Chris Bowen has stopped short of guaranteeing Labor would return the budget to surplus over the forward estimates and has declined to say whether the ALP would repeal the company tax cuts the Turnbull government has already legislated.
In his traditional budget reply speech at the National Press Club, the shadow treasurer stepped round both questions, saying only that it was a “suitable objective” to return to balance over the cycle and Labor was yet to determine a settled position on the company tax cuts.
On the company tax cut, Bowen said Labor’s concerns were “well known”.
Labor’s position has been to support a tax cut from 30% to 27.5% for small businesses with a turnover up to $2m.
The Turnbull government has recently legislated, with the support of the Senate crossbench, a tax cut for companies with turnovers up to $50m. A tax cut for larger companies is also built into the budget’s medium-term projections.
Bowen was asked at the press club whether Labor would repeal what had already been legislated and his non-answer gives the opposition room to move.
“We don’t support what [the government are] doing but, in terms of what has been legislated, it is right that we reassess what the Senate has done, have costings commissioned and reconsidered, and that shadow cabinet take its time for a proper consideration, which we will announce,” he said.
Labor will be under significant pressure from business to preserve the tax cut, which has already been legislated, but Bowen will also be under considerable internal pressure to junk the company tax cut to fund other priorities.
Pressed over several questions whether Labor would guarantee a return to surplus over the four year forward estimates, Bowen said the opposition would release new fiscal rules dealing with both the four-year cycle and the 10-year medium-term projections.
He suggested the government’s current budget projection of returning to surplus in 2020-21 may not hold up until the next election.
“I expect we will see between now and the next election the government update the numbers and of course they will update the numbers and I will respond then,” Bowen said Wednesday. “Whether that’s still the expected surplus state at the time of the next election, we don’t know.”
Bowen said he envisaged that Labor would return to surplus in the same year as the government projection. “I’m not outlining our fiscal rules today but that’s what I envisage to be the case,” he said.
While declining to lock Labor in, the shadow treasurer said he accepted the necessity of getting the budget back into the black to ensure the government had room to move in the event of an international downturn, to help reduce the debt interest burden and to have fiscal room to make substantial investments in health and education.
“That’s what I want to be doing, so we have to have that objective.”
Bowen was also whether Labor’s refusal to pass a proposed 0.5% increase in the Medicare levy for workers on modest incomes to fund the National Disability Insurance Scheme could ultimately jeopardise secure funding for the NDIS.
The shadow treasurer said there was no immediate funding gap for the NDIS, given the Medicare levy hike wasn’t scheduled to start until July 2019 – so voters could go to the next election and decide between two proposed funding models.
Labor would propose to raise funds by taxing people earning over $87,000 and the government would propose a Medicare levy increase for workers earning more than $21,000.
Bowen also responded to rolling pressure within Labor ranks to adopt a more assertively progressive tax policy for the next federal election.
The shadow treasurer continued to resist internal calls for a “Buffett rule” where wealthy people would pay a minimum rate of tax – saying it was a policy with unintended consequences that had not been adopted by progressive political parties elsewhere.
Colleagues have thus far ignored Bowen’s public declarations on the “Buffett rule”.
At the beginning of the month, two Labor frontbenchers, Andrew Giles and Terri Butler, penned a new essay published by Australian Fabians which backed the Buffett debate.
The former Labor treasurer Wayne Swan last week declared the ALP had to avoid being “trickle down lite”, or offering voters “a sickening Davos third-way approach” at the next election – and needed to countenance all measures to strengthen progressive taxation, including a “Buffett rule”.
Bowen said it was important for Labor to be able to explain and justify changes in tax policy to the voting public.
Bowen said Labor had adopted “the most progressive tax policy Labor has had in generations” during his period in the portfolio and, because the detailed policy work had been done, it was a policy that could withstand detailed scrutiny.
While holding the line against “Buffett”, he also sent a signal to restive colleagues that he was prepared to push the policy envelope. He said the policy Labor took to the 2019 poll would be even more progressive.
“The one thing I know is that the tax system, the tax policy we take to the next election will be more progressive, will be fairer and will be eminently defensible and will be one that we will be proud to take to the people.”
