Breaking Politics with Tim Lester

I spoke on Breaking Politics with Tim Lester and Senator Fiona Nash this morning about the upcoming budget, government revenue, the Coalition's internal disagreements on their paid parental leave scheme, and sports betting promotion.

Andrew Leigh MP
Parliamentary Secretary to the Prime Minister
Member for Fraser
7 May 2013

TOPICS:                                The budget, government revenue, paid parental leave, sports betting.

Tim Lester:          So to our Tuesday regulars on Breaking Politics. Senator Fiona Nash is with the National Party, she’s in her Young electorate office this morning, and Andrew Leigh, Labor MP here in Canberra has come in the Parliament House studio. Welcome to you both on Breaking Politics this morning.

Let’s begin our discussion with the announcement from Penny Wong this morning, the confirmation of a $17 billion hole in the budget this year because of revenue write downs and changes to Family Tax Benefit A, the scrapping of a planned handout under Family Tax Benefit A. What do you read from that, Fiona Nash?

Fiona Nash:        Well I think it just really shows, Tim, the shambles economically that this government is. We had the Treasures, Wayne Swan, telling us hundreds of times that the budget was going to be in surplus by the middle of this year and now we see this huge, huge black hole potentially in front of the government. People out there on the ground realise that their government simply cannot manage the economy, that they have just made a huge mess of it. So while people out there in the communities are trying to do the right thing, trying to manage and balance their household budgets, we’ve just seen the enormous waste and mismanagement from this Labor government and people are feeling incredibly disappointed about that and even stronger Tim, they’re just furious that the Labor government has made such a mess of the country economically.

Tim Lester:          Andrew Leigh, you’d obviously have some counter comments to that, but give us also a sense of the scale of $17 billion write down this financial year. How big a budget hole is that?

Andrew Leigh: Well Tim, Fiona is certainly right to talk about this being huge. It’s more than 1 per cent of GDP and it’s of the scale that Ken Henry advised the government to go with stimulus when we were hit by the global financial crisis. This is a very significant chuck of tax revenue. But where Fiona’s wrong is where is she’s talking about revenues, but of course this is a tax write down. This is not to do with what the government is spending, it’s to do with the amount of tax revenue that’s coming in. And that’s occurred because while commodity prices have come off, the dollar has stayed high. That’s a challenge to both sides of politics, frankly. It’s a challenge as much to the Coalition that would fund a paid parental leave scheme from company tax revenue, and will find that – if they were to win office – that company tax revenues coming off will make that very difficult for their accounting.

Tim Lester:          And so this morning families eligible for Family Tax Benefit A are looking at losing three, four, five hundred dollars in the coming year. Not money they already had, but money they might have budgeted on, to try and patch that hole. Is that a good cut?

Andrew Leigh: No one’s family tax benefits are going down. These are just changes that have been announced but haven’t been put into place. This is a difficult decision, as are some of the other difficult decisions we’ve made, such as means-testing the private health insurance rebate, means-testing the baby bonus and restricting it to second and subsequent children. None of these are straightforward, but when your tax revenue comes down from 24 per cent GDP to 22 per cent of GDP, you know it might be higher in nominal dollars, but it certainly hasn’t kept pace with the demands and the economy over that period.

Tim Lester:          Fiona Nash, you’re deeply critical of the budget management of the current government. Yet as well while we sit here today, your side of politics, the Coalition, is looking at the rolled gold paid parental leave scheme, vastly more expensive than the Labor government’s option. Do you agree with those inside the Coalition party room who are now saying Tony Abbott’s plan needs reassessing?

Fiona Nash:        Well firstly, just to respond to Andrew there, we see from this government, from the Prime Minister, this continuation of promises that are never delivered. And that’s what really, really, getting people’s goat out in the community. So the fact that last budget, this funding promised under the Family Tax A changes, the increase was heralded as a wonderful thing for families coming down the track. And yet now we see it’s never eventuated. The NDIS promise, we still haven’t seen that. The Gonski reforms, there’s still nothing. And people out there in the community, Tim, they really, really understand that this is a government that promises but never delivers. And on the paid parental leave system, look Tony is really looking at this as a workforce productivity issue. It’s about those women out there in the community that need better assistance than they currently do, because it’s a fair and appropriate thing to do. Now Tony believes, and has right from day one, that this is a very good way of addressing that issue about workforce productivity. And it’s also very good for small business out there in the regions, those small businesses are really going to benefit from this without the cost impost and that’s going to help out in the region. So I’m very supportive of Tony Abbott pushing his policy.

Tim Lester:          Andrew Leigh, is the Coalition right to be looking at paid parental leave on such a large scale when the budget looks like this?

Andrew Leigh: Well this is an extremely expensive measure, Tim, and that’s because it provides up to $75 000: if you’re a woman who’s taking off six months and your salary is up to $150 000, the government will give you $75 000. If you’re a woman on a lower income you’ll get much less. Traditionally the Australian social safety net has been so effective because it’s been targeted. It’s disproportionately provided more to those at the lower end of the income spectrum. But this is the opposite – it’s a policy that gives the most to those that have the most, and that’s why it turns out to be so expensive.  And it’s funded by a company tax increase, and we know that the company tax ultimately falls on workers, so all workers will pay for that company tax increase but it will end up going disproportionately to the most affluent households.

Tim Lester:          I want to move on to a couple of other issues around this morning, if we can before we go. The front of several of Fairfax’s newspapers this morning has the story of the analysis of seventy of our wealthiest in this country earning more than $1 million a year and they’re not paying a cent in tax. Doesn’t that suggest that there is something is awry in a system where people on such large incomes are so capable of avoiding tax liability?

Andrew Leigh: The difference between Australia and the US, Tim, is that they have a thing called the alternative minimum tax which is in some sense a cap on deductions and would mean that in the United States, you wouldn’t be able to see a situation like that. We haven’t developed caps on deductions.

Tim Lester:          We should?

Andrew Leigh: Well, the economic case is simply that you ought to be entitled to the same deductions regardless of where you are on the income scale. So if you earn a million dollars and you give it all to charity, you shouldn’t be paying any tax. The alternative minimum tax is actually if you did that, you would pay tax. I think that’s a difficult conversation to have and you want to understand more than just looking at 70 people, you want to actually look right across the income scale to see if this would be a sensible thing to do in Australia.

Tim Lester:          Fiona Nash, are you concerned that a large number of such big income earners didn’t pay any tax in 2010-2011? Is our system awry do you think, or not?

Fiona Nash:        I think the Australian people expect people to contribute fairly when it comes to the tax system. I think that out there in our communities people expect that there’ll be that contribution fairly from those that are contributing to the tax system. Now in this particular instance, I’m not aware of those individual circumstances. But out there in regional communities, we as the National Party every day are out there seeing people battling, working hard, our farmers facing drought now again in a lot of areas, and facing some real difficulties. When they read stories like that, they’re not surprisingly a bit concerned  and want to makes sure that that fairness and equity is actually there in the tax system.

Tim Lester:          Fiona Nash, to close perhaps, an issue that keeps cropping up now quite regularly, this of sports betting and advertising of sports betting during games. Labor MP Stephen Jones says neither of the major parties are being tough enough on limiting sport betting and he’s bringing in a private members bill that will ban the promotion of odds, pretty much at everything except horse races and greyhound races. Is he right? Is that something we should support, or is that too much a case of kids gloves?

Fiona Nash:        As a mother, Tim, I have real concerns about the prevalence of these types of gambling advertisements and I think that Tony Abbott has got it absolutely right on this when he talks about that industry should try and sort it out, but if not he is absolutely prepared to step in and make sure that those things are done properly. And I think he’s absolutely right that if industry is not going to sort it out, then I believe that government certainly has a role to do that.

Tim Lester:          But Tony Abbott isn’t talking nearly as tough at Stephen Jones at the moment in terms of strict limits here. You think we should adopt Tony Abbott’s wait-and-see approach?

Fiona Nash:        Well I think it’s fair to give the sector, the industry some time to appropriately deal with it. I don’t use Stephen Jones as my litmus test for policy development, unfortunately for him. But certainly I think we do need to come into this and make sure we get it right, and if industry isn’t going to get it right, isn’t going to make sure that we have those constraints there, then government absolutely has a role to step in and make sure that happens.

Tim Lester:          Andrew Leigh, your thoughts? A private members bill that might be worth supporting, or no?

Andrew Leigh: Well Tim, I certainly share Fiona’s concern. As a dad, the only solution that I’ve found to this is to try and move the conversation away from betting and to use those odds as a way to teach my boys about maths.

Time Lester:       But you shouldn’t have to do that while watching a footy match, right?

Andrew Leigh: That’s right, I’m making the best of what I regard as a bad situation. I’m trying in some sense to distract them from money and into learning something. I think the code of conduct that the government has put in place with broadcasters where odds promotion is restricted to breaks in play has been an important step and has seen significant reduction in the promotion of odds. But I do think that this is an issue that concerns many Australians, I’ve certainly had constituents talk to me at my shopping centre stalls and in my electorate office with their concerns about this. So it’s something that I’ll be watching closely and I think, similarly to Fiona, I’m very interested to see how the industry responds and whether we need this big stick approaches, or whether we can actually deal with it through voluntary regulation.

Tim Lester:          Andrew Leigh, Fiona Nash, delighted to have you on board with Breaking Politics. Thanks for coming in, and we’ll talk again next Tuesday.

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