Beattie and Reith

04 May 2016


SUBJECT/S: Budget 2016; Superannuation Measures; Unemployment; Debt and Deficit; Labor’s Positive Policies

PETER BEATTIE: Welcome back to Beattie and Reith. We're now going to talk to Jim Chalmers, who if the Labor Party wins on the second of July, will be one of the senior Ministers in the Labor Government and he'll have responsibility for financial services, superannuation, productivity, trade and a range of other matters. So Jim, thank you very much for joining us.


PETER REITH: Good to see you.

BEATTIE: We obviously want to talk about superannuation, and I think there are two issues that would concern Australians. I think most people know the Labor Party led the charge on changes in superannuation, and I think most Australians would think 'yeah, look the rich should be cracked down on, no problem with that'. But I think there are two issues -- one of the things though that I think frustrates Australians is the constant change about the superannuation rules. Do you think we'll ever get some consistency? That's the first question. And the second part of that is, what will the Labor Party now do in terms of the policy difference in terms of the Labor Party and the current Government?

CHALMERS: Thanks Peter. There are two categories of super changes in the Budget. The first category is those policies that Labor proposed and which the Government has now picked up, with this sort of humiliating backflip from the Treasurer -- whether that be the Low Income Super measure or the threshold at the top end where you pay a different rate of tax. So there are two measures there that we instantly support. We support them for a good reason -- we wrote them.

The other category of changes has come a bit out of the blue, and we're taking our time to consult on them and carefully consider them. But as you said in your introduction, I think people know where we're coming from when it comes to high income super. We do think that the tax concessions are really poorly targeted and we've been saying for more than a year now they need to be addressed. So we'll look at what the Government is proposing in that light.

When it comes to stability and predictability, I do take the point that you don't want to see this sort of annual chopping and changing in super, but equally we can't use that as an excuse not to fix some of the things that we know are wrong in super. We've got arguably one of the best superannuation systems on the planet, but it doesn't mean it's perfect and one of its imperfections are those tax concessions. We do need to fix them. But we do need to give people an indication what the direction of that change is, when it will change into the future so that they can plan.

BEATTIE: Jim, do you think we'll ever get to a position where there will be, after these changes which both sides of politics tend to agree to now -- the Labor Party forced the Government into it, I don't think it's unfair to say that. Do you think we'll ever get to a bipartisan position where people will say 'that's super, it's for retirement, here are the rules and that's it'?

CHALMERS: That would be ideal, and we go out of our way to find common ground with the Government when it comes to superannuation because it is so important to people's planning and their retirement aspirations and all of that. We've actually gone a step further. One of the initiatives that hasn't got a lot of attention from us is the idea of a commission which sketches out the changes they think are necessary, does all of the research to give people a factual basis to make superannuation changes and to understand the trends. We think that would be a good development. But I think overall, your point, Peter, would be pretty well received out in the community that where the parties can agree, they should, but where you can't possibly agree, you should set out the reasons for it. That's why we put our policies out so long ago -- April of last year, which is very unusual, as you'd both appreciate, for an Opposition to put a policy like that out so far from the election. That's so you can judge our policy against the Liberal policy.

REITH: It is good to put a policy out early. We did that in Fightback, although sometimes an update is not a bad idea, wouldn't you agree Jim? I got a feeling you didn't get around to an update when it came to the cigarette money, mate? There's a few dollars gone missing in that.

CHALMERS: As a student of history, Peter, I've read a lot and understand a fair bit of that '93 period. I usually say we put out more positive policy for an Opposition, of any Opposition since 1993, and we're hoping for a slightly better result. I hope that doesn't rub it in! But I think it is important -- I do actually think it's important that oppositions sketch out an agenda despite what happened to you guys in 1993. I think it is a good thing that we've done.

Of course, as we need to we update the various costings and parameters. We've said that all along. People will have no doubt when they get the little pencil in the polling booth in 59 days’ time or whatever it is, they will understand perfectly what we're proposing to the Australian people.

REITH: Jim, sorry to be a bit negative on this, but there's $19.5 billion gone missing, mate. And it's basically, as I understand it, because of a failure to undertake a re-consideration of the numbers before putting it out. Now, where's this going to end up? Because I mean, we had members of your frontbench basically saying that some of that money was going to go to education and we'd like to know where it's going to come from now. It's a fair question.

CHALMERS: It's a fair question, sure, you're welcome to ask it. It's good to judge us to a high standard, that's a good thing. But with respect, Peter, you're not accurate about the nature of our costing. The way it works federally now is that there's the independent Parliamentary Budget Office, you ask them for a costing. They're completely removed from us. They gave us a costing. They gave a very similar costing to a Senator only five weeks ago, so they haven't changed their assumptions. So had we asked for an update on our costings, we still would have got a very similar number. The Treasury is using a different set of assumptions. We play by the usual rules, Peter. We impose very high standards on ourselves. We will release all of our numbers, all of our spends and saves and tax changes and all of that, and as I said before, people will be under no illusion what we're on about.

REITH: So then why did the Shadow Treasurer say that they'll go back and have a look at the numbers mate? You seem to be in denial, at least he's admitting that they've got to check them again.

CHALMERS: No, I just said the same thing, Peter, if you listened to me, respectfully. I just said that we'd been saying for some time, Chris Bowen and others, that when numbers need to be updated, they'll be updated in the usual way. I'm not clinging to the old costing necessarily. The usual standard practice since you were around and certainly now is to use the most recent numbers that you can, the most recent assumptions and you put your numbers out there on the table for people to judge. I'm confident that we've done the work, more work than the Government which is really quite an extraordinary thing for an Opposition to find more problems--

REITH: I don't think you can say that, mate. They found the problem.

BEATTIE: Anyway, Jim.

REITH: I want to ask you this question on superannuation.

BEATTIE: Yeah, sure. We've got to get him on to super now.

REITH: We do, but the money is a big issue, and I think there will be a big problem with the money. Look, I was chatting to an expert apparently today. A bloke, talking about the circumstances--

CHALMERS: It wasn't the bloke next to you, was it?

REITH: It wasn't actually, this was a real person, apparently.

CHALMERS: Another expert?

BEATTIE: I could give him better advice.

REITH: A real person. It's going to be hard to get this story out. I'm going to ask you about superannuation because I've had nothing but trouble with it all my life. So, I want to ask you this simple question that anybody should be able to understand. Take a very rich person, with $10 million who is aged sixty. Now they've made some changes. As I understand it, for the first $1.6 million there's no tax on that $1.6 million in the superannuation. For the next $8.4 million, there's a 15 per cent tax. Can you tell me, and tell the Australian public why it's necessary to have somebody who's on $10 million and got assets of $10 million, why should they be getting a tax deal at 15 per cent, when people are working and trying to make a quid and some of them get up to $180k and they're paying nearly 50 per cent in the dollar.

BEATTIE: It's not a bad question, I could have asked that question.

CHALMERS: It's a good question--

REITH: What's the answer? I mean maybe you guys have gone a bit soft on this issue.

BEATTIE: He hasn't had a response afforded to him yet.

CHALMERS: When you're ready! I think this is one of the issues that as time goes on post-Budget, more and more people will focus on it. You're right that what they're saying to people is if you've got $10 million, you actually have to reduce your retirement balance down to $1.6 million. So you have to park the $8.4 million somewhere else. The tax rate on that $8.4 million is actually worse than you describe. And I think a lot of people will be worried about that. It's not for us, necessarily, to defend high income earners in the tax system in superannuation, and I've said over and over again that we think that the tax concessions are overly generous. But one of the things that the Treasurer did trip up on today was that he was asked multiple times in the Parliament and at the Press Club why he's making this retrospective change. And he has argued, bizarrely, that it's not a retrospective change and that just beggars belief that the Treasurer of Australia --

BEATTIE: Of course it's retrospective!

CHALMERS: Of course it is. Everybody knows that except Scott Morrison unfortunately. So we asked him on behalf of people like the guy that you were talking to, why, having railed against retrospective changes why he was making a retrospective change. And he has, instead of fessing up and saying this is the reason, he has denied that it's a retrospective change and that's a pretty absurd position to have.

BEATTIE: Jim, let me ask you another couple of quick things before we wrap this up, and thank you again for your time. One of the things that worries me in the Budget Papers is this. If you look at the level of unemployment, for example, it's on about 5.75 per cent, or whatever it is now. At the end of the four years, and the Government is talking about growth and all the rest of it, it's about 5.5 per cent. So in other words, realistically, there's not going to be much movement in unemployment. So I don't quite understand when you look at the growth figures, matching those up with the unemployment figures. So what's your response to that?

CHALMERS: I think one of the most noticeable things about the unemployment figures, not just in the Budget last night, but for the last three years, is the way that they have hovered around GFC levels. And that's partly because we were so successful during the GFC in keeping the unemployment rate down. It's quite extraordinary. And when you say to people 'did you know that the unemployment rate has been hovering around the same level as it was when the US was going off the cliff and Europe off the cliff and all of that', they're quite surprised about that fact. That's the first point that I'd make about unemployment.

The second thing is when you look at so many of those parameters, we've now had three Coalition Budgets and there hasn't been a noticeable improvement in most of those indicators and at the same time, we've got about $100 billion more in debt. Debt as a percentage of the economy has grown. Deficits are no better than they were. All of these sorts of things. It's really stark when you look at the first Budget and the last Budget of this period just how little has changed. With all the promises that were made and all the stuff about 'budget emergencies' and all of that, the Turnbull Government is doing no better and I think that's not one of the things that leap out on the front page of The Daily Tele the day after a Budget. But I think people are starting to wonder, what's the point of these guys? Isn't this their whole reason for being, to improve these indicators? And none of these indicators are really improving.

BEATTIE: Finally, the last thing too, Peter and I were talking about this, and that is the issue about the Reserve Bank's decision yesterday. I mean often when you bring interest rates down, it's because the economy is a bit weak and you're trying to give it a whack to help it along. I know that deflation figure must have scared the hell out of them. So why do you think they made that decision yesterday?

CHALMERS: There's pockets of softness in the economy. It's not easily making that transition that Scott Morrison talks about between that big mining investment phase into what comes next. I think if you said to any of us in the last decade or two, 'did you ever think that interest rates would have a one in front of them', most of us wouldn't have predicted that they would go that low. It's really quite an extraordinary thing.

BEATTIE: The lowest on record.

CHALMERS: Yeah, the lowest on record. The Governor of the Reserve Bank is a terrific servant of the Australian people and he did his best to couch in language that wasn't too negative, but there is a bit of a discord between interest rates at 1.75 per cent at the same time as the Treasurer is pretending that everything is rosy. I think most people understand that our economy is big and there are bad-performing pockets and good-performing pockets. But overall, I think the Australian people would expect us to be in a far better position all these years after the GFC than still wallowing in this sort of slower growth.

BEATTIE: Well, Jim, thanks for your time. We appreciate it. Peter and I decided tonight we'd have two people of the future on, future stars. We regard you as one so we wish you all the best. Good luck!

CHALMERS: Thanks very much to both of you.