Topics: Increase in income tax being paid by Australians under Labor; Labor’s homegrown inflation; Labor’s wasteful spending; Labor’s economic mismanagement; Defence spending; record collapse in labour productivity under Labor

 

E&OE   

 

MICHAEL MCLAREN:

Shadow Treasurer, good afternoon.

 

ANGUS TAYLOR: 

G'day, Michael. Great to be with you.

 

MICHAEL MCLAREN:

Firstly, that situation though, the government will go out and say we're wonderful economic managers, and the average person who's paying through the nose will say, well, hang on, you've got $400 billion additional that you didn't think you were going to get thanks to us, largely because of bracket creep with tax, income tax. We've got to fundamentally do something about the tax system, because this is just going to continue.

 

ANGUS TAYLOR: 

Well that's absolutely right. Australians have seen a record reduction in their standard of living. Part of that has been a huge surge in prices, almost 20% for working families since Labor came to power. Part of that is the 12 interest rate increases since Labor came to power, and we're not getting back anywhere near where they were before. But part of that is also a huge increase in personal income tax driven particularly by inflation. 24% increase in personal income taxes being paid since Labor came to power, and the first and most important way to stop that is to beat inflation once and for all. Sustainably beat inflation because bracket creep, as you rightly point out, is an important contributor to this, and bracket creep increases with inflation. So we've got to fight and beat inflation. That's got to be the number one battle here. That has the added benefit of bringing down prices or reducing increases in prices at least, and bringing down interest rates. So that has to be the number one battle for the government. They've failed on that.

 

MICHAEL MCLAREN:

Okay, so you go to government, you're right, inflation has to be dealt with. What do you do? How do you deal with inflation?

 

ANGUS TAYLOR: 

That is the first and most important thing. So how do you do that? You do have to make sure you avoid government waste. We've opposed over $100 billion of government spending since they came to power. We've also said we'll re-establish the fiscal guardrails, the rules that make sure that the budget gets to structural balance, not windfalls, but structural balance over time, to take pressure off prices, to take pressure off interest rates, and to take pressure off household budgets, and that is the number one way to do it. We know that. That's how it was beaten last time. So that has to be the first port of call. The second is to encourage the private sector to get out there, invest and create jobs, strengthen the supply side of our economy, building houses, getting our energy supply moving, particularly dispatchable energy, gas and gas investments and other investments in the energy sector that is so desperately needed, getting our financial services sector in shape. All of that, taking away the red tape that we've seen added to the economy since Labor came to power, the construction industry, which is controlled now by a union with deep links to the criminal underworld, the CFMEU. This is the way you free up the economy, et investment going, get productivity moving, get inflation down and strengthen the standard of living of all Australians. That's the agenda.

 

MICHAEL MCLAREN:

Okay, my answer to the question would have been the first thing we will do, we will hold a constitutional convention, and we will iron out the duplication once and for all. We'll get the academics, we'll get the politicians, we'll get the former prime ministers, we'll get all the people that understand the Constitution. We'll sit them around old Parliament House, as we do for these sort of big events, and we'll say, right, we've drifted a long way since 1901 when our foundation document, the Constitution, was written at Federation. We've now got the Commonwealth raising something like eight in every $10 and yet the states have far more than 20% of the delivery still on their watch. There's a mismatch. The states still have hangovers from the colonial era, looking at issues that the federal government now also deal with. Federal Education Department, they don't employ one teacher, they don't look after one school. All of this, you look at this, Angus, there are billions and billions and billions of dollars to be found annually. Is there any scope we're going to see a convention of that scale on your watch to iron out the waste?

 

ANGUS TAYLOR: 

Well, look, your point is a very good one, which is that there's no tax reform without spending reform. You've got to manage spending if you're going to manage tax and that is absolutely right. But I think you can move faster than that. We do have to, we do have to make sure that government is the right size and this government has added 36,000 Canberra-based public servants since they've come to power. We've opposed over $100 billion of Labor spending, which we think is wasteful, not essential services, but wasteful spending that is not necessary at a time like this.

 

MICHAEL MCLAREN:

Okay, just on the 36,000, on the 36,000 … what they've done is they've largely employed public servants on the government's books. The Coalition tend to prefer contractors but the size of the human capital, if I can put it that way, that is servicing the public sector, whether they're contractors or public servants, doesn't seem to change very much, irrespective of who wins. They just go into different columns. So let's say you punt 20 of the 36,000 is there any guarantee we're not going to see 20,000 consultants pop up the next week over here?

 

ANGUS TAYLOR: 

Well, again, you make a good point. Let's look at the overall spending of government. I mean, we're seeing government spending at a record level as a percent of GDP at the moment. Now, we've seen huge increases in spending under Labor and so they haven't been taking away the spending you talked about there. It's all just been adding to it, and Michael, this is why we've taken a strong stance as we have over the last two and a half years. I mean, we've opposed Labor's attempt to build more houses that haven't delivered another house. We've said now is the wrong time to be trying to solve the manufacturing challenges we've got in this country with subsidies. We need to solve it by getting the cost of energy down, by making it efficient to construct new facilities, by making sure you can get approvals through. Get the basics right. Get the basics right. Don't, add to government to try to solve these problems. But that's been Labor’s approach. So you're absolutely right. The first step in making sure that people only have to pay the tax they should pay, and they don't have to see increases in taxes, as they've seen under Labor, is to make sure that you're managing your pennies very, very carefully, as every small business and household has to do in this country. That that's why we've taken the strong steps that we have, and that is indicative of exactly what we'll do in government.

 

MICHAEL MCLAREN:

Okay, Defence, I was watching an interesting piece by Sir Niall Ferguson. He was speaking at the conservative conference in London the other week. You might have been there, I'm not sure, but he referenced the Ferguson rule. It's not his. Adam Ferguson – the Scottish Enlightenment thinker, and the rule is basically this: great nations that spend more on debt repayments than Defence won't stay great for long, and yet the United States apparently transgressed that rule last year for the first time since 1934. So Trump's now at the White House. He's seen this and said, right, we can't spend more than we're spending. We're going broke, but the Europeans can, the Australians should. So if you come into government, you'll be told you've got to spend more on Defence. 2% of GDP doesn't cut it. It's got to be three, three and a half minimum. You're going to have to find the money. How are you going to do it?

 

ANGUS TAYLOR: 

Well, the absolute dollars you spend on Defence is what counts at the end of the day and we learned, we learned a really important lesson through the Cold War, Michael. It's a crucial lesson, which is that a strong economy can pay for a strong Defence Force. We saw Ronald Reagan take on the Soviets at the time and beat them through the strength of the US economy. It's the strength of your economy that allows you to spend more on Defence in absolute dollar terms as well as in percentage terms, but it's the absolute dollars that count the most and let me say that that is the key. This is one of the reasons why we need to strengthen our economy. It allows us to pay for the things that we do need, like stronger Defence for this country and that lesson, that lesson from the Cold War, is a hugely important one. If you've got a strong economy, you can beat your adversaries who don't have a strong economy.

 

MICHAEL MCLAREN:

That’s quite right. That's historically true.

 

ANGUS TAYLOR: 

And Niall Ferguson would be the first person to agree with that. I know because I've heard him talk about it.

 

MICHAEL MCLAREN:

But he would also say, okay, but you can't just grow your way to Defence strength. You've also got to reprioritise some of your budget into the here and the now. I mean, time isn't on our side, you know, because you've been getting the briefings, but it's potentially 2027 China moves into Taiwan. That’s two years. You know, we don't have time to see all of the economic minutiae filter through. We've got to spend and spend now. So, you know, when you've got the NDIS growing at 8% and that's considered mission accomplished by the government, and you've got the health budget going through the roof, education budget’s going up, all of these other things going up. They want universal childcare, money, money, money. At some point, some of this has to be cut. The money's got to go somewhere else.

 

ANGUS TAYLOR: 

That’s exactly why we have opposed over $100 billion of bad Labor spending, which isn’t an essential services, which is money that can be used for other purposes, including reducing the deficit and paying back debt, but also Defence and that's why we’ve committed to a fourth squadron for the F-35s. We've found from Opposition, the money to be able to spend on that, and we'll continue to do that. But the important … and I think you're underestimating the power of the strength of a strong economy in supporting Defence. I think this is hugely important. It accumulates very quickly and whilst I don't disagree with the fact that over time we've got to find extra money as a per cent of GDP to spend on Defense, we also have to have a strong economy, because if you don't have that, you can never get to the sorts of dollars you need to be able to have a strong Defence Force.

 

MICHAEL MCLAREN:

When you say over time on the GDP question, we don't … time’s not on our side. What sort of time are we looking at?

 

ANGUS TAYLOR: 

Well, you know, the cumulative power of a stronger economy is it appears very rapid, Michael, but I accept the fact, as we already have through our commitment to the F-35s to the full squadron of the F-35s, that we do need to find money to spend on Defence, but right now, we've got a government that is spending at a level we have never seen before. Governments across this country spending at levels we've never seen before, and the truth is that is crowding out Defence. There’s no question about that. I mean, this a government that keeps saying they're going to spend more on Defence and then do the exact opposite. So your point is an important one. I accept where you're coming from, and that's why we have to have a strong economy, and that's why we have to make sure we're not spending money where we don't need to.

 

MICHAEL MCLAREN:

Just finally, we'll talk again, obviously, before the vote, productivity, this seems to be one of the real boondoggles, and not just here, but Australia seems to be suffering from a lack of productivity. How do you get that growing?

 

ANGUS TAYLOR: 

Well, you're absolutely right. I mean, the only thing growing our economy right now, over the recent years has been through growing the number of people in the economy, which is primarily immigration and that is not the way to grow the economy. Immigration is an important part of our Australian economy and history but it's not, it's not where your growth should come from. You want GDP per person growth, and we know where that comes from. It comes from productivity, and that means you do have to make sure that government isn't growing faster than the rest of the economy. That's why we've made a commitment to ensure the economy grows faster than our government spending. You do have to make sure that you're getting out of the way of small business and businesses more generally, to invest, to create jobs, to create opportunities, and to drive an economy that delivers more with less. That's what productivity is. It means you get paid more for doing less hours. Sounds pretty good to me, and that's what we stand for with strong economic management, and it's what we'll continue to announce policies for in the coming weeks and months. We're looking forward to the start gun going, I think we're all getting pretty impatient at this point, Michael.

 

MICHAEL MCLAREN:

We’re not far away, I don't think, yes.

 

ANGUS TAYLOR: 

Yeah, this will be an important part of the debate because we need to restore the standard of living that has been absolutely smashed under this Labor Government.

 

MICHAEL MCLAREN:

All right, good to talk. Thank you for your time as always, and we'll speak again before the vote whenever it happens to be. Thanks, Angus.

 

ANGUS TAYLOR: 

Thanks, Michael.

 

MICHAEL MCLAREN:

Angus Taylor, the Shadow Treasurer.

 

ENDS.