Federal budget: former treasurer says public won’t support corporate tax cuts and says Australia’s net debt will take decades to wipe

This article is more than 2 years old

This article is more than 2 years old

The former Liberal treasurer Peter Costello says the Turnbull government ought to consider giving tax cuts to the “forgotten people” in Australia who earn around $100,000 and $200,000, saying they haven’t had a tax cut in a decade.

He also warned the Coalition government would probably fail to reduce Australia’s net debt meaningfully, predicting that the country’s net debt would not be erased in his lifetime.

Costello said big businesses were expected to pay a headline rate of 30%, but people who earned over $180,001 were being forced pay a tax rate of 47% for every dollar they earn over that amount.

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He said the voting public was in a less generous mood to support tax cuts for big businesses with the banking royal commission in the news, but the Turnbull government should consider giving tax cuts to medium and high salary earners who hadn’t had a tax cut in years.

“This is the point I find curious: banks and big companies pay tax at 30%, [but] individuals pay tax at 47%,” he said.

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“You pay tax at 47% if you’re on $200,000, a bank or a big company pays it at 30% – a big company only pays it at 30% on $1m.

“It’s all very well for business to argue its case ... for tax cuts, and tax cuts are always good for the economy, but somebody has to speak for the individual wage and salary earner as well.

“I think the Liberal party ought to remember them. These are people paying 47% on $200,000, they’re paying 39% on $100,000, they’re paying higher than the corporate rate and they haven’t had any tax relief for 10 years.

“I think those forgotten people, those people that don’t have organised lobbyists to speak for them, also ought to be in the calculation of the government at the moment.”

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Australia’s progressive income tax system means workers pay no income tax on their first $18,200, then 19c for each $1 they earn between $18,201 and $37,000.

They are then asked to pay 32.5c for each $1 they earn between $37,001 and $87,000, plus a 2% Medicare levy, which lifts their rate to 34.5c.

Higher income earners are then expected to pay 37c for each $1 they earn between $87,001 and $180,000 (39c with the Medicare levy), and 45c for each $1 they earn over $180,001 (47c with the Medicare levy).

Costello’s figures of 39% and 47% were referring to progressive income tax rates that included the 2% Medicare levy.

The 60-year-old former treasurer, who left politics after the Howard government lost the 2007 election, also savaged the Turnbull government’s approach towards debt, saying it would need to deliver a decade’s worth of surplus budgets to pay off Australia’s net debt.

He said he doubted that will happen.

“If you’re running a deficit what that means is you’re spending more than you raise [in taxes] and you’re borrowing to cover the difference,” Costello told the ABC’s Leigh Sales on Monday.

“People have got to understand this point: your deficit is your yearly result, your debt is the cumulation of all those yearly results.

“We’ve now had 10 years of deficit, cumulatively that means to cover that we’ve had to borrow about $370bn. We went from having no net debt to borrowing about $370bn.

“That money doesn’t go away. We’re going to be paying interest on it until somebody pays it back.

“You’re looking at a decade at least [of budget surpluses], maybe beyond,” he said.



“I think the probabilities are we’ll never get back to where we were. You and I will die before that happens.”