SUBJECTS: Release of 'Stronger, Fairer, Simpler - A tax plan for our future'
Today the Australian Government will take concrete steps to reform the tax system to deliver Australia a strong and secure economic future. The Government acted decisively during the global financial crisis to keep the Australian economy out of recession.
Today, the Government will take action on tax reform to: one, keep Government finances strong. Two, to protect the future of the Australian economy. And three, make sure working families and small businesses get their fair share.
Australia has come out of the global recession as one of the world's strongest economies. We have the fastest growth, the lowest debt, the lowest deficit and the second lowest unemployment of all the major advanced economies and we've kept our triple-A credit rating.
Just as the Government has worked hard to ensure our economy was the envy of the world during the downturn. We must now work hard to build a strong economy for the future. This long-term plan, released today, builds a stronger economy by using super profits earned from the resources owned by all Australians to provide better super for working families, simpler, lower tax for all companies especially small business [and] the future infrastructure needs of our nation.
This plan means that working families of the future will have to worry less about their retirement. The plan increases the superannuation guarantee from 9 per cent to 12 per cent, supports older workers to top up their super, and boosts the super of lower income workers.
These reforms will add $108,000 to the retirement super of an average worker aged 30 now and increase Australia's pool of superannuation savings by $85 billion over the decade ahead. These are major reforms.
Second, the plan also means that Australian businesses will become more competitive. 2.4 million small businesses will face lower and simpler tax. All Australian companies will benefit from a cut to the company rate boosting investment, jobs and productivity.
Third, the plan will also help build the rail, roads and ports we need for the future, in particular, in our resource states. This package dedicates over $5.6 billion over the decade ahead to fund our critical infrastructure. For the first time nation building infrastructure will become a permanent structural feature of State and Commonwealth Budgets.
We also want to expand and to broaden the mining industry itself by providing big tax incentives to exploration companies. The mining industry is a fantastic industry. It involves great enterprise and hard work from tens of thousands of Australians. That is why changing the tax structure to help smaller emerging miners and exploration companies will help expand the industry. Independent modelling advises that this package will increase mining activity by 5.5 per cent.
By building a stronger economy, creating more job opportunities and higher wages, this reform will make our economy more globally competitive, it will boost long term GDP by around 0.7 per cent, and lift wages by 1.1 per cent putting $450 per year into the pockets of average workers right across the nation.
This package won't be popular with everyone. Some will say it will cost projects and jobs. The fear campaign will be large and the fear campaign will be well funded and London-to-a-brick our political opponents will use it for a scare campaign. But I'd ask the proponents of the fear campaign why it is that mining profits have risen $80 billion in the last decade but revenue from royalties for all Australians have only increased by $9 billion. I'd also ask them to answer this question. Why should we put up with a tax system for the next decade that has cost us $35 billion in lost revenue over the last decade, money that could have been funding the rails, roads, ports and other infrastructure that our nation needs.
This is real reform that will help convert Australia's strong economic position today into enduring prosperity for the future.
I'd like to thank the secretary of the Treasury, Ken Henry, and his team for all their work. In particular I'd like thank the Treasurer, Wayne Swan, for all his work. This has been an extraordinary undertaking by his team.
Also, Chris Bowen, Nick Sherry and Martin Ferguson and other Cabinet colleagues who have worked together on this package.
I'd now like to hand over the Treasurer to take you through the package in more detail.
Thank you very much Prime Minister. It's good to see so many people flocking to Canberra on a Sunday. I know that it's the joy of tax reform that brings you all here.
The package that we have today is an ambitious package for long-term reform. For better super, less tax for business – especially small business – and, of course, as the Prime Minister was saying before, 21st Century infrastructure. It will ensure that all Australians get a fairer share and the benefits of the boom are directed where they can make the best impact on jobs, growth and savings.
What I want to do now is just take a few minutes to go through both the historical and the macro context before I go to the specifics of the reforms. There's probably been nothing I've thought about more, first of all as a Shadow Treasurer and then as a Treasurer over five years, than how do we manage the resources boom better than our predecessors managed the last boom. Because if we don't, we will simply sell Australia short. And that objective has informed the development of this package.
It goes to the core of what we're doing in infrastructure. It goes to the core of what we are doing when it comes to company taxation and small business taxation. And it goes to the core of the objective of increasing national savings. Not just for individuals, as important as that is, to recognise dignity, to recognise the need for adequate living standards in the retirement. But also to support national savings. That is the objective that has driven us through the late nights in the preparation of this package over a period of five months.
I want to just run through a few graphs and a few facts. Now, what we've seen in recent times – as the Prime Minister was saying before – we've seen that our mining profits have increased, but the taxpayer's share of revenue from those mining profits has decreased. You can see the orange bars which, of course, are the profits. You can see the purple bars which, of course, are the state royalties.
If our share of profits had remained at the average of the first half of this decade we would have collected $35 billion more between 1999-2000 and 2008-09. Now these are billions of dollars that the Australian people have missed out on; billions of dollars that could have been invested in our future prosperity. Let's give that some context. That $35 billion could have delivered something like 14 major hospital redevelopments. Now Australia simply can't afford to make the same mistake in commodity boom mark two that was made during commodity boom mark one.
Now, there are also some macro-economic reasons why we have to get this right because we are at a crucial turning point in our economic history. Having seen off the worst of the global recession, seen off the worst that it could throw at us, Australia now faces the future from a position of economic strength. That's a great thing for Australia, but it brings a series of challenges which are linked to the return to full capacity, and of course, the re-emergence of a two‑speed economy
The global recession has accelerated the economic shift towards the big developing countries in our neighbourhood, and that has obvious implications for our terms of trade which you can see in the next chart. Export prices will reach a 60 year high this year. Now, we don't expect them to stay at those levels forever, but we do know our terms of trade will remain at high levels relative to what we have seen in the past.
Now, the return of boom conditions in the mining sector makes things more challenging for other industries such as manufacturing, construction and tourism. The other sectors find it harder to find workers and capital and, of course the stronger dollar makes them less competitive in their own global markets.
Now, in a two-speed economy we can still build our mining sector while we simultaneously do everything we can to grow other areas of our economy. It is absolutely critical that we grow all sectors of the economy together. We don't want to grow apart, we actually want to grow together and that is a central objective. And, of course that's why we're going to cut the company tax rate to 29 per cent in 2013- 2014, and to 28 percent from 2014- 2015. In terms of competitiveness, this takes us from 22nd amongst comparable OECD countries to 17th. . And you can see that in the chart
Reducing company tax will create new jobs and grow the economy right around the country – to the ultimate benefit of all Australians. I recognise the independent review recommended the company rate of 25 per cent. This isn't affordable right now, but depending on future revenues from the super profits tax, we have an open mind on whether 28 [per cent] is a final landing point.
And of course, small businesses will get a head start in the cut to the 28 per cent rate. This will give small business a direct financial benefit from the resource boom and an incentive to retain profits to grow their companies. But also, small business will also benefit from an instant write off of assets worth up to $5,000 and simpler depreciation arrangements for other assets.
And as I move around Australia talking to small business, this is a big reform for small business. This gets rid of red tape. This does simplify the tax system for millions of small businesses in this country and that reform should not be underestimated. The changes will let them write off many assets more quickly, increasing their cash flows at a time when they are investing to grow. This is a very big deal for small business, and as I said, it will also cut red tape.
Which brings me to national savings which the Prime Minister talked about before. And where I think we have an absolutely historic reform here. Not only in terms of the accumulation of national savings, but recognising the dignity and respect that people in retirement deserve from our nation.
And, of course there's nothing that is more on the mind of many people who may be my age or above than what is actually happening in the retirement income system. And we know from the Intergenerational Report what an important challenge this is for Australia, which is why we have chosen to put together this reform.
Now, you'll all remember that last year we made a real difference to the age pension, a very big difference to the base rate of pension, because so many people were living in great difficulty and in poverty. This year we build on that. We build on that by building up the private savings of Australians who are saving for the future. So it's a source of great pride to us today that we do build on the great Labor legacy that began two decades ago – compulsory superannuation.
We are boosting super savings so we can ensure that whenever the commodity boom ends, we've got something more to show for it than last time. And that is terribly important. And it's also terribly important in terms of macroeconomic management. Our plan includes concessions on additional superannuation guarantee contributions, a new government contribution for low income earners, and higher caps for the over 50s.
In increasing the SG to 12 per cent, we're providing a three year lead time before the gradual changes start, so businesses get a decent run-up. We're also making super fairer, namely a refund of up to $500 of contributions tax from mid 2012 for workers with incomes up to $37,000.
Our changes mean something like an extra $108,000 in the retirement super balances of today's average 30 year old worker. And they'll increase Australia's pool of superannuation savings by $85 billion over 10 years which, as I said before, further boosts investment in the economy.
Now, that brings me to infrastructure, because we will make infrastructure spending a permanent structural feature of State and Commonwealth Budgets. Every single Budget, for every single year will now contain infrastructure investment funded by the Resource Super Profits Tax. I'm proud to announce some of the proceeds will be invested in a new $5.6 billion infrastructure fund focussed particularly on the resource states. That's a very important step forward given the nature of the challenges that are coming down the road.
And, of course that brings me to the Resources Super Profits Tax. The reforms I've just outlined to super, business tax, and infrastructure will be completely funded by the Resource Super Profits Tax. This is entirely consistent with our belief that a fair share of the proceeds of the boom should be dedicated to a stronger and broader economy.
Our resources belong to all Australians, and Australians do deserve a fair share. That is why we will now tax mining profits in a way that supports the growth of the industry and the economy and ensures the community gets a fair return.
From 1 July 2012 we will apply a 40 per cent tax to profits from resource projects after allowing for extraction costs and recouping capital investment. Companies will not pay the tax until after they provide shareholders with a normal return on capital investments, and then only on any additional profit. The generous tax treatment of capital investment will improve the viability of less immediately profitable mining ventures, boosting investment and boosting jobs.
We've listened to the States, letting them keep their royalties, but refunding them to mining companies as credits, removing the distortions. And we've listened to the resources companies and will put in place generous transitional arrangements that we will detail in time.
So there are big gains to come from these reforms that we have announced today. Taken together, the reforms we're announcing today will provide a long-run boost to GDP of around 0.7 per cent, and that's in the chart there. On their own, the changes to mining taxation are expected to increase GDP in the order of 0.3 per cent in the long run. And the cut in the company tax rate is expected to increase GDP by 0.4 per cent in the long-run. Real after-tax wages are estimated to rise by 1.1 per cent in the long-run, which means $450 a year in the pocket of an average worker.
The package we are presenting today is fully funded both over the forward estimates and the medium-term projections. It fully meets our fiscal strategy, including the commitment to keep the tax-to-GDP ratio on average below what we inherited in 2007-08.
These reforms will strengthen the economy and generate a growth dividend that will be returned back to the Budget to bolster our fiscal position.
And I want to be very clear about this one point. The package I have outlined just now depends entirely on the successful implementation of the Resource Super Profits Tax. No super profits tax – no super investments, infrastructure or tax cuts.
Now of course, as the Prime Minister indicated before, there will be hysterical opposition from the Liberals but they should remember this. It isn't possible to support the investments in this package today without supporting the Super Profits Tax that pays for it. It's not possible to do one and not the other.
So to make sure these measures are successfully put in place, we will consult with industry on the implementation of a number of the reforms announced today. These are very significant steps in a decade long process of reform. On their own they do represent a very big agenda for the next few years. We will make more announcements on tax simplification and savings in the coming months, and you'll see from the release we are also ruling some things out.
Can I just say this package today is built on the hard work of the tax review team, but also on the Government's own values and priorities.
I want to take this opportunity to thank Ken Henry and all of the team that have worked on the independent tax review. I want to thank everybody in the community who contributed all of their views to this very extensive process. I also want to thank my Cabinet colleagues, particularly Chris, Nick and Martin.
As the Prime Minister said before, we are under no illusions about how difficult it will be to win support for this package. Support will never be unanimous, and we understand there will be many who will oppose parts of this reform.
But in all of my years in politics the one thing that I've learnt is this: that it's the big, hard reforms that are the one that are worthwhile. They're always the toughest to implement, but they're always the most worthwhile for the long-term national interest. In my view the question isn't whether Australia can afford to embark on this reform course – we can't afford not to. For a country that stared down a global recession it should not be beyond us to face up to all of these challenges with confidence.
Now is the time to build foundations for a stable and long lasting recovery. Now is the time to start managing the next boom better than the last. Thank you.
Mr Swan, can I ask a couple of questions. What is to stop the States syphoning off some of this tax by increasing their own royalties being reimbursed by you? And, the windfall you make from the tax after you've paid for all the things you've promised (inaudible)
Well, secondly as we've made very clear in the press release there will be further announcements coming on simplification, and also in terms of incentives for savings. In terms of the States, we will reach agreement with the States. I think we've indicated in the documentation that some of the States are currently planning increases in their royalties, and that would be incorporated into our arrangements with the States. As we move on, how we handle that challenge will be a matter of negotiation between us and the States, and I'm confident we will resolve that.
As for the infrastructure fund as being a potential stick in this circumstance, but you could use your negotiating (inaudible) infrastructure spending to ensure we don't get the sorts of distortions from royalty payments that (inaudible). On superannuation, the Henry Review said that (inaudible).
Well, let me answer the second one first. They are two reasonably big questions. We haven't followed the full recommendations of the Independent Tax Review when it comes to investing in the adequacy, or sorting out the adequacy, of the superannuation system. We've chosen to build everybody up, rather than to re-arrange the tax concessions, because we think certainty is absolutely paramount when it comes to the retirement income system, and we want people to have confidence that they can save in the way in which they have in the past. So what we've decided to do is instead of going down the recommended way in the report, which is essentially rearranging the tax concessions from the top half principally to the bottom half, we decided to build up the bottom half. We've decided to take a number of other initiatives as well.
Sorry, I've got to finish the first question that Laura asked because it's also an important one. The Infrastructure Fund is terribly important. It goes back to learning the lesson that we should've learned out of the last boom, which is making sure that investment to build the capacity in the economy while the boom is developing, not after the event. So the sort of monies that will flow here are a critical part of our macroeconomic response, working with the States in the industry to make sure we can do something about the capacity constraints that have bedevilled this country and which, of course, in past times have put upward pressure on inflation.
So yes, that is an important part of our negotiations, but I don't come to these negotiations with a big stick. I come to these negotiations with the national interest in mind. And as we go through and work out these issues with State Governments, whether it's the future of their royalty regime or whether it's infrastructure, or indeed whether it is health, we come to the table with the national interest in mind, dealing with the big challenges of the ageing of the population, of a mining boom. These are the things that are very much on our mind and that's the spirit we go to the table with.
Mr Swan, you put the argument saying that all these changes are hostage to the passing of the (inaudible)…
No, can I just interrupt you there? They are hostage to fiscal responsibility. That's what they're hostage to because…
That's not what I mean…
It's very important, because this is only do-able if it can be funded. What we want to do is to use what we think is a perfectly reasonable proposition, which is effectively updating and modernising the way in which we tax the value of our resources – the people's resources. How we use that to make our economy stronger in the long-run – that's what it's about.
Alright, if I can continue my question. Do you concede, however, that it's somewhat ironic that there's so many of these firms that do rely on this super profits tax, and yet your super profits tax could in fact slow that sector which will be paying it?
Well, can I make a couple of points about that. We believe the arrangements we are putting forward will encourage growth, not discourage growth. Now, there'll be a lot of flack flying around. There'll be a lot of colourful language about all of this. But the fact is that the royalty regime is one that discourages growth, discourages investment. So it's not a good tax. And if you go through all the analysis in the report, you'll see why it's not a good tax. They use the economic terms of efficiency and so on – it just discourages investment. We are putting in place a tax that encourages investment. So that's the most important point.
There's one other thing I wanted to add to that. Just in case there may be people out there who are saying that somehow the idea of a resource rental tax, or a super profits tax is unique – we've had one for 20 years. We've got the PRRT under which some of the biggest projects in Australia are operating right now. So I just wanted to make the point that a resource profits tax is not new. A 40 per cent resource profits tax is not new – we already have one. The biggest investment in Australia's history has just been approved to operate under a resource rent tax. What has been recommended to us is a modernised version of the existing 40 per cent resource rent tax.
(Inaudible) people deserve a fairer crack at the value of the resources as a moral argument? And how well do you think that will go over during the election campaign (inaudible)?
Well, I think it's a very important economic argument, and I think I've just demonstrated that the royalty regime didn't capture the amount of value for the owners of the resource that it should have captured in recent years. Of course all economics at the end of the day is based on moral judgements. We do take value judgements about what sort of society we want to live in, and how we maximise the opportunity for growth in that society is the economic question, consistent with our values.
So we will move forward, putting forward what I think is a very important economic argument about efficiency, about investment with this proposal, which we believe focuses on increasing growth not just in the mining sector, but the economy as a whole on the one hand, and on the other saying: well how as a country do we want to deal with some of these issues? How do we want to deal with the capacity constraints that could potentially put upward pressure on inflation, or have an infrastructure fund? We understand here that there are other areas of the economy that need a bit of a boost for the reasons that I outlined earlier. So we think that the pathway suggested here by the independent inquiry is one way to do that. It's fundamentally for me about economics, but there are judgements we make which go to the core of our values which underpin it.
I can see the logic in what you are arguing. Is there not a danger, however, that this will leverage the tax base to the mining boom? There's boom-bust cycles in this industry. If we actually had a bust in mining then we could have structural…
Well, our estimates of revenue from this tax is not predicated on the fact that – if we go back to that chart – showing 60-year highs forever. We're not operating on that basis. We understand that this as a revenue source has the potential over time to be somewhat volatile.
But let me give you an example of what we're dealing with here. We're saying roughly $10, $12 billion will be raised from this tax over our forward estimates. What's revenue at the moment? Roughly $300 billion. So, what we've got here is about 3 per cent of that. So that is one of the things that moves around. I mean, one of the challenges we've got – because we're also preparing a Budget at the moment – is that because of the consequence of the global recession, what we've not seen in our revenues, particularly our business revenues as a consequence of that, is as fast a return of those revenues as you'd normally expect because of the very significant size of the losses that are a consequence of the global recession. So I just say that to demonstrate that revenue from different classes, for different reasons, always moves around.
Mr Swan, you've picked up about ten of the Henry Review's 140-odd recommendations. Why should that not be seen as a lack of political courage by the Government?
Well, could I just say that I completely and utterly repudiate that assertion which is not matched by the facts whatsoever – just to be clear about it.
But Mr Swan…
No, no, I do want to go through and answer that question because if you think about reforms of our economy and the economic system in our lifetime, this is more significant than any I can think of.
Just take what, as the Prime Minister said before, we were doing in retirement income. And don't just think about it in terms of adequacy for people who are seeking a decent standard of living in their retirement. Think about it in terms of national savings, and what the national savings mean in terms of the terms of trade. This is a very important measure in terms of macroeconomic management as well. So I won't go on too much about super because I think the case is established there almost straight away – 20 years since we've seen any action of this type in this area.
But then let's just go on to what we're doing in taxation. We're facing up to the reality of the 21st century. We are facing up to the reality of the 21st century with what we're doing in the area of company tax. We are recognising that small business, particularly in this economy, does need a bit of a helping hand, and they're going to get it. So, I think in terms of that and then in terms of the infrastructure, it is much more significant.
But let me go to the fundamental point you were making because you've done a bit of a tally here and there and reckon that we haven't done too much. We've done an enormous amount here. We have ruled out a limited number – as you'll see at the end of the press release – a limited number of things that exist, or that are recommended by the Henry inquiry, some of which we would never do in a thousand years. That's not a reflection on the inquiry – they are just things that don't match our values or our economics. And that just shows it was an independent report.
What we have outlined to you today is the things that we're going to progress through the next term. And by any measure, when you take the size of what we are doing, this is a pretty full agenda for a government during a term of Parliament. And on top of that, we have said we will have more to do in simplification. So I think it's a pretty big agenda, and I don't think that just by picking out a few numbers here and there you can make that case whatsoever.
One more point. The independent review chaired by Dr Henry also makes one other point – that many of the things it's talking about are not desirable to be done now and couldn't be done even if you wanted to do them, because when this review was commissioned, it was commissioned to have a long-term focus.
So what we've got here – it is genuinely a 10-year agenda which takes into account changes in technology, changes in the global economy. And as we move forward, I'm sure there'll be many people who'll see many things in some of these recommendations which may not be timely now, they may not be timely in the future, but who knows.
You've spent the last ten years campaigning on family payments and recognising the fact that there's obviously a large section of this report on (inaudible). Are you still committed to that kind of reporting, and are we likely to see that kind of action from the Government?
There's a couple of points about that. You're dead right – I've always been passionate about this area and I remain very passionate about it. But there are one or two recommendations in there that the Government can't wear and you'll see we've ruled them out. For example, my values, the Government's values, will not see a work test put on families when their children turn four. This Government will never ever accept that sort of recommendation, and we've ruled it out.
Now, when it comes to the future of the family payment system and the income taxation system, we've done a lot to reform that inner section in the last three years, and I know the report goes further and I'll come to that in a minute. But, for example, we've now got an effective tax free threshold of about $16,000 from 1 July. The rate structures that we have, over the last three years, have effectively done a lot of that effective marginal tax rates and incentive to participate. The report makes the point that more ought to be done in that area.
It also makes the point that there ought to be a simplification of personal income tax scales, and puts out the ideal simplification as being a two-rate system. My point is this: you can't continue to reform the family payment system in the absence of knowing where your tax scales are going in the income taxation system. And if you are moving towards a two-rate scale, the sort of changes you might want to take in the family payment system are (inaudible). So further progress in that area awaits the fiscal capacity to reform both of those at once.
Are you moving towards a two-rate scale?
No, the two-rate scale is not on our agenda for the next term. I'm just making the point that these things are linked. We've done a lot in the family payment system, there will be more to be done, but if you're looking at the report as a whole, you've got to take both those areas as a job lot.
Treasurer, is the Government keeping an open mind on means-testing the Child Care Rebate as a component of this (inaudible), and on the changes that will impact on the single income families such as (inaudible)?
No, we're not means-testing the Child Care Rebate.
Will you attempt to legislate this before the election?
Well, some of this – maybe – but let me just take the typical process of tax legislation. It frequently takes a period of consultation, preparation of draft, consultation, further response, further consultation. So I can't give you the timetable, but we've got a fair bit of time to sort this one out, and whether it happens before or after an election is not something I would speculate about.
Mr Swan, if further action on disincentives to work for the welfare sector and low-income households is not going to happen until, I guess, (inaudible) or post-2013, where are the workers going to come from for the expansion in not just the mining industry but the (inaudible)?
Sorry, I didn't say that. The first thing I said is we're always open to looking at incentives, but we've done a lot and reformed a lot. And we've got a big bang out of the reforms that we've done already. And the LITO in this Budget is going up again and the effective tax free threshold is $16,000. There's not much more within the architecture of the current system you can do than what is actually being done right now. So I wouldn't have it be said that we are blind to that challenge – we are absolutely not and work is continuing there. I'm just saying that we're putting forward now the reforms that we've adopted in this package. They will go through for the next term, and if we have to do a complete and fundamental realignment of the system, it won't happen until the term after that, if we're in government.
Treasurer, does this tax – the mining tax and the cigarette tax through the week – break your commitment not to raise taxes as a proportion of GDP?
Above the level we inherited? No, it doesn't.
But how do you counter the argument that you've just simply overspent in the last two years and this is a way of clawing back some of that money?
Well, because we haven't. We've responsibly stimulated the economy in recent times, giving us the outcome of being the fastest-growing advanced economy in the developed world. When I was at the G20 last week people would wander up to me and say: why is it that Australia is the fastest-growing developed economy with such low levels of debt? And they do recognise that Australia acted decisively at a critical stage and put in place one of the most effective stimuluses in the developed world, that everybody in this community worked together – employers, employees and the Government – to really produce a very, very special outcome for Australia.
Now, of course, we've got our medium-term fiscal strategy and our fiscal rules. We are meeting all of our fiscal rules. I look forward to seeing you here Tuesday week to go through all of the fiscal rules and how we are meeting them. We do take the savings task in our Budget very seriously. We've had something like $56 billion worth of savings over two Budgets. We have really been clamping down on new spending – we've got the cap of 2 per cent real in operation. This is in dramatic contrast to our predecessors, who particularly in election year spent like drunken sailors.
Why should Australians believe you on this reform, Prime Minister, when you were so quick to backpedal on the ETS?
Well, I'm actually doing all the questions thanks very much, and that's the way we're running this press conference.
Why should they believe you though after the ETS backflip?
Well sure, okay, we'll come back at the end – how about that.
Why not announce today your measures on simplifying tax? The Prime Minister's publicly talked about the need (inaudible) tax return system. The Henry review's loaded up. Why not announce it today? And are you attracted to the formula, the principles that they have laid out in the review?
We are strongly in favour of simplifying the tax system, but – I know it may seem strange to you – but actually simplifying it takes a lot of work to do and a lot of preparation, so…
You had the report for six months. Surely (inaudible)…
Well, Steve, you used to work for the Financial Review, and basically when you do the business round there you understand that anything in tax isn't something you announce one day and necessarily get done six months later. The reforms that we have outlined today are long-term reforms. They will take some time to do because they are complex, but we are giving plenty of time to do them so we can pay attention to all of the detail and complexity and get them right. You don't, with all the will in the world, announce or receive a report three months before and then suddenly, hey presto, pull a simplified tax system out.
Can you confidently predict that the sorts of numbers the Henry review talks about of people who would essentially be exempted from having to fill out tax returns…
Can I assure you that…
…can you confirm that's the aspiration you have?
Can I assure you that in that area we do share the objective of the report of the independent committee, and we will work very hard in that area.
Mr Swan, what are you assuming about future commodity prices, what are you assuming about future growth (inaudible)? And secondly, you talk about this preventing the emergence of a two-speed economy, but how does this package assist the industries (inaudible) that are affected by the (inaudible) high dollar – manufacturing, services, exporters? They're getting a cut in the corporate tax rate, but on the other hand they've got to increase their payments to superannuation (inaudible).
Well, essentially the SG doesn't kick in for some time. And that is then subject to all the processes that are involved, including enterprise bargaining negotiations, and it may or may not be a factor in regard to those.
But secondly, the whole thrust of the report, Peter, is that the lower corporate rate drives growth, drives investment. That is precisely why we are moving in this way. That is the most fundamental thing you can do for business. That's precisely why we are moving in this area. It's probably not the most politically popular, but it is the right thing to do. And the right thing to do given our budgetary environment is to start this with small business earlier, as we've indicated, which is why we've moved to the 28 cent rate a year earlier in terms of small business, but also particularly why we embraced the instant write-off of $5,000 – for precisely all of the points that you made.
But on the first set of points that you made about the future of the global economy and the future of our region, this region will be growing faster than other regions in the world for some time. It will contribute a greater percentage of global growth into the future than it has in the past. And in terms of global recovery, when you've got the American consumer who will not be as active as they've been in the past, you've got the situation in Europe – the world and the global economy is actually relying on this region to grow a bit faster to make up for that gap in terms of global demand. That means for us certainly a higher level of the terms of trade than we've experienced in the past, but it doesn't mean to say, as I said before, that it's going to sit up there at that 60-year [levels]. Those sorts of assumptions are factored into our medium-term projections.
Treasurer, will you give the opportunity to Dr Henry, as the independent chairman of the review, to address us now about his response to your response?
No. Good try Dennis.
There's one more and who's it going to go to – Mal, is it?
Treasurer, there's a significant tone in Dr Henry's report of concern about social problems and one of them being gambling. Now, you've had Dr Henry's report since Christmas. You've had the Productivity Commission's report on gambling since February. Are you squibbing any action on problem gambling?
Not at all. We will progress these matters in a methodical way. The Government has had a very, very full agenda over the last two and a half years. We're frequently accused of doing too much. We've got a lot on our agenda and we are going to work our way through it all in a methodical way. Now, that's enough from me. The Prime Minister wants to have the final word as he should.
Thanks very much, Treasurer, and again I thank the Treasurer and his team for all the work that they have put into this important exercise in reform.
Addressing a question which was raised before and my concluding remarks, let me just say this: the Government was faced with some very, very big decisions over the last year or two, one of which was the decisions necessary to keep this economy out of recession. We succeeded. Very few economies around the world in the developed world managed to do that.
The second thing was to bring about health and hospitals reform. This was a very big reform. It involved considerable work, preparation, negotiations, and concluded in this place a week or so ago.
The third, of course, in terms of the Government's reform agenda is what the Treasurer's been addressing today, which is what happens with tax reform. Tax reform is important. It's important in terms of global economic competitiveness, but it's important also to make sure that Australians get a fair share of the resources which they themselves own. A fair share for the resources which they, the Australian people, own. Because those resources can help build the hospitals of the future, the schools of the future, and the other things that our country needs.
A question was asked about emissions trading. When you have a Liberal Party which fundamentally torpedoes longstanding bipartisan consensus on the support for legislation for an emissions trading scheme, obviously it means it doesn't get through. The Government's commitment to action on climate change remains. The Government's commitment to its greenhouse gas reduction targets remains. The Government's commitment to an emissions trading scheme as the most efficient and cheapest way of realising those targets remains the same. Our path to getting there has now changed. Thanks very much folks.