ALAN JONES, PRESENTER: Chris Bowen, good morning.
CHRIS BOWEN, SHADOW TREASURER: Good morning Alan, nice to join you again.
JONES: Thank you very much. I should say to my listeners too, we are not into this ‘gotcha’ business here, we are not trying to trip people up, just get some insights into some of the things. Now I did think this morning by the way when I heard you last night that you were on something. You’re saying that the third phase of the package, that’s where the Turnbull Government want to flatten the tax bracket to 32.5 per cent for incomes between $41,000 and $200,000 and you’re saying that would overwhelmingly benefit men. That $41.6 billion in savings from flattening the tax bracket, of the $41.6 billion, $30 billion would go to men. Now I have never, never thought that tax rates should involve a gender bias. Why are you saying this?
BOWEN: Well Alan, there’s a number of points to make here. As you know, the Government brought down it’s income tax scheme in the Budget in three tranches. 2018, which we support, and in 2022 and 2024 which we’ve said we need to have a good look at. Now the Government has provided very little information on those second and third tranches. Now you and I talked last week about the need to get the Budget back into surplus and for tough decisions, and we need to look at this very carefully because these are huge decisions with a big impact. Now I was making a number of points yesterday. The Government wouldn’t release the information, so we had to go and get it from the Parliamentary Budget Office which is not a good way of dealing with it. The Government should have released the information. Now stage three, the big tax cuts that you are talking about, are the most expensive part going forward and the fastest growing. I was making that key point yesterday. They grow at 12 per cent a year in terms of cost to the Budget. $10.4 billion a year by 2028. I mean that is a huge cost.
JONES: But isn’t the answer expenditure rather than worry about tax rates? Don’t we have to cut back expenditure and we’ll need less tax?
BOWEN: It’s all of it Alan. I mean you’ve got to look at everything. You’ve got to look at expenditure and revenue and I’ve made the point previously, others have made the point, that governments that lock in big decision based on times being good, snapshot the moment the international economy is good right now, it is very good right now around the world, and Australia is benefitting from that. But we’d be mugs to assume that that is going to continue forever Alan and we have to make all of those decisions on a really realistic examination of what we can afford. On women –
JONES: I just think it’s unregrettable that you’ve brought gender into this. I mean obviously a tax change that lowers the tax on higher income earners will favour men because they earn more than women. You’ve got a proposal to increase the top marginal tax rate which discriminates against men.
BOWEN: Well Alan I think all of these things are fair enough considerations. I’m not saying it’s the only consideration. There’s been a lot of talk about these stage three tax cuts and who they benefit. The Treasurer has been out there saying it benefits this occupational group, and that profession. Well he can do that, and I think we are also right to point out that ‘hang on a second, these stage three tax cuts, they do overwhelmingly benefit men’.
JONES: But does that mean –
BOWEN: People are going to make their own judgment as you say. People are going to make their own judgment. It’s fair enough to go through all the facts –
JONES: Yes well that’s what we are here to hear. I agree that’s what we are here to hear. I just, my own view, is that tax rates ought to be agnostic to gender. But are you saying though that the average rate of tax paid by women is lower than that of men and therefore we can’t touch the tax schedule if in fact it is going to discriminate against women?
BOWEN: No what I’m saying Alan, is that there is a gender pay gap in Australia. There is. Women earn less. Women are in overwhelmingly lower paid occupations and they have career breaks to bring up children etcetera, and that in particular Alan is something that worries me a lot and might worry your listeners. That in particular compounds over a working life to mean that many more women are retiring into poverty. I mean we want Australians retiring into a dignified retirement. Many more women are retiring into poverty. And when you’ve got that gender pay gap I think it’s fair enough to examine and consider the implications of tax changes and other government policies.
JONES: Quite, but isn’t it the reality that many women and men regard their incomes as joint, that is that the family is working together, the husband works, the wife works, to support one another and the children, therefore the tax cut for one is a tax cut for the family. If you believe in progressive income tax, and I think you do, because you seem to want to increase the top marginal tax rate to 47 cents in the dollar, then lower tax rates will result in a bigger absolute cut for those who pay a lot of tax rather than those who pay little tax.
BOWEN: Of course Alan there are couples who have joint incomes and in many instances the man earns more, of course that’s the case. There are many instances of women working two or three jobs in single parent families, or you know, the marriage has broken up in difficult circumstances. I just think Alan it’s fair enough to put all these things on the table. These are big decisions, we should look at all the implications.
JONES: But when people read this today they’d be thinking you’re saying that ‘oh well we can’t lower income tax rates because they might hurt women’.
BOWEN: No what we are saying is that we need to target our income tax cuts very carefully. As you know, we talked about it last week, we have bigger income tax cuts than the Government in the shorter term, we have another round of tax cuts that we are offering in 2019 which the Government isn’t offering, that they oppose. They are targeted at those people earning less than $125,000. We think they are the people who need the most relief at the moment, people earning less than $125,000. Men and women, all Australians earning less than $125,000 need that tax relief right now.
JONES: But if they need extra tax relief isn’t that a good thing to widen that bracket at 32.5 per cent. They are saying, between $41,000 and $200,000 in that tranche of reform, you would only pay 32.5 per cent. Isn’t that a good idea?
BOWEN: Well everybody would like to pay less tax Alan, but we have to look at how expensive it is. Again I am talking about very responsible budgeting which the country needs. A government which says ‘look we are going to give you these tax cuts in 2024, we don’t know what the world economy is going to be like, we don’t know what the Australian economy is going to be like, last year we told you we needed to increase tax’ remember that’s what the Government told us last year, we all needed to pay more income tax last year. This year they are saying ‘no, no, we got that wrong, we don’t need to do that anymore, but we know what we can do in 2024’. Now I don’t know what I’ll be doing in 2024, I certainly don’t know what the world economy will be doing in 2024. We’ve got to be very, very careful about these sorts of decisions Alan.
JONES: Let’s just take the other thing that’s grabbed a headline from yesterday because you are blocking company tax cuts and yet you are increasing the tax for suburban families who might buy an investment property. But there’s talk that you are going to give business a 50 per cent tax cut off or for multinationals, foreigners and sovereign wealth funds to build mega blocks of residential apartments in Sydney, more high-rise, more battery hens. What’s this about? On the one hand we’re say going to halve the tax rate from 30 per cent to 15 per cent for foreign capital and big developers who use managed investment trusts to build residential stock for rent. Is that what you’re saying?
BOWEN: Well look this is lashing out by the Treasurer. I think he’s feeling the pressure from a bad decision he made last year. Now let’s just run through this in a little bit of detail Alan because it’s important. Firstly, our negative gearing changes which you referred to, again we talked about those last week, limiting negative gearing going forward, grandfathering all existing investments. Everybody who’s got an existing investment now grandfathered, all protected but going forward saying we need to get more houses built so will limit negative gearing to new houses.
Now on the managed investment trusts, the Treasurer made a 4:30pm press release in September last year and just said ‘I’m changing the law today’. No consultation with the property industry, he just changed the law. We still haven’t seen legislation, there wasn’t any mention in the Budget. Now a lot of companies are saying ‘Look at what’s happening in the United States and the United Kingdom, a lot of pressure is being taken off rent there because these companies are doing what’s called build to rent’, i.e. build houses and apartments as you say through all the planning requirements and the company whether it be Mirvac or Lendlease or whichever company it is holds on to those apartments and rents them out. Now that’s good for rental affordability.
Now the Treasurer just stopped that, no consultation, no discussion he just stopped that. Now a number of us, myself included Dominic Perrottet the Liberal Treasurer of New South Wales has pointed out that that is just not the way to go about it and for the Treasurer to try and make some huge leap and draw it together with negative gearing and say that they’re different -
JONES: No, I think what they’re saying here if I could just interrupt you sorry. For our listeners, I think with this saying is that you’re opposed to Australian companies getting a 25 per cent tax rate even though you’ve supported that in your book and Andrew Leigh has supported it, cutting the company tax rate to 25 per cent but this proposal seems to me to be saying that you’re going to give big multinationals funds a 15 per cent tax rate?
BOWEN: What I am proposing Alan is that any tax relief be based on a commitment. Now we got our Australian Investment Guarantee which is saying if you invest in Australia we will provide you with tax relief upfront, we will improve your cash flow, we will give you a 20 per cent upfront deduction. That applies to small business, big business, every business for investments they make over $20,000. But I’m also saying if a business is out there trying to take pressure off the rental market and provide rental accommodation for people, well that’s on a condition as well, it’s not just a tax cut so…
JONES: But if you wanted to do that you would change population policy, I mean what people are frightened of when they read this is that you are going to give tax breaks to build more high-rise, disfigure the environment, jam up the roads, crowd out of the schools, a greenlight to population growth and too bad if the infrastructure doesn’t exist to accommodate it all.
BOWEN: What I’m saying Alan is we are going to have to have of course accommodation for people regardless of what the immigration rates are. We’re going to continue to increase population. People are going to rent houses and apartments and where you’ve got a company which is saying ‘Look in the United States, United Kingdom they’re actually building very good quality apartments for people to live in, high-quality we’re not talking low quality stuff with an affordable component’ it makes sense to work with the sector to get that done. You know the Government likes to talk to us about business and working with business, they just completely blindsided…
JONES: But do you understand how that’s completely changing the environment of this city and indeed Brisbane and indeed Melbourne, this high-rise stuff?
BOWEN: Of course.
JONES: Eh? I mean the environment, the roads are jammed up, the schools don’t exist, I mean….
BOWEN: I see it every day as you do Alan. I live in Smithfield, in Western Sydney and travel back-and-forth into the city through places like…
JONES: Well this seems to me to be the greenlight to say ‘Away you go and you’ll do it at fifteen cents in the dollar’.
BOWEN: No at all, of course all the normal planning requirements would have to be in place but simply saying Alan where you’ve got people who are willing to build rental accommodation and that will take the pressure off rents and put downwards pressure on rental prices….
JONES: But we got plenty of people there. I could name you four developers whom you know who are ready, shovel ready now to build the very kind of rental accommodation you’re talking about and without drowning in red tape and regulation, they exist now.
BOWEN: All of that has got to be taken into account as well Alan. All I’m saying is where the Government just changes the law by a press release, no consultation with anybody and I’ve pointed out that that’s not the way the Government should run. And you got plenty of companies, I’m sure they’re prepared to show you examples of what they built in the United Kingdom. If you had a look at those Alan I think you’d say ‘Well actually that’s pretty good quality development’. You know that’s not over development, it’s pretty good quality and of course you’ve also got the advantage that it provides more rental certainty to people. They can have better tenure, longer rental leases because the companies are happy with that than say other landlords would be. It’s just got to be part of the mix Alan and I think the Treasurer has just got this one wrong.
JONES: Okay, we’ve run out of time I do want to talk to you and I hope you can join us next week because I’m getting a lot of letters about dividend imputation and I know it’s a very complicated term but it’s a really simple issue and we can talk next week.
BOWEN: I’d love to talk to you about it in length.
JONES: Okay thank you we’ll talk next week.