Interview with Kristina Keneally and Peter Van Olsen (1)

09 November 2015


SUBJECT/S: Liberal Government’s Plans to Jack Up the GST; Trans-Pacific Partnership; Negative Gearing; Emissions Trading SchemeVAN ONSELEN: Let's bring in Jim Chalmers now, he joins us live from Parliament House. Thanks very much for being there.

CHALMERS: Hi guys.

VAN ONSELEN: Can you explain to me why John Brumby, why Peter Beattie, why the lady next to me - Kristina Keneally - and why that person that knows so little about business, Mr Clyne, former NAB Chief Executive are all just so incredibly silly to even want to have the GST on the table, much less even considering doing something at the end of at least having looked at it?

CHALMERS: Given how badly you just verballed Kristina's position, Peter, I'm a bit reluctant to take your word for all the other views!

VAN ONSELEN: She just agreed. She just agreed she wants to look at it, but with all sorts of caveats.

CHALMERS: I know those people that you've just listed, they're all good people, they're all thoughtful people. We have a difference of view when it comes to the GST. You make it sound like it's some kind of snap judgement to oppose an increase in the GST. I couldn't disagree more. I've opposed it for some time, including in the way that you described - in a former role in this building. The problem is, Peter, that the Government thinks that they can increase the tax by 50 per cent and say to people it won't hurt a bit and we can use the proceeds to fix hospitals, fix the bottom line, give more money to the States, replace State taxes. Then they think that we're stupid enough to believe that low and middle income earners in this country would somehow get a look-in in those plans. I'm deeply skeptical that the Government would ever or could ever adequately compensate people when you look at all the various ways that this GST hike has already been spent.

VAN ONSELEN: And you know what, I think you are right to be deeply skeptical about that, because it isn't a magic pudding. I agree and I can understand it. But here's what gets me, Dr Chalmers, this is my real gripe with this. It's not that Labor lands on the side of opposing the increase or the broadening of the GST. It's that Labor won't even enter the debate before coming to that conclusion. I accept that behind closed doors you might have had a bit of a look at this. But I suppose what really frustrates me is that if the GST - and this is the question I suppose - if the GST changing or adjusting is not only bad enough that you reject it at the end of a process of looking at it, but you reject it before even looking at a process of examination, surely then Labor has to have a process of removing the incredibly regressive, debilitating, disgraceful existing 10 per cent GST, because otherwise, why not?

CHALMERS: Your question assumes that this idea just popped onto the table a week or two or a month ago, which is obviously not the case. We've been thinking about and participating in this debate in some time. But participating in a debate about the GST does not mean agreeing with everything that you write in your column or that Malcolm Turnbull or Scott Morrison says. We've got a very well-considered position on the GST. NATSEM which is the independent modeller has confirmed what we've been saying all along that it's a deeply unfair way to go about raising extra revenue. As I've already said it's been spent over and over and over again - in some kind of magic pudding way. So we are participating in the current debate…

VAN ONSELEN: So why not get rid of the current 10 per cent GST? I mean, that's a fair question. If it's such a bad tax at 15 cent, surely it's a bad tax at 10 per cent. It's still regressive.

CHALMERS: Well it's a feature of our tax system at 10 per cent. That argument was had and lost in the late nineties and early 2000's. I’ve never said that we'd wind back the 10 per cent. But what we have said - because we're constructive participants in the tax reform debate - we've said that there are other places you should go first. The difference between us and the Government is that when they look at the tax system, they think that the biggest problem is that battlers aren't paying enough tax. When we look at the tax system, we think there's unfairness at the top of the superannuation system. We think for multinationals that it's too easy for them to avoid their tax obligations. So we say, let's reform the tax system. Let's begin at the top end of super and let's begin with multinational tax avoidance. If we do that - and our proposal is costed and considered and on the table - if we do that we raise $21 billion over ten years, which is a very good down-payment on reform or on repairing the bottom line.

KENEALLY: Jim Chalmers, can I stick with the GST just for a moment and ask you to explain why is it if compensation is offered that Labor would still resist the idea of a GST? Because surely compensation, many would argue, deals with the impact of the regressive nature of the tax.

CHALMERS: Anyone who thinks that low and middle income earners in this country will be adequately compensated by this Government after they jack up the GST has got rocks in their head. With all of their other spending pressures that they have let flow out there - whether it's about payments to the States or state tax reform, or company rate cuts or income tax cuts at the top end - all of these other things, anybody who thinks that low and middle income earners will get a look-in is kidding themselves. And so, the first thing is our deep skepticism about the nature and the adequacy of that compensation. But beyond that, there are additional points. Another additional reason that we won't take the Government's word for it on compensation is what they'd be doing is they'd be locking in a permanent 50 per cent increase into a tax that disproportionately hits battlers while they put in place some sort of temporary compensation which is subject to the pressures in the tax system that income tax is already subject to - like bracket creep and other pressures. And then the final reason, as I've already alluded to, is that we think there are other ways to go about it. If you are fair dinkum about fixing the tax system, why would you begin by making battlers in our country and in our community pay more tax? And what we're headed towards Kristina is a really stark, sharp choice at the next election. If people think that battlers don't pay enough tax, if they think that they should pay more for health and education and other things, then they should vote for Malcolm Turnbull. If they think that the first cab off the rank for tax reform should be the top end of super or in terms of multinational tax avoidance, then they've got a choice and they should vote for us.

KENEALLY: At the moment, we're trying to work out what the Government actually does think is a priority. It's a bit like trying to read the tea leaves in the bottom of a cup, but if we can look at what the Treasurer Scott Morrison said this morning, he called rising personal income tax the "silent scourge" and seemed to suggest for him that was his priority in fixing the tax system. In your view, what are the flaws in our tax system? I know that you've talked about the concessions at the top end of the scale, but what about personal income tax, and what can legitimately be done about it?

CHALMERS: Nobody on our side has said that there aren't legitimate issues around bracket creep over time, for example. We've talked from time to time about how we make our company rate as competitive and as effective as possible, but that begins of course by making sure the companies are actually paying their fair share, whatever the rate is. So I do think that we're up for a constructive conversation about how we improve the tax system. We wouldn't begin with a regressive GST hike like the Government is. But Chris Bowen and Andrew Leigh and Bill Shorten and all of our team have been constructive participants in the conversation around tax reform. We've been meeting with stakeholders, we've had roundtables, we've got carefully costed policies already on the table which the Government could pick up if they were fair dinkum about improving the tax system.

VAN ONSELEN: Jim Chalmers, if you don't want to rehash the debate about maybe getting rid of that regressive 10 per cent GST, why did Labor wind back so much of industrial relations after you won the 2007 election? It wasn't just WorkChoices from the immediate previous Parliament. There were a whole raft - I won't go through them now - of elements of IR that were wound back from earlier periods or incarnations of the Howard years, as well as even from the Keating years as Prime Minister. You were prepared to have that debate again - why not help Australians out - particularly in lower income brackets and get rid of that regressive 10 per cent GST?

CHALMERS: It's a feature of the tax system. We lost the argument 15 years ago, as I said. The difference is when it comes to WorkChoices is that we immediately went to an election saying that we would reform the workplace so that people got a fair go. And what unites our position on workplace relations, what unites our position on the Government's planned GST hike is we think that the most important priority is to get fairness in the system - whether that be the workplace arrangements or the tax system. We've been consistent throughout on that. We say what we mean when it comes to fairness in both arenas - tax and workplace. And we'll have on the table when we get to the election a very serious, very well-considered, very broad tax reform plan and we'll have our position on workplaces staked out as well. And people will know when they go to the election, unlike the Liberal Party they'll know that what we say we'll do before the election is what we'll do afterwards. That's what happened with our reform of WorkChoices.

KENEALLY: Today, we see Dan Tehan raising the spectre of expanding the GST to cover financial services. Labor Premier Jay Weatherill seems to be in support of that. I mean, aren't there ways you could look at changing the GST that would limit its regressive impact. For example, whether it's financial services, private education, private healthcare. Doesn't Labor risk dealing itself out of the discussion if it's not willing to contemplate some changes that might not be so regressive?

CHALMERS: It's a free-for-all on the Liberal side when it comes to the tax discussion at the moment. Angus Taylor, Dan Tehan, David Gillespie…

VAN ONSELEN: You're not answering the question, Dr Chalmers, you know you're not answering the question. That's a fair question from your former Labor colleague, Kristina Keneally - you're dealing yourself out.

CHALMERS: If you gave me more than four seconds to answer it, Peter, I would have got to the answer!

KENEALLY: Jim, he interrupts me all the time, just roll with it.

CHALMERS: Yeah, I know.

VAN ONSELEN: I'm the one getting ganged up on.

CHALMERS: He does two things - he interrupts us and he quotes his own columns!

VAN ONSELEN: What is this - pay out on me day?

CHALMERS: Those are the two things you can count on.

VAN ONSELEN: Now you are once again avoiding answering the question.

KENEALLY: But it's great television, so keep going.

VAN ONSELEN: I'm not so sure about that. Dr Chalmers, let's get to the answer - I'll leave you to it.

CHALMERS: There are no proposals on the table from Scott Morrison or Malcolm Turnbull or anyone else with carriage of this area when it comes to financial services. We've said before when this has popped up that the onus is on the Government to put some detail on the table. It's not for us to swing at every pitch of every disappointed backbencher who didn't get promoted by Malcolm Turnbull. That's our position.

VAN ONSELEN: Are you open to it though?

CHALMERS: Well the Government hasn't proposed it. I mean, these are the musings of a backbencher. If the Government proposed it, we'd see what they're proposing. Just like we've seen what they're proposing on taking the GST from ten to fifteen and then broadening it to hurt people on low and middle incomes. Of course we would participate in a discussion on financial services.

VAN ONSELEN: Okay, so you are open-minded? I mean, maybe I'm being unfair. You are open-minded to some adjustments to the GST but on a case-by-case basis because you'd want to make sure that, for example, low income earners are not stung by the regressive nature of it.

CHALMERS: I think I'm saying we're yet to be convinced, but we are convinced when it comes to the regressive nature of the other changes that the Government has put on the table.

KENEALLY: Can I take you to the Trans-Pacific Partnership? The text of the trade deal which has been somewhat unavailable was released last week. Have you in your role as Shadow Assistant Minister for Trade, have you had a chance to look at it? There's been some emerging criticisms to some of the arrangements that are proposed in the TPP. Particularly, is there anything in there that gives Labor pause about giving this support in the Parliament?

CHALMERS: We've had a bit of a look at the TPP. We did welcome its release last week. We do think that the TPP has a great deal of potential in our region when it comes to creating opportunities and creating economic growth. But the most important thing from our point of view is not to make snap judgements about it. There are thousands of pages in this agreement and many, many side deals and side letters. So we'll hold all of that up to the light and make sure that the agreement stacks up to what Andrew Robb and Malcolm Turnbull claim it will do. So we've got a process going forward. We've got a parliamentary committee which will give people right around the country the opportunity to feed in their views on the TPP. We've also got in each of the countries a political process to go through, not least of which is the Americans which are having a real fight about the outcomes of the negotiation. So we're pleased to see the text released - thousands of pages and just absolutely heaps of mind-numbing details. We won't make a snap judgement, we'll take our time to go through it, and we'll come to a considered view at the end of that process.

VAN ONSELEN: One of the things that is being talked about is that Labor might look at negative gearing and how to perhaps limit that. Is that a policy area we're likely to see something quite firm as a policy script going into the next election?

CHALMERS: We've said that it's not at the top of our tax reform priority list and I've gone through some of our priorities in other answers. But we have also said that we're not prepared to rule out changes to negative gearing. People have been very clear about that for some months now. We think if you're having a broad-ranging conversation about tax, about making it fairer and more efficient, more sustainable, more competitive, then that is one of those things worth having a conversation about.

KENEALLY: We've also seen some modelling that would suggest that a $28 a tonne price on carbon would raise the same amount of money as a 2.5% increase of the GST. Is it likely Labor is going to put a price on carbon or a carbon tax, not just in its climate change policy, but indeed as possibly an economic policy?

CHALMERS: We've said that we're not up for a carbon tax like we've had in the last term of Government, but we are up for emissions trading. Because we do think that we need to put a market mechanism in place to combat pollution, and have a low pollution economy…

VAN ONSELEN: I thought that's what you had in the last term, I thought it was an ETS. It was an ETS, wasn't it?

CHALMERS: It transitioned to an ETS, yes, but what I'm saying is there's a vast difference between what the Government's proposing with the GST and what we're proposing with emissions trading. The purpose of one of them is to raise revenue - that's the GST. The purpose of an ETS is to cut carbon pollution. So I don't think it's a fair comparison. I did read with interest the material that was around the last couple of days. But I think there are two very different purposes when you think of those two policy instruments. And so, I'm reluctant to compare the revenue you’d get from them.

KENEALLY: Dr Jim Chalmers, we're going to leave it there. Thank you for joining us this afternoon on To the Point.

VAN ONSELEN: Thank you.

CHALMERS: Thanks very much, cheers.