paid, but its also about so much more than just the tax rate paid.

MCDONALD:But you see the direction of travel that other countries are going in, we have to respond to that dont we? Our company tax rate is 30%, the UK is moving towards 17%, the US to 21%.

BOWEN:The Government lectures us, for example Hamish, that we cant possibly afford $17 billion extra for schools funding over the next decade. They say thats completely unaffordable. Cant afford that. We just couldnt withstand that in the Budget. But we can afford $65 billion worth of corporate tax cuts. Cant afford $17 billion for schools but can afford $65 billion for corporate tax cuts. I understand Australian big business would like a tax cut. Im sure you would too, Hamish. Im sure most listeners would say a tax cut would be nice thanks very much. But Governments have to make the tough choices. Im here to tell you that the Labor party has made a different set of choices to the Government.

MCDONALD:Alright its probably the last time we will speak to you before Christmas. Hopefully youre getting a break like many. What are you going to do differently next year? How will politics be better? How are you going to raise the tone? I know not just you alone. You know the thing that we hear every morning is the anger from Australians towards our politics. What are you going to do to fix that next year? Dont blame the other side.

BOWEN:I wont blame the other side but let me say something about my side. I think youre seeing something unusual from the Labor opposition federally in recent years including this year. Actually taking political risks and leading the policy debate. And saying its not just as simple as vote for us and everything will be ok. There will be tough choices made. I mean this year for example, Bill Shorten and I announced a policy to tackle family trusts, something that has been in the too hard basket for forty years. While there are legitimate uses for family trusts, they are also used to minimise tax. Its an opportunity thats not available to most Australians. Now somebody needs to tackle it. These are the sorts of things that the nation needs to tackle. Now Labor is tackling them from Opposition. Now there have been plenty of people, when weve done things like negative gearing, capital gains tax reform, family trust tax reform, who have said oh Labors just lost the next election. Well guess what. We are very competitive. We came very close in the last election. We are tackling the big things. We are not out there saying we are a small target. You might disagree with some of our policies, you might love some of the others. But one thing we cannot be accused of is saying to the Australian people everything will be alright, just vote for us. We are making tough decisions and we are seeking a mandate to do big and bold and ambitious things. That will continue in 2018.

MCDONALD:Bolder things?

BOWEN:Youve already seen plenty of bold things from us, Bill Shorten and the Labor party. And youll see more.

MCDONALD:Can you tell us what we can expect?

BOWEN:Well you can continue to see the Labor Party leading the economic debate as we have done and you know, talking about important things like investment in education, investment in vocational education and training, the skills of the future. But paying for those investments and at the same time ensuring Budget repair by doing those big important structural reforms like negative gearing reform, capital gains tax reform, and family trust tax reform.

MCDONALD:Chris Bowen, Shadow Treasurer thanks for your time. Have a good Christmas.

BOWEN:All the best to you Hamish for the Christmas break, I know youre working over summer, youre doing a fine job standing in for Fran, but have a break anyway.

MCDONALD:Good at keeping the seat warm.

Thanks very much Chris Bowen.