Topics: Budget 2022
30/03/2022
04:05PM
Greg Jennett: All right. Well, he joined us yesterday, and we’re glad to say he’s joining us again, 24 hours later. Finance Minister Simon Birmingham is here in the studio with us, only this time unbound by any requirement, Senator, to keep surprises under wraps. So why don’t we run through what was lobbed out last night, starting with the cost of living relief and the fuel excise? Why can motorists be certain that they will notice a difference at the pump in what are you saying, a week to two weeks time?
Simon Birmingham: So, Greg, we’re putting the legislation through the parliament today and within 24 hours of the budget, making sure that that 22 cent per litre reduction in the fuel excise comes into law. That means it’s around $15 per tank of fuel when people go out and fill their cars up. We have given instructions to the ACCC around using every inch of their monitoring powers and there are penalties if anybody does the wrong thing. The ACCC has extensive experience in looking in to the fuel industry and to petrol pricing. We’re quite confident that they have the skills to identify if anybody does anything wrong and to hold them to account.
Greg Jennett: It’s complicated, though, isn’t it, because world oil prices are gyrating at the moment. I think they went up a few percentage points in the last 24 hours, but they had fallen three or four per cent the couple of days before that. So can we be certain that if it’s entering an upward cycle, people can be sure that the full 22 cents was actually passed on and wasn’t disguised by those natural fluctuations?
Simon Birmingham: That’s why we’ve asked the experts at the ACCC to do this work because they have the experience in understanding how the different pressure points across the petrol supply chain actually works, where of course oil price movements relate then through the distribution channels and ultimately to retail pricing, it will take a week or two to to flow through to the bowser. But Australians will see fuel 22 cents a litre less than it would have otherwise been. We’re doing this because we can’t control those global oil price movements. They’ve spiked as a result of Russia’s invasion of Ukraine. They continue to show great volatility. We and international markets expect there will be a stabilisation back at, at least somewhat more normal levels than some of these spikes into the future. It’s why this is a measure that is temporary and targeted to deal with a temporary spike and a temporary problem that’s come from the other side of the world but is hurting Australian families and motorists right now.
Greg Jennett: Yeah, it is temporary and it’s defined with an end date in the legislation. In the preparation of this, because we know what government policy makers can do to distort markets, as you prepare this, did you take a look at all about distortionary behavioural changes towards the tail end of this? I know people can’t store vast amounts of fuel around their home or their garage, but have you given thought to how that might look as we reach the end date of this scheme?
Simon Birmingham: There may be very minor behavioural impacts that occur, but ultimately this is about addressing real life problems that real life Australians have right now as a result of events well outside of their control, outside of our control happening from the other side of the world. But what we can control is this rate of taxation. Ultimately, it’s necessary for investment in roads and infrastructure. We can’t permanently undermine a revenue base, but we can provide this cost of living relief knowing these spikes won’t be there forever. And we want to make sure that Australians get through this time without feeling too much pain.
Greg Jennett: Yep. And with the other sort of cash benefits, the low to middle income tax offset bonus and the $250 for pensioners and concession card holders that again you can guarantee will not be extended. This is literally a one off because I know many people are starting to look now at the disappearance of the lamington, so-called, and are facing the prospect of higher taxes at that point.
Simon Birmingham: Well, these these are absolutely one off payments that we’re introducing because of unique circumstances driven from events around the world. But they’re impacting on Australians. So we’re doing the fuel price cut benefiting all motorists, be they of course people doing the run to work, the run to school, operating in terms of their small business or other activities. We’re also applying these payments to help low and middle, and fixed income Australians and to give them extra support. But what I’d highlight more generally is as a government we’ve shown the willingness to act when necessary in targeted ways and to adapt policy as necessary. So during COVID-19, we introduced a range of things in terms of additional payments, support, and of course the JobKeeper program. All of those extraordinary measures were in response to events to help Australians, given a crisis at that particular point in time. And we made sure we showed the policy innovation, but we also kept them temporary and targeted, avoiding the type of legacy of budget blow-outs that Labor had in their years when they did school halls, pink batts and cash for clunkers and other disastrous policies. Our interventions have been shown to help Australians when it matters at the time it matters. And of course, if re-elected, will show that type of innovative approach if we face further crises in the future.
Greg Jennett: Right. But Lamington would not be extended under any circumstances. Are you prepared to say that?
Simon Birmingham: The lower middle income tax offset was extended as part of those COVID supports. Otherwise, its role in our income tax reforms, which are extensive, and which ensure when the final piece of them come in, in the next parliament, which we’ve already legislated, and Australians can rely on us to keep that promise, whether they can rely on Labor to keep a promise that they never liked and they’ve only grudgingly come to accept is questionable.
Greg Jennett: Well, there’s no suggestion?
Simon Birmingham: We’ll ensure those reforms will ensure that 90% of Australians pay no more than 30 cents in the dollar as their top marginal tax rate. It’s a significant reform to income tax and it creates more incentive to work the extra shift, to take the extra part time job and ultimately to keep more of your take home pay and have higher disposable income.
Greg Jennett: Sure, there’s no suggestion we have on the table yet. We are going to talk…
Simon Birmingham: Only Labor’s track record
Greg Jennett: …about Labor and and the next wave of personal income tax cuts. Structural deficit though even as we wash out some of the temporary measures, spending still remains higher than revenue as far as the eye can see. Ten years. Can we expect a pledge at some point to close that in year 11 or year 12? When are Australian governments of all persuasions, but particularly your own, the Coalition, likely to be able to bridge that gap?
Simon Birmingham: Well, we’ve bridged the gap a lot in last night’s budget. Indeed, the deficit as a share of the size of the economy has around halved compared to what it was previously. So we have demonstrated that our fiscal strategy of growing the economy more strongly is helping to bridge that gap. And of course, that’s the strategy we’re continuing forward with. An economic plan for the future that will seek to drive is further strengthening…
Greg Jennett: There are no caps on the spending side, though, are there? That’s how you could drive that change more ruthlessly.
Simon Birmingham: We remain committed to, for example, meeting the full cost of the National Disability Insurance Scheme, to meeting the costs of our aged care reform to meet costs in defence expenditure. These are all areas of real pressure that we face in terms of the budget. But what we demonstrated in last night’s budget was that the rate of payment by government has actually been coming down by around 6% this year compared to last year, by close to 5% next year compared to this year. These are the largest reductions in payments by governments in close to 50 years. It’s a demonstration of the fact that when we said COVID support would be temporary and targeted, we meant it. We’ve acted on that. We are closing that gap and the strength of our economic growth is meaning that the dividends of having fewer people on welfare, more people in jobs and contributing and paying taxes is helping us to close the deficit, which will now be, as I said, $100 billion less over the budget forward estimates period than we’d previously forecast thanks to that growth.
Greg Jennett: And let’s just hope we don’t hit other unforeseen catastrophes globally or in Australia. Simon Birmingham We will wrap up this chat for now and talk again.