Topics: OECD tax report, Labor’s inflation crisis, Made in Australia plan

E&OE

MICHAEL MCLAREN:

I said earlier last week that we'd get Angus Taylor, the Shadow Treasurer back on the line to discuss the matters, and he is. Angus, thank you for your time.

ANGUS TAYLOR:

Good to be with you. Thanks for having me again.

MICHAEL MCLAREN:

Pleasure. It's gone largely under the radar today because of all sorts of things going on but according to the OECD working Australians suffered the biggest increase in average tax rates in the developed world last year, Shane Wright in the Herald reminding us 7.6% increase in average tax rates, that's personal income tax in 2023. That seems to go against or counter to the government's claim that they are dealing with cost of living pressures.

ANGUS TAYLOR:

Sure does. I mean, we're breaking records in Australia, we like breaking records but not these ones, not these ones. This is the biggest increase in personal income taxes of any advanced country in the world. To put this in perspective for individuals, the government is seeing a 23% increase in personal income taxes being paid, big part of that is driven by inflation. Inflation drives people's incomes up into higher tax brackets, and we pay more taxes - bracket creep, that's what it is. And other countries around the world are not even close, not even close to these numbers. So in the middle of a cost of living crisis, not only are we paying higher taxes, obviously, we're seeing much higher inflation, and we hear this week, of course, that there's real risks now of interest rates not coming down anytime soon.

MICHAEL MCLAREN:

I think it's more than a risk. I think you'd take it to the bank they won't. But you see, the government would say well hang on, look we've overseen big pay rises for this group, and that group and this private sector, and ok, people are earning more, some three, four, five others sometimes more than 6% per annum compared to what they were. But when bracket creep isn't addressed, you can earn more, but then you effectively become the middleman between the bloke that pays your payroll and the government tax department who collects it. This is why genuine reform through stage three tax reform was required. Genuine reform has been squibbed.

ANGUS TAYLOR:

Exactly right. So to put it in perspective, what matters at the end of the day is the purchasing power of what ends up in your bank account.

MICHAEL MCLAREN:

That's it, yep.

ANGUS TAYLOR:

That's what counts - the purchasing power of what ends up in the bank account. And if prices are going up 10 percentage point increase and much more for many things, since Labor came into power and you're paying more tax, less money, in real terms, is turning up in your bank account. And Australians are feeling that. What are they doing? Record number of Australians working on a second job, well that's not sustainable for many because you know, who's going to pick up the kids from school and all of those challenges, you hear they're cutting back on discretionary spending, and they've dug deep into their savings and they continue to do so. So this is completely unsustainable. We've got a government that's out of touch. It's patting itself on the back saying aren't things wonderful. Well, they're not. I see it as I get around Australia, I go to food banks, I talk to small businesses wherever I go. And there's enormous amount of pain out there, many small business people can't even afford to pay themselves.

MICHAEL MCLAREN:

People are paddling to keep their head above water, but they're paddling harder than they've ever had to and eventually they'll peter out. Look, having both though just agreed that the stage three tax cut changes that the government have legislated, you voted for, indeed squibbing genuine tax reform. Why did you vote for them?

ANGUS TAYLOR:

Well, you’ve got to remember, there are two parts to this. One is lower taxes for Australians - well we tend to support that that's always our starting position as Liberals and Nationals. But there was a second part, which is paying for it by raising taxes on another group of Australians and that we don't support. We never did support that. And we think that's the wrong way to achieve this, which is to your point, we want to see lower taxes for Australians across the board. I'd have to say right now the single biggest priority to achieve that is to have a budget handed down in a couple of weeks time that is an inflation fighting budget. That means getting off of Labor's addiction to spending - $209 billion of extra spending since they came into government, putting downward pressure on inflation. We know that's the way to beat inflation because that's what we've seen in the past, making sure that you've got sensible measures in place to drive down energy prices, make sure immigration is in line with housing supply. We've had numbers that are completely out of whack on that. Get rid of red tape, all the sensible things we know can beat inflation. That's what we need to see in this budget. I'm hoping for the best but of course, planning for the worst given what we've seen in the last two budgets.

MICHAEL MCLAREN:

Well when we last spoke, you said re immigration, a figure more like 200,000 per annum rather than 600,000 is where we need to be aiming at. A lot of people agree. Just on inflation and the budget, there is a concern with this Future Made in Australia thought bubble of the Prime Minister and the Treasurer and others, we're gonna see extra money, stimulus, injected into the economy and given to people, that will only drive inflation. I put that as context because the Reserve Bank have one lever as you know, at their disposal, interest rates. And they've hiked them a fair bit, it doesn't look like they're going to drop them anytime soon. And nor can they with inflation where it is. But many question, what on earth hiking interest rates is actually going to do for underlying inflation, because you look at what has actually gone through the roof, the last couple of years, it's things like eggs and breakfast cereals, bread, fuel, insurance, I mean, none of those are affected by interest rate hikes. They're essentials, you've got to pay them, doesn't matter what the interest rate is. The only thing that really gets affected is variable mortgages of which Australia has a heavy percentage. But when the Reserve only has one baton at its disposal, it's even more important, is not economically speaking, that the government do some heavy lifting rather than adding fuel to the fire?

ANGUS TAYLOR:

That's exactly right. So you've got a situation where the Reserve Bank has its foot on the brake, it has to, that's the one lever it's got as a brake, which is interest rates. And government, meanwhile, has got its foot on the accelerator is making the situation worse. What have we learned from the last big bout of inflation in this country? I feel old in talking about this because I remember it so well back in the 70s and 80s. And many of your listeners will as well. The government had to play a crucial role in getting back to basics. What's that mean? It means get off the addiction to spending, make sure that the government isn't spending money it doesn't need to on failed referendum, on spin units that we've seen the Treasurer is setting up a $40 million spin unit in his office, get the basics right on energy, get the basics right on immigration, which we've talked about, make sure you're getting red tape out of the way for small businesses who are trying to grow. I mean, these are the really basic things we did through the 80s and 90s, across both sides of politics, I should say.

MICHAEL MCLAREN:

Yeah, there was bipartisanship on boosting productivity.

ANGUS TAYLOR:

Bipartisanship on getting back to basics. And that's what you have to do. This government doesn't seem to get it yet. As I say, I hope this budget is the one where they do get it, the test for them is, is this going to be a genuinely inflation fighting budget that gets to the source of the problem and doesn't just deal with symptoms.

MICHAEL MCLAREN:

I mean, you can have all the reviews into the Reserve Bank you like but if you make their job harder than need be, there's only so much they can do.

ANGUS TAYLOR:

They had to put up interest rates.

MICHAEL MCLAREN:

Of course they did. Well, they had no choice. Angus Taylor here, the Shadow Treasurer. Couple of minutes left here, Angus. Re income taxes, let's go back to that, we mentioned the world leading hike the last 12 months in Australia, our reliance on income tax, rather than consumption taxes like the GST, or the VAT in the UK or whatever. Again, we're almost a world leader in relying on income tax to prop up the budget. 24.9% of gross wages in this country were devoted to income tax last year, miles ahead of the OECD average of 15.4%. Now, you might be the Treasurer in a year and a half. Are you going to put on the table, a real fair dinkum examination of this and say, well look, you know, we'd be probably better served, we'd be more productive, people would keep more of their own wealth, if we reduced income tax but boosted consumption tax via an increase or a broadening of the GST?

ANGUS TAYLOR:

Well I'm not in favour of raising the GST in the middle of a cost of living crisis, because that raises the cost of everything. And so, it's not something right now that we're contemplating, or even giving any consideration to. I do think you've got to put downward pressure on income taxes. And I think the way to do that is to manage government spending, just like every household out there right now is having to really manage its spending. We're seeing that in the numbers. I see that on the ground. I see that when I talk to people around the electorate, I saw that talking to people on ANZAC Day yesterday, people talking about the sacrifices they're having to make right now. Well, government doesn't seem to be making any sacrifices. You know we've got almost an extra 20,000 public servants who have been employed since Labor came to power? Great for the Canberra economy, not much good for anyone else.

MICHAEL MCLAREN:

Yeah and half of them are at home half the week, it seems. But on that, but just in the last minute, just to go back to that figure., I mean, you can reduce the size of government, but I don't think that's going to do much to reduce the percentage of gross wages devoted to income tax. It's a very, it's a bit like land tax. It's a rather unproductive way to raise revenue. Consumption taxes globally have proved to be far more productive and in fact, fairer, but you're saying you don't want to really go down that path.

ANGUS TAYLOR:

You see, when I think about how to get a better tax system, I always start with why do we need to tax people? How much do we need to tax them? So how do we make that lower? I'd rather get income taxes lower by lowering income taxes. And that's what we did with the stage three tax cuts. And stages one and two, I should emphasise, we got stages one and two in place, and people are already benefiting from that. But we needed to get to stage three, of course we've already had that discussion. But the way to get income taxes down, the most important starting point is to make sure government is living within its means so there's more money to give back to people in lower taxes.

MICHAEL MCLAREN:

We're out of time we'll keep the conversation going. It's important stuff. This nation I think needs these sort of conversations and on air. Thank you again for your time. Enjoy the weekend.

ANGUS TAYLOR:

Good to be with you.

ENDS.