Interview with Paul Karp, The Guardian Podcast

10 February 2024

PAUL KARP: Thank you very much for joining us, Senator Hume.

JANE HUME: It's a pleasure to be here. Paul.

PAUL KARP: I want to start by asking you about Labor's changes to the stage three tax cuts for casual observers of politics. It must be a bit disorienting to see one day Coalition members saying the changes are Marxism, kill aspiration and are going to fight them in the parliament. Then the next minute families are hurting so well, we'll support them. If the original stage three tax cuts were as good as you say, Why was this not a hill worth dying on?

JANE HUME: Well, I think it's probably more disorienting for an Australian public to have gone to an election having those stage three tax cuts committed to by the Government who knew they couldn't get elected unless they did. Then to have seen those stage three tax cuts committed to publicly, more than 100 times and that includes 12 times even after they had commissioned Treasury to do the work to unwind the stage three tax cuts. So that's a blatant lie. It was only, I'm not sure who's listening on what date, but it was only two weeks ago that the Prime Minister looked Australians in the eye and said we're not reconsidering those changes and then the very next day, said we've reconsidered them. So that I think is possibly more disorienting. What's important, I think to understand here, though, is that the Coalition has always been the party of lower taxes. That's why we introduced stage one and stage two and stage three of the Personal Income Tax Plan many years ago. It was a very calibrated, well calibrated plan. It made sure that we addressed bracket creep at the top end, but we also made sure that it maintained the progressivity of our tax system, to make sure that taxes were lower and simpler and fairer now that's been junked that's been jumped by these changes to stage three, because we're the party of lower taxes. Of course, we're going to support a tax cut to take that 19 cent rate down to 16 cents particularly for people that are doing it really tough right now. But it's important to understand here that because of a combination of inflation, interest rates, and bracket creep, the average Australian is around 8.7% worse off than they were just two years ago. So for someone on $100,000 income, for instance, that means their real disposable income is about $8,000 less. So it's not just that you're feeling poorer, you actually are poor, and that's because of decisions the Government has made. This change to the statutory tax cuts is hardly going to touch the sides. There's more that they could have done on the cost of living. This was their solution. It's really clearly a political fix, particularly with a by-election coming up, not an economic one.

PAUL KARP: Well, we'll get on to what more can be done in a minute, but you've dealt very well with the Labor side of the change position, and then the broken promise there. But when you say the changes would junked, you know, the Coalition, we're not obliged to help Labor break the piggy bank of stage three, you could have tried to block these changes. Was that something that people were seriously advocating for internally or did you all agree that once Labor had changed that you had to fall into line?

JANE HUME: I think there were barrakers out there and some of them in the media that were trying to push us to push the Government to negotiate with the Greens because of course, when the Government has to negotiate with that with the Greens, they tend to end up with economically more damaging policies, which make it much easier for the Coalition to win at the next election. We decided that that was the irresponsible thing to do for the nation. We had to do what was best for Australians. Right now, particularly those Australians that are really feeling the pinch. They appreciate that additional tax cut. However, just today, we read in the newspapers that it's probably one in four Australians that are going to be worse off by this change over the next 10 years. That is something that we're going to have to flesh out further. In fact, the Government is raking in an additional $28 billion from this decision. Somebody's going to have to pay for that. And that's going to take the form of that higher bracket creep, which is such a handbrake on productivity and growth.

PAUL KARP: And you’ve made the argument again today that this doesn't touch the sides of the cost of living crisis. The figure you know, us others have used in your party is an extra $15 a week on top of stage three for middle income earners. If the cost of living crisis is so bad, you know why did the Coalition vote against earlier measures like the energy price relief?

JANE HUME: Well, because the energy price relief hasn't come good has it the Government promised $275 off your energy bills in the lead up to the last election. In fact, we've seen electricity prices go up by around 23% gas prices. Go up by around 28%. That promise has also gone out of the window. There are things that you can do to reduce pressure on inflation that the Government has actively chosen not to do, and one of them is to send a signal to the market using your fiscal policy to rein in your spending ambitions. So that the RBA doesn't have to only use monetary policy to combat higher inflation and that's pushed up interest rates much further and faster than they needed to go because the Government wasn't doing its fair bit. It's fair share of the lifting. If you don't use your fiscal policy to tackle inflation, if you just leave it to monetary policy, it's a little bit like having one foot on the brake and one foot on the accelerator, which is a great way to stuff up the engine.

PAUL KARP: I will note for listeners that the $275 was promised reduction by 2025.

JANE HUME: Still time to go, are you holding out for it still?

PAUL KARP: I think gas and coal prices have made that difficult but that was what the promise was. Just in terms of getting fiscal policy and working in the same direction as monetary policy, would the Coalition had been trying to run bigger surpluses to reduce inflation? What and what do you think Jim Chalmers should be doing for this upcoming budget?

JANE HUME: Well, certainly you should be writing in those spending ambitions. You know, the Labor Government have spent about $208 billion more just in the last 18 months alone than the Coalition committed to at the last budget. Of course, that fiscal spending, you know, let's put, you know, budget surpluses and things aside that fiscal spending stimulates the economy. The RBA's job is to try and contract the economy. So if you've got, the government's trying to stimulate the economy, the RBA is trying to put the handbrake on it, that doesn't work. That means interest rates go up, last higher for longer. That affects mortgage holders. It affects landlords, that's why rents go up. You know, it actually has such a knock on effect. Right across the economy. It's not just for people that have mortgages, but of course, they are doing it particularly tough right now.

PAUL KARP: I want to ask about the Coalition's amendments to Labor's tax plan we've seen so far. The Shadow Treasurer Angus Taylor has a symbolic amendment, and It criticises the Government's handling of the economy and deliberate decision to break promises and raise taxes. But are you going to try and change the structure of the package at all by any substantive amendments to it?

JANE HUME: Well, this is legislation that will inevitably go to a Senate committee. We will probably amend the legislation in accordance with recommendations from that committee in particular from Coalition members on that committee, according to the evidence that they hear. So amendments will play out on the floor. I'm sure there will be lots of them. from us, from the Greens, potentially even from Labor if they decide to adjust their own Bill and that sometimes does happen. But what I can safely say is that we will do everything in our power to make sure that at the end of the day, this Bill is as fair as possible. More importantly, we will go to the next election, the Coalition will go next election with a tax package that demonstrates our commitment to lower simpler and fairer taxes. That injects aspiration back into our tax system because, you know, this isn't just about people that are earning high incomes today not getting a tax break. This is about somebody that's earning $100,000 today, but hopes that maybe in the next 10 years they might be earning $150,000 or they might want to retire on $180,000. Their future prosperity has been robbed by these changes. We’ll also make sure that the policy tax package policy is fully funded, fully costed. It's gone through all the right processes not circumventing whether it be shadow cabinet or the shadow expenditure review committee process and still maintains that we guarantee the essential services that Australians expect and deserve from their government and will be ready to implement the moment a Coalition government is reelected.

PAUL KARP: You mentioned lower simpler and fairer and Angus Taylor's formulation is in keeping with or in line with the principles of stage three. What changes fit that criteria, does that imply abolishing the 37% tax rate that Labor has decided to keep?

JANE HUME: Well, that abolition of the 37% tax bracket was part of the simplification of the system. What it really meant was it a few minutes between $45,000 and $200,000 which is the vast majority of people throughout their working life will earn somewhere in that bracket. If you earn between those two thresholds, your tax bracket wouldn't change. You wouldn't keep paying more and more to government. That's bracket creep. So it essentially got rid of bracket creep. Bracket creep sucks the aspiration out of society is a disincentive to get the promotion to change jobs to do more hours. That's what bracket creep is. It's a handbrake on productivity, which in this country has essentially gone backwards. We're now at productivity levels that we were in about 2017. Without productivity, you can't have economic growth. Without economic growth, you don't grow the pie, you just keep watching the pie shrink and then cutting it up differently. So we want to make sure that when we take our tax package to the next election, that it is fairer, that it does incentivise people to get out there and have a crack and have a go and get that promotion, change the job and work the extra hours inject productivity back into the system. Now will it mean that we abolish that tax bracket? As I said, when we first started the original tax package, the original personal income tax plan was really carefully calibrated stage one, stage two and stage three. So make it lower and simpler and fairer for everybody. Now that because that has been junked, because not just the calibration but the timing has gone. We will have to go back to the drawing board and recalibrate what it is that we want to do. So I don't want to make any guarantees right now there are lots of ways you can skin a cat in tax. But we will commit to the principles behind the original package.

PAUL KARP: Now when Peter Dutton was asked about this at his press conference, he cited the cost so the $9 billion a year to do stage three on top of what Labor's doing, and he also mentioned that it would overcompensate some high income earners because they would benefit both from Labor's package and then the original stage three, could I asked is the intention in your new policy going to be to try and compensate the people earning over 147,000 so that they're at least not as bad no worse off compared to stage three under Labor's policy?

JANE HUME: It’s way too early to ask that question Paul. I think that it's really important to note here, that $9 billion a year, that's something that we had to work out, you know exactly what it was going to cost, potentially to do both Labor's changes to Stage Three and the original stage three tax cuts. Then because of that, you know, we've arrived on the side of fiscal responsibility, which is a sensible thing to do at a time when inflation is still not under control. So we will go back and work out what it is that is sensible that is responsible but also delivers on the promises and injects growth back into the economy. What it will look like I don't want to preempt right now. It's only two weeks ago that this all happened. It was only two weeks ago that the Prime Minister back flipped on the original lie that he told the Australian public so many times and we have to rework it.

PAUL KARP: Do you think Labor should have tried something else? For example, a temporary cost of living relief for low and middle income earners instead of a permanent change? If the reason for the change is that circumstances were different as they said?

JANE HUME: Well, it's interesting isn't it? Because at a time when the cost of living was really skyrocketing, which of course was last year, inflation was rocketing away. That was when the Government decided not to go ahead with the Low Middle Income Tax Offset, which probably would put much more money into people's pockets at that end, where he has targeted his new version of stage three 3.0. So that would have been an option. Now the Government will tell you that that was inflationary. But if that's the case, surely this too is inflationary because if you give money to people on lower incomes, they have a marginal propensity to spend, a greater marginal propensity to spend. That makes perfect sense if you don't earn as much. When you get a bit more money you spend it straightaway on the necessities of life, but that can be inflationary. That was a Government decision. I personally don't think that they've done enough on the cost of living because it's not as if they didn't know that this problem existed. They were talking about it at the last election when we'd had a tiny tick up in petrol prices. Now petrol prices are much greater than they were in the 2022 election. I don't see them doing anything about that. Energy prices have gone up, that's because they haven't injected enough supply into the system. Renewables are terrific and they're always going to be a part of our energy mix. But unless you've got that supply of baseload, the price is going to go up. That's inevitable and they've actually discouraged the gas producers from supplementing that baseload supply. So that's why your energy bills are so big. We spoke before about those signals that you use with your fiscal policy that have essentially completely contradicted those of the RBA. That's why your interest rates have gone up too. So there's more that they could do, and they haven't done it. The idea that this is their solution to the cost of living crisis and don't forget that, you know, Albo actually said at the National Press Club, everything we've done so far has been ineffective on the cost of living he said that. That this is his solution, I think that shows a profound lack of imagination and or a very disingenuous approach to economics because there's a by-election around the corner. This is very much a political fix.

PAUL KARP: The Government has hinted there will be further cost of living relief between now and Budget Day. It sounds like rolling over the energy price relief, which I noted in an earlier question the Coalition voted against. But are there measures that you think the Coalition would vote for I know, you mentioned petrol prices there. Would you like to see a cut to the petrol excise?

JANE HUME: Well, certainly that's what we did when we were in government. We had a temporary cut to the fuel excise, but that's because that at the time was what was causing inflation. At that time, Russia had just invaded Ukraine and petrol prices around the world exploded and that fit into inflation in Australia. But it was really the major driver. Now, we've seen the RBA Governor come out and say that Australia's inflation isn't driven by overseas factors. In fact, it is a homegrown crisis. That's the words that she used. The only way you can cure a homegrown crisis is with homegrown solutions and that's got to come from government. If they go to the next budget with energy price relief, of course, we will look at the legislation that they're proposing and how much it's going to cost and what it will mean. But surely the energy crisis is one of basic economics: it's demand and supply. If you don't put more supply into the system, well then what you've got isn't going to meet demand and that's going to push up prices. So if you're putting subsidies out there, that's you know, fine and dandy but it's a band aid on a solution. Or you're on a problem rather than finding a solution to the problem.

PAUL KARP: Earlier you said one of the reasons you voted for this package is you didn't want the Government to have to negotiate with the radical Greens. The Greens proposals were to increase government payments like job seeker and to raise the tax free threshold. Are those really such radical and concerning ideas?

JANE HUME: Well, look it might horrify some of my colleagues but I'm going to come out and give the Greens a compliment here because the Coalition and the Greens got together at the beginning of this Parliament and put together the cost of living committee which has allowed Penny Allman-Payne from Queensland as the deputy chair and I as the chair to travel right around the country and hear from ordinary Australians as to how the cost of living is biting them, whether it be businesses, whether it be charities, whether it be households we did one bit last week in Brisbane on the costs of going back to school. We did one earlier this week on the tax package. We're going up to Gladstone in a couple of weeks time to talk about the effect of the cost of living on energy and in a big industry. So that's allowed us to hear from so many sections of the Australian community and the economy to try and come up with implementable and practical solutions to the cost of living crisis that aren't necessarily going to fuel inflation further. Now, I know that the Greens you know, they have their particular constituents that you want certain things and that's fine. But in the context of the broader economy, I think it's really important that the Greens get a chance to hear from those businesses that are also really doing it tough. You can't complain that your prices are going up for your goods and services if those poor businesses have to pay high wages, higher rents, higher energy bills, higher insurance premiums, all of those things that you might think are fair and reasonable but something's got to give somewhere. Of course, the real problem at the end of the day is if you push the economy to the brink, like that in a cost of living crisis, not just households, but businesses as well. Well, the first thing to give is employment. That's what we heard from the RBA. Governor just yesterday. Was it yesterday or Tuesday? I'm losing track of time. The sitting week is always like a little bubble, you do lose track of time. But the RBA Governor has said that she is expecting unemployment to go up quite significantly over the next few months to few years. That's because the economy is just grinding to a halt. There's nothing left in it, it’s run out of puff. The only reason we're not in recession right now is because our migration levels are so high. So somethings gotta give. The decisions that the Government are making, we think, are the wrong ones, and they're making a bad situation worse.

PAUL KARP: Now, I want to ask you just quickly about electoral law with your Shadow Special Minister of State hat.

JANE HUME: Yes, I'll put a different hat on now.

PAUL KARP: The Greens and Teals, including Kate Cheney, are warning there's about to be a major party stitch up making it harder for new parties and independents to challenge incumbents because of spending and donation caps. You're about to sit down opposite Don Farrell, the Special Minister of State to discuss this he says he wants a multi party approach. But of course, bipartisan Labor and Coalition would be enough to pass such a bill through Parliament. What do you think about spending and donation caps?

JANE HUME: Well, I'm gonna take Don at his word here. We haven't sat down and you know, mused waxed poetic about electoral reform. We talk about a lot of things all the time. That's as you would expect from a Special Minister of State and a Shadow Special Minister of State. However, there is a committee report out there with recommendations from the Joint Standing Committee on Electoral Matters and the Government hasn't responded to that yet. So it's kind of hard to know exactly where the Government wants to go on electoral reform. When they do respond to the recommendations of that committee and provide some legislation for us to look at well, then we'll have a position but it's kind of too early for that at the moment. I know the Greens and the Teals are so desperate to talk about this stuff, because they have this sort of weird conspiracy theory that you know, the two major parties are sitting around smoking cigars or drinking whiskey and talking about them and laughing how are we going to talk about the system, nothing is further from the truth. You know, Labor rely on the Greens and dare I say the Teals as well, to get them elected to power. So I think maybe they're thinking the sky is falling.

PAUL KARP: Do you think, obviously the Government has to respond to the JSCEM report, the Government would be the one putting forward legislation and an offer, but do you have a view about whether there's too much money in politics?

JANE HUME: Yeah well, I think that we want to make sure that the system is fair and entirely constitutional. People have the right to donate to political parties. That's part of our, you know, right of political expression and political freedoms. To make sure that though, that's a transparent system that you know, where the money is coming from, and that's perfectly fair and reasonable.

PAUL KARP: I'm sad sack. November 2012, I was reporting on the Union's New South Wales High Court case, which is the one on that point about the constitutionality of giving donations so that's why I'm following this very closely.

JANE HUME: Well that makes sense and let's not forget that the union's donated around $5.7 million to the Labor Party for the last election and spent another $1.37 on their own anti-Coalition campaign. So anything that doesn't involve donation limitations for Unions, as well as the rest of the country is profoundly unfair.

PAUL KARP: That's an interesting point and we'll see what Labor comes up with. That's all we have time though, so thank you so much for joining us today.

JANE HUME: Really good to be with you, Paul.