E&OE - PROOF ONLY
KRISTINA KENEALLY: Let’s bring Penny Wong in, the campaign spokesperson.
PETER VAN ONSELEN: She already looks like she doesn’t want to be here, you’re the campaign spokesperson.
PENNY WONG, CAMPAIGN SPOKESPERSON: Do you know what I was thinking, that’s not really the most welcoming way to enter the program, ‘Ah, we didn’t really want her. We want someone else.’
VAN ONSELEN: Penny, Kristina Keneally and I have a deal on this program, she gets all the guests and I get the rest of the guests for the time News Day is on, so we can afford to be rude to guests on To The Point without any fear of whether they’ll come back or not because it’s her program. It wouldn’t happen on News Day, I can assure you.
WONG: PVO, we’re not actually breaking up. We’re just centralising the requests for media. Everyone is still very loved.
VAN ONSELEN: On your end, it’s different for you. As the campaign spokesperson, or one of them, you will be doing a lot of media like it or not, but how do other ministers feel about this? I’m not being critical, by the way, both sides are in the same boat on this one, but how do the ministers feel about it because in a sense they’re getting directed quite heavily by central office in a way that they wouldn’t ordinarily be outside of a campaign, but it’s understandable because messaging in modern politics is what it is.
WONG: Well, I think this is a normal process, isn’t it? Every Federal Campaign I’ve worked on, I think this is the third time I’ve been spokesperson, you’ve had the central campaign headquarters handle media requests. As I said, we’re not breaking up with you PVO. We’re still coming on your shows, so all is well.
VAN ONSELEN: Senator, let me ask you, big issues at stake in this election campaign, including for you. You’ve been the spokesperson twice, you’re one for one, you want to get this one right or else you’ll fall into the wrong half of the ledger.
WONG: I think that is very low on the list of things that are on the table for this campaign. I suspect things like the future of the country and the future of our schools and universities and hospitals and what sort of tax system we want, I suspect they’re a little more important to people.
KENEALLY: The Government is clearly trying to define this election between jobs and growth and a Labor Government that would just raise taxes. How is Labor going to try and define the choice at this election?
WONG: This is a choice about what sort of Australia we want and what sort of future you want. And we’ve said very clearly our priority is clear, we will put people first, we will put more investment into schools, we will defend Medicare, and we will ensure that we have an economy that is focused on future jobs and opportunities. When we’ve got a Government that wants to talk about jobs and growth, and what I’d say to you both is that you don’t have a plan for jobs and growth if you don’t have a plan for schools and their only plan for schools is less funding.
KENEALLY: Let’s pick up on that because Turnbull is out today spruiking his tax cut for business, saying it would have a $4 return to the economy for every dollar that was cut from taxation. Did Labor do any similar modelling before it decided to reject that company tax cut?
WONG: This comes down to priorities, doesn’t it? And what we have said very clearly, and it remains our view, our priority is first putting funding into Australian schools, into our people, because you don’t have a plan for future jobs if you don’t invest in the skills and the minds of our greatest resource which is our people. That’s the reality. So the government wants you to believe that magically the budget, which is already in deficit, debt is increasing, remember under them they have tripled the deficit, they want you to believe that the priority for the nation should be an uncosted and unfunded $50 billion cut for businesses, a tax cut. That’s the tax cut that I think Malcolm Turnbull avoided the question on some 18 times on this channel.
KENEALLY: But they’re claiming a $4 return for every dollar they provide in a tax cut. You’re claiming the best way to provide jobs and growth is to invest in education. How are you going to counter this argument, can you point to any figures that say every dollar we put into education is going to deliver an X return to the economy?
WONG: I think not only does the OECD experience demonstrate this, I guess I’d turn it around and say to you this: why is it that so many economies are investing more in their schools and in their universities and in research than we are? There’s a reason why you see nations like China putting money into particular schools, there’s a reason you see schools in Singapore and the sort of funding they get. And there’s a reason why nations recognise education is so important and that is because it is the first and most important asset a nation has. But again I come back to this, when you’ve got a budget that is under pressure, you have to make very clear decisions about what your priorities are. And the Government has said ‘our priority is an uncosted and unfunded tax cut for big business.’ Now I just don’t think that is a sensible set of priorities and I think Australians are rightly concerned about the Prime Minister who is telling them that that is the most important thing over the next 10 years.
VAN ONSELEN: I want to ask you about Labor’s negative gearing policy. Why is investment income allowed to still be used for negative gearing purposes under the changes that Labor is putting in place?
WONG: I think that the key thing here is that if you negatively gear you can offset your losses against your personal income, so your wages income. We’ve said we think that you should continue to allow negative gearing for new homes, but we don’t think it’s a sensible thing to continue to use what is effectively a tax payer subsidy for people who are buying their second, third, fourth or fifth home. I know that there are people who are critical of that, but it does ultimately, Peter, come back to priorities. People seem to forget that a tax concession is, in effect, a subsidy by tax payers. Do we really say that people earning 50, 60, 70, $80,000 a year, they should continue to have their hard earned tax dollars funding an incentive for investors? Now I just don’t think that’s a sensible proposition.
VAN ONSELEN: But within the mix of what Labor is doing though, Senator, it says – this is your own policy document – from 1 July 2017, losses from new investments in shares and existing properties can still be used to offset investment income tax liabilities. In other words, negatively geared essentially. That’s just benefitting the wealthy, isn’t it? People that are so rich that they have that amount of investment income they still get to be able to buy houses, etc, and have it offset in that way.
WONG: Now, Peter, this is a Malcolm Turnbull line, where I think he talks about a plumber or something, from memory, in a rather long and convoluted analogy. That is not unknown to the tax system to say you can offset investment losses against investment income. That is a principle applied throughout our tax system. I think the question here is, if you want to talk about benefitting the wealthy, that is not the issue you would be concerned about. The issue if you’re really concerned about benefitting the wealthy, as you’ve put to me, is that you would look at who gets the most benefit out of the current regime and capital gains regime. You would also look at who gets the most benefits of the budget that just got handed down. I mean that is a budget which will benefit people on higher income far more than people on average and low incomes.
VAN ONSELEN: Don’t get me wrong, I would like to see, for example, the Government embrace a negative gearing change, such as limiting the number of investment properties, or the quantum to which you can allow for negative gearing to continue. They’ve decided not to do that, they’ve created a black and white argument against your side, but that strikes me as something that was almost an accidental miss by Labor in their policy. Because I can’t imagine that you guys would think it’s a good idea that someone who’s worth such an amount of money that they have masses of investment income can still get to be engaging in negative gearing, whereas everybody else can’t, unless they buy a new home.
WONG: I think the fundamental inequity is not that. I think the fundamental inequity in the policy that the Government has put forward, or the Government wants to retain, is that you continue to have taxpayer funded subsidies that are disproportionately going to higher income earners. That is the primary inequity in the system we have and as you say, some of the ideas that you just floated in that question to me, Peter, were ideas that from memory, that the Government had backgrounded. The Government had previously floated those sorts of measures. Those ideas, what did they describe it as? That there are excesses, I think Mr Morrison, excesses, but he never actually did anything about them and I think you’ve actually identified the political problem the Government has. They’re so anxious to create a political divide on certain issues that some of their previous tax plans have been jettisoned in an attempt to find a different contest, which means they’ve been pretty incoherent over a pretty long time.
VAN ONSELEN: I agree that that’s a miss by them but I guess my point is that if somebody is so wealthy that they’re able to generate $100,000, $200,000, $1 million in investment income, they can actually offset that in a negative gearing way under your scheme. I’m just surprised that Labor would allow that loophole to continue.
WONG: Well, I’ve answered that question and I’ve said also that I think if you’re very concerned about inequity, that that’s not the primary concern, the primary concern is the current system.
KENEALLY: Penny Wong, can we come back to the budget and I realise that Labor’s not yet released all of its policies but the Government is very keen to paint that there’s a black hole in your costings. When you look though, at your spending commitments, when you look at your revenue and savings measures, can you take us through, just very briefly, what are your figures. Can you answer this question, is there a black hole in your promises?
WONG: Of course not and all our policies have been fully costed and fully funded and Australians will know before the election very clearly what our bottom line will be. But let’s understand what Mathias Cormann is trying to say. I think he is trying to ignore the budget reply that Bill Shorten made on Thursday night where he said, we will agree with you on a tax cut for small businesses up to $2 million turnover, but we will not be agreeing with you on this uncosted and unfunded company tax cut for companies who will earn up to $1 billion. That’s the end point of the policy. Now, that is a very different set of budget priorities to that which the Government has put in place. If someone wants to talk about a black hole, as I said, the Prime Minister, came onto, not this program but this channel, refused eighteen times to be clear about what is the centre piece of his budget cost. That’s now finally, under pressure from the media, from the public, and from the opposition, been disclosed. How is he funding it? I mean this is a Government that’s tripled the deficit in three years, debt is higher than it was under us, they’re taxing more than we did and now they want to say that you should trust us on a $50 billion spend. If there’s a black hole, that’s it.
VAN ONSELEN: Penny Wong raises a good point, Kristina Keneally, why hasn’t the Prime Minister come on this program? You’re responsible for getting guests.
KENEALLY: Well, I don’t know. Back to the thing, before the budget, Labor was out there spruiking over $100 billion of budget savings and new taxation measures. You’ve now agreed to accept the budget repair levy, you’re going to continue that. Can you give us a quantum on your saving and revenue measures and can you give us a quantum on your spending measures?
WONG: Well, in Budget Reply, Bill outlined just over $70 billion worth of improvements to the budget bottom line over the ten years. Obviously because the budgets sets, I suppose, a new baseline against which parties will look at their policies. We will continue to go through and look at the some of the detail. There are a number of aspects we need to consider in more detail, but what I think is very clear is there is one big spending item, in terms of effect on the budget, the biggest dent in the budget, the centre piece of the budget, is a company tax plan that we have not signed up for.
KENEALLY: Okay then, well let me put the question another way. I realise you haven’t released all your policies, but let’s assume there’s some money left over. What’s your view about deficit reduction? I mean, if you’re raising money through revenue, if you’re saving money through not proceeding with the baby bonus and the same-sex marriage plebiscite, what’s your view on deficit reduction? How much would you like to see, or are you inclined to see some of these new revenue and savings measures go towards reducing the deficit?
WONG: That’s a good question. Of course, we want to see a strengthening of the budget over the medium term. Of course we want to see that. The Government says that they want to see that too. But unlike the Government, we recognise in the real world that you can’t pretend to Australians that you can achieve all of that strengthening of the budget only on the expenditure chart side. Now, we have announced some expenditure saves, you’ve identified some of them. But the reality is, as the ratings agencies have said, as sensible economic commentators have said, you have to look at the revenue side of the budget as well. So, the Government, Mathias Cormann and others can come on beating their chest about taxes and how taxes are bad, let’s remember two things. One, is they are actually taxing more than Labor did. And second, sensible economic commentators have recognised that we have to look at the revenue side of the budget as well. Because, that is an effective subsidy. It comes back to negative gearing or company tax; these are tax payer dollars that they are either effectively subsidising or forgone. So we are putting forward plans, which are about budget repair which is fair and you will see over the coming weeks we will add to those in more detail. I think, you would say, that this is an Opposition that has been prepared to put savings on the table, that has been prepared to put difficult political arguments on the table. Negative gearing is a difficult political argument, but we think that Australians are up for a sensible conversation about what budget priorities should be, where spending should be, but also where we need to look at the tax side of the equation.
VAN ONSELEN: Can Australians trust either side of politics on this stuff? Because, you look at the graph for example. Out of the budget, where it supposedly gets to surplus over a five year period in the mid 2020′s, even when it gets up over into the black rather than the red and ticks into surplus, it just flat lines into 0.5 per cent of GDP, even though by then debt will have swollen into way in excess $600 billon. So it looks like, of course these are predicated on nominal growth forecasts that are not realistic anyway. The Labor side say there will be all these savings that will be found or tax increases, but again history tells us these predictions by both sides never come through anyway. So, voters would look at this, wouldn’t they? And say ‘well, hang on, even if everything goes absolutely swimmingly, the best case scenario is that we barely tick into a surplus that’s wafer thin and therefore we can’t pay back debt, all we do is just sit there plonked with the same amount of debt going forward and hence all the interest payments.’
WONG: Well, you raised many points in that question. Your point about nominal GDP is a very good one, it’s not a conversation that you tend to have often in interviews, but I think it’s a very good one because I think the Government has been very optimistic about nominal GDP, which of course is the measure, as you know, which significantly affects what you’re assuming in terms of your tax take. And the figures they put on it are much more optimistic than we’ve seen over the last few years under them and certainly, I think, are questionable. But, leaving that to one side, I think we know that we do have to continue to look at the strength of the budget over the medium term. And that means being careful about where your spending priorities are and also being honest about where you think taxpayer dollars are most effectively spent. Now, I don’t think saying that big business should have a tax cut of $50 billion over the ten years is the best way to improve the budget and I think it’s a pretty odd position for Malcolm Turnbull to be pressing.
KENEALLY: Penny Wong, thanks so much for joining us, I’m sure we’re going to see you a few more times.
VAN ONSELEN: We’ll talk to you again tomorrow.
WONG: See, it was more fun than you thought, wasn’t it?
KENEALLY: It was, the Twitter feeds suggest that too. We’ll look forward to having you back on.
VAN ONSELEN: Thanks for your company.
WONG: Talk to you soon, cheers.