ABC Insiders

25 March 2017



SUBJECT/S: Child care changes; Malcolm Turnbull’s family payments cuts; Turnbull’s tax cut for millionaires; $50 billion big business tax cut; penalty rates cuts and impact on the Budget


BARRIE CASSIDY: Now we go to Brisbane where we're joined by the Shadow Finance Minister Jim Chalmers. Good morning, welcome.




CASSIDY: We'll start with the child care reforms. This will benefit around one million families. The Government is entitled to ask, surely, what does it take to get the Labor Party's support on anything?


CHALMERS: This is a really crucial area of public policy, child care. It goes to our ability to get mums and dads back into the work force and it also goes to the early education that our kids need and deserve. We have said for some time that there are some positive aspects to the Government's package. But what passed through the Senate on Thursday night really was a missed opportunity to fix some pretty serious flaws in the legislation. The Government rejected the advice of the sector to try and maintain sufficient hours for disadvantaged kids in particular. What we will see instead as a result of the changes is minimum care go from something like two days to something like one day. That has implications for disadvantaged kids right around the country. So that is why we couldn't support it. It takes a fair effort for the Government to spend $1.6 billion on child care and still manage to further disadvantage some of our kids and still manage to get the sector offside. That is before you get to the fact that they are taking $1.4 billion out of the pockets of 1.5 million families to pay for this, one of the worst aspects of Tony Abbott's 2014 Budget. It is very disappointing to see One Nation and the Nick Xenophon Team vote with the Government on those cuts and not vote with Labor to guarantee disadvantaged kids the early education arrangements that they need if we are to improve their life trajectory over time.


CASSIDY: You talk about disadvantaged kids. Families that earn less than $65,000, 85% of their fees are now covered. A single working parent earning $50,000 are $3,200 better off a year. This is about equity. It is doing its best work at the bottom end?


CHALMERS: One-third of families will be worse off - I think up to 70,000 families earning under $65,000 a year or something like that. But our principal concern is about the cut to the minimum hours for disadvantaged kids. Anyone who knows anything about this policy area, including, of course, the relevant stakeholders and experts, knows that is a very damaging change; because early education is crucial to the life prospects of disadvantaged kids not only in communities like the one I represent, but right around the country.


CASSIDY: You complain too about the way they went about paying for these child care changes. They have introduced a freeze, not an immediate cut and it saves $2 billion. Isn't that what they should be doing?


CHALMERS: Everybody knows when you freeze the rates, as they are planning to do, and inflation continues that that is a real cut to the living standards of people who are on Family Tax Benefits. It will impact every single recipient of Family Tax Benefits, something like 1.5 million families. And think about this, Barrie: On 1 July, the Government intends to abolish the deficit levy, which will mean a tax cut for a millionaire of $16,400 a year or $315 a week. What they could have done, if they had hung onto the deficit levy, is they could have raised three times as much money from a third as many families and only impacted largely the top 1% of earners in this country. If that deficit levy was necessary in 2014, when the deficit was only $11 billion, it's more than necessary now that the deficit is $37 billion. So the point I am making, Barrie, is there are other ways they could have gone about it. True to form, they chose to attack the most vulnerable families on Family Tax Benefits rather than continue the deficit levy. Instead they're going to abolish that deficit levy and it will give a huge tax cut to people at the top end. That is how this Government operates. If they are given a choice between looking after people on middle incomes and low incomes or looking after the top end of town, they always look after the top end of town.


CASSIDY: You are trying to portray this as a benefit that is about to be given to high income earners when it is just a return to the status quo. They are removing an impost that was there temporarily.


CHALMERS: The effect of that policy change will be a $16,400 tax cut for millionaires at the same time as we're seeing...


CASSIDY:...It is just a return to the status quo, it is not a tax cut, it's a return to the status quo?


CHALMERS: But it's a deficit levy. They could choose to continue the deficit levy. They have tripled the deficit between the 2014 Budget and now. If the deficit levy was necessary back then, it is more than necessary now. It is a way they could raise three times as much money as their Family Tax Benefits cuts and impact only a third as many families, and families that could afford to go without a $16,400 tax cut.


CASSIDY: So for how long would you leave that deficit levy in place? A levy that was always intended to be temporary?


CHALMERS: It was intended to be temporary but it was also intended to be in place while there is a deficit. And as I keep saying, the deficit has tripled over the life of this Government from their first Budget to now; debt has blown out by more than $100 billion; the AAA credit rating is at serious risk. So the Government should continue with that deficit levy. It would be a far more appropriate, far fairer way to raise the money that they need to fix their Budget mess and to pay for things like child care.


CASSIDY: So that levy stays in place until the country returns to surplus, under Labor?


CHALMERS: It's for the Government to decide, Barrie. The point I am making is it shouldn't come off on 1 July this year with Budget in the condition it is in.


CASSIDY: When would Labor bring it off?


CHALMERS: It is not too late for the Government to continue it, Barrie, so we will see what they do in the Budget and we will make our decisions after that. We call on the Government to maintain that deficit levy, go about Budget repair and to pay for their priorities in a much fairer way that doesn't see them go about it attacking people on Family Tax Benefits and taking money out of the pockets of people on middle- and low-incomes.


CASSIDY: It just seems to be a case where you criticise the Government for what it is doing without having an alternative in place?


CHALMERS: There is still time, Barrie, for them to continue it in the Budget. We call on them to do that. If they don't do that, then we will make the relevant announcements after the Budget. But it is not too late for them to do the right thing. We won't hold our breath. But it is a proposal we have put on the table for some time and Government should pick up and run with it.


CASSIDY: There was speculation that Scott Morrison was about to abandon at least part of the company tax cuts. Not any more, it seems. There were fairly extensive briefings on Friday suggesting Malcolm Turnbull is committed to the tax cuts as announced. Are you surprised by that?


CHALMERS: Who would know really, Barrie, where they are headed on this? It seems to me to be a typical Turnbull Government shambles and nobody will be particularly surprised to see that the Treasurer's in the middle of this debacle. It has dawned on Scott Morrison that if they don't keep the tax cuts in the Budget, it would be pretty hard for them to keep the Treasurer in his current role after the Budget. If they do hang onto them, it will be up to Malcolm Turnbull and Scott Morrison to explain to the Australian people why they should wear cuts to family payments or a tax on Medicare at the same time as the Government gives $50 billion to the big banks and multinationals. You can see why people are turning on this Government, when the only conclusion they can draw is, under this Government, low income workers get a pay cut, while big banks and multinationals get a tax cut.


CASSIDY: On penalty rates, given that this was a Fair Work Commission decision, what exactly is it that you want the Federal Government to do?


CHALMERS: We want the Federal Government to step in and prevent these cuts to the take home pay of low income workers around the country.


CASSIDY: How do they do that?


CHALMERS: It is not beyond them. We saw with the Road Safety Remuneration Tribunal that the Prime Minister was prepared to step in and change the outcome. Bill Shorten and Labor, our side of the Parliament, have put into the Parliament a way for him to go about that and he should support that. There is a very stark difference between the Labor Party and the Liberal Party on penalty rates. We don't think they should be cut; Malcolm Turnbull does. We think there is something that can be done about it; Malcolm Turnbull is not prepared to do anything about it.


Something that has not received a lot of attention in the last little while is that cuts to penalty rates will hurt, obviously, people on low incomes, but it will also hurt the Budget. As I understand it, the Australia Institute will be releasing some estimates of the impact on the Budget of these cuts to penalty rates as it relates to lowering the income tax take and also increased social security payments. I think it speaks volumes about Malcolm Turnbull that he is so keen to attack the take-home pay of ordinary people around Australia, that he is prepared to smash the Budget to do it. These penalty rate cuts won't just cost people up to $77 a week, they will also cost the Budget hundreds of millions of dollars.


CASSIDY: You say the Australia Institute is about to announce that. Do they whether take into account the productivity gains and increased jobs?


CHALMERS: They will be releasing their material later on today. The point you make about an increase in jobs is not proven. There is not any evidence of that. There have been varying claims made about the impacts on employment that range from nothing to negligible. So if the Government has better numbers or what they consider to be more accurate numbers of the cost of this penalty rates cut to the Budget, they should release them. But the impacts that have been claimed on productivity and on jobs are not agreed and they are not substantial.


CASSIDY: Jim Chalmers, thanks for your time.


CHALMERS: Thanks Barrie.