JON FAINE: Lindsay Tanner is the Minister for Finance, the second most senior after Wayne Swan, the Treasurer, in this Rudd Government economic team flanking the prime minister as he made the announcement of $42 billion of stimulus for the economy yesterday. Lindsay Tanner good morning.
LINDSAY TANNER: Good morning, Jon.
JON FAINE: This makes budgets irrelevant this package, does it not?
LINDSAY TANNER: It doesn't make them irrelevant but we live in very unusual times, Jon, and we of course had an update, a fiscal update in November last year which, as you've seen yesterday has been rendered out of date by events very quickly. International circumstances have changed dramatically and that's having a very big negative impact on our economy and we have to push back hard. Its certainly complicates the preparation of the budget in May but we're preceding with that and of course if further effort has to be made to keep jobs and growth in the positive, well, that's what will occur.
JON FAINE: So there's more to come, what more can you do?
LINDSAY TANNER: Not necessarily more to come but we are keeping that option open because we really are in unchartered territory here because of the unfolding recession internationally which is proving to be deeper and tougher than many people expected and of course China dropping its growth rate very substantially has a very big negative impact on Australia as well so we just have to do our best to chart our way through this and we're committed to doing whatever's required to sustain jobs and keep growth positive in moving upward.
JON FAINE: What controls the Australian economy, what impact can a government actually have these days?
LINDSAY TANNER: Oh, a Government still does have significant impact but probably not as much as maybe 20 or 30 years ago. We live in a very different world, we're much more connected to the rest of the world. These events, of course, are demonstrating and they're demonstrated in a positive sense though, the past five to seven years when demand for our minerals from Asia in particular, really sent Australia's income soaring and our economic growth and our budget surpluses soaring. So, things are very different but nonetheless we do still have the capacity to influence things and we do have the capacity to fill the gap that the private sector is now going to allow to occur because of declining demand, declining activity and to try and soak up as much of that slack as we can to keep jobs in place to keep people working and to keep activity occurring.
JON FAINE: It's been hard to get any comment from the Liberal Party from the Federal Opposition this morning. We tried three senior Liberals and the Shadow Treasurer, the Opposition Leader, the Shadow Finance Minister, none of them were prepared to talk AM apparently couldn't get much comment and other media outlets were all struggling as they work out exactly which song sheet they will sing from this morning. But it's been interesting this morning to see Peter Costello in the Age newspaper and on Lateline last night and some other conservative commentators saying typical, Kevin Rudd's just a Whitlamite, after all he wants to spend money he hasn't got, in typical Labor Party fashion.
LINDSAY TANNER: Well, it's notable that Peter Costello's had a sudden resurgence. He made a long condolence speech in the House yesterday, he was on Alan Jones yesterday, he was in the Age today. I didn't know he was on Lateline last night but, so he's obviously suddenly decided to make yet another mini-comeback and tease people yet again.
JON FAINE: Well, rather than playing the man, play the ball, typically you're spending, a Labor Government's spending money it hasn't got.
LINDSAY TANNER: Well, firstly the deficits that we are now projecting are being driven overwhelmingly by a huge collapse in revenue, and in fact the figures for the projected deficits are very similar to the figures for the reduction in revenue, and of course, additionally we are having to spend money that we didn't plan to spend, in order to stimulate economic activity to try and get growth kick-started again. We are in much better shape in this country than virtually any other country in the world, to be able to do these things. Yes, we will have debt as a result of it, but that debt is projected to only reach about five per cent of the nation's total annual economic output, five per cent of GDP. The average across the developed world now, is about 45 per cent…
JON FAINE: Yes, but that's helped by basket economies like Zimbabwe and the like, that bring the average down, I mean the alternative here surely, is to do as Malcolm Turnbull points out, you can create stimulus and incentive by lowering taxes.
LINDSAY TANNER: The average I'm referring to Jon, is across the OECD, of which Zimbabwe is not a member. The Malcolm Turnbull, Julie Bishop alternative is literally whacky, they are promoting the proposition that was behind the vast budget deficits that Ronald Reagan handed over to George Bush Senior in 1988, and was equally behind the vast, even great budget deficits that George Bush Junior has handed over to Barack Obama. It's off the theories of this guy called Professor Arthur Laffer, the theory is, if you cut tax rates, then people collectively will end up paying more tax. Now it's been discredited by events, by experience, but that's what their argument is, they are pushing a failed US Republic policy that George Bush has really been the prime pursuer of, and has left the US budget in an absolutely dilapidated state.
JON FAINE: All right, a couple of quick things. The interest rate collapse hits self-funded retirees hardest, yet this package has nothing for them.
LINDSAY TANNER: Well no, that's not correct, in fact those self-funded retirees who are net taxpayers, of whom there are considerable numbers, will get the individual $950 tax bonus on that basis, and…
JON FAINE: Why was it described then as a hand-out for workers, in all of your press releases and material?
LINDSAY TANNER: Well because the overwhelming bulk of people who get it, will be people who are currently working, I think that's not unreasonable, Jon, that does - otherwise…
JON FAINE: A self-funded retiree is eligible for the hand-out?
LINDSAY TANNER: Yes, anybody who's a taxpayer, and whose income in the last financial year was below $80,000, gets the full $950, and there is a phasing out rate to $100,000, so it's $650 if you're between $80,000 and $90,000, and $300 if you're between $90,000 and $100,000. The other thing I'd say that I think you need to bear in mind is, whether it's the package in December, or this one now, unless you want to literally just spray money round to every single person in the country, at vast expense, and very inefficient in terms of getting money pumped into the economy, you've got to draw lines in various places, and it's impossible to get them perfect, there'll always be some people somewhere, and this is not the only area, where there'll be some people on the wrong side of the line, that will understandably feel hard done by, that's just unavoidable.
JON FAINE: All right, why give people cash, when some will choose to go and throw it down the pokies, or the casino, or whatever else it might be, why not give people vouchers?
LINDSAY TANNER: The administrative cost and complexity and bureaucracy associated with that, would be something that would send a chill up my spine, as Finance Minister, I can tell you, Jon. And secondly, although yes, some people will in effect spend some of this on the pokies or whatever, I would suggest that's a relatively small proportion of the total. The key thing, and these are lawful businesses that employ people too, so it's obviously undesirable that money be spent, that particularly people with problems with gambling spend the money on those things, but they are lawful businesses, part of our overall economy that employ people.
JON FAINE: Okay. Schools get 100 per cent of the public investment, why not split it between schools and health?
LINDSAY TANNER: If you look across the wider picture, you'll see that primary schools have been an area that we have not, until now, spent a lot of money on. We've got a $5 billion health and hospitals fund in place, where major investments will start to come - start to be announced in the ensuing months, we have major money going to hospitals and the health system, through the COAG system with the states in November, and of course with secondary schools, you have both the Trades Training Centres Program, and the Computers Program, which are billions of dollars, so we felt that it was overdue for a bit of focus on primary schools, there are much more of them, of course, than secondary schools, so…
JON FAINE: But nothing for hospitals, nothing for health?
LINDSAY TANNER: Well, that's not correct, Jon, it's just nothing today, but you will see very substantial announcements coming through about major, really major infrastructure works in the health sector, coming out of the health and hospital funds, which is all part of the total Government response. This is only one part of what we're doing, so you've got to look at the total picture here.
JON FAINE: All right, and just finally, credit card interest rates still up around 17, 18, 19 per cent, depending on what product you use, banks yesterday, the Commonwealth Bank announced $2 billion, share price went up 10 per cent, everyone's doing it tough, except the banks. Do you think the banks are doing their share?
LINDSAY TANNER: Look, we obviously are putting in as much pressure as we can on the banks to pass through the full interest rate reduction. Credit cards are a bit different, because the risk factors involved are different from, for example, a mortgage on your house, they're not backed by an asset, like the mortgage on your house is, so different things apply, and there are different products, there's a lot of competition in the market, but we are putting as much pressure as we can on the banks. But I'll tell you one lesson that I think a lot of people have learned over the course of the last 12 months, Jon, is that having banks that are well capitalised, stable, and conservative in their behaviour has been one of the key things that has kept Australia in good shape over the past 12 to 18 months, and…
JON FAINE: The counter to which is, they're ripping us off.
LINDSAY TANNER: Well, look, some people will argue that, and some…
JON FAINE: Well, I am.
LINDSAY TANNER: Well, good for you. In some instances, you know, there'll be some areas in that case. I've had arguments with the banks over the years, for example, with ATMs, and the fee that they charge if you go and take money out of somebody else's ATM from your account, so there's plenty of scope for those kind of arguments, and the people have different views on them. What I'm saying is, we are putting maximum pressure on the banks to pass on all of this interest rate cut as quickly as possible, but different issues apply to different products, whether it's mortgages, whether it's small business lending, whether it's credit cards, and the ultimate, big picture issue here that matters most, is that we have stable, well capitalised, well run banks, that people can rely on, that they can trust, and that they can know that their money is safe in, that's the key thing that we've got to keep our focus on.
JON FAINE: Thank you for your time this morning, it's been most interesting, and you've filled in some of the gaps. Lindsay Tanner, the Minister for Finance and Deregulation, in the Rudd Federal Government.
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04/02/2009, 09:06 AM
JON FAINE: During the news we've sought to clarify with Lindsay Tanner's office whether or not it's combined family income or individual taxpayers' income that qualifies you for the $950. It would seem it's individuals. Here's the response:
For a family of five with each parent earning less than $80,000 both parents would get $950 so you would get nearly $2000 plus $950 for each school-age child. And if you're eligible for the family tax benefits A or B that is pretty much the qualifying mark. So combined family income is not the benchmark it's individual taxpayer income. So you can have mum and dad both earning under $80,000, individually that is, each of them earning under $80,000, each of them will get the $950 as will singles and the like, so some families are going to get as much as four, five, even six thousand dollars. If, for instance, you've got two people earning under $80,000, mum and dad, and you've got three school-age kids, you'd get $5000 nearly and on and on it goes.
You're also eligible for either a subsidy for the solar hot water heater or the insulation if you want that. So this is a remarkable package for many families but then there are always people who find that they are missing out and we want to hear from all of you this morning.
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