TONY JONES, PRESENTER: To discuss the Commission of Audit report we're joined in the studio by shadow Treasurer Chris Bowen, thanks for being here.

CHRIS BOWEN, SHADOW TREASURER: Pleasure Tony.

TONY JONES: You've got a lot to choose from. Where will you start your scare campaign? .

CHRIS BOWEN: It's not about a scare campaign; it's about holding the Government to account for its promises which it made fundamentally to the Australian people and also engaging in a proper discussion about fairness, as well as about impact on the Budget. So we've outlined a process whereby we've indicated some issues of principle which we won't be supporting. There's other things we've said we'll need time to have a look at.

TONY JONES: Inevitably there will be to scare campaign, I think you know, you'd have to be, illogical not to think there won't be.

CHRIS BOWEN: There will be a debate and contest of ideas. We'll be vigorously putting a case when it comes to fairness and equity in a return to Budget surplus over time. We'll be putting a case about principles and priorities and the wrong priorities of the Government. We'll be putting a case that we shouldn't be charging people to go to the doctor when we're giving up people up to $50,000 to have a baby. We'll be putting a different set of priorities to the Australian people than the Government is presenting. I don't call that a scare campaign, I call that a contest of ideas, a contest of ideas we're up for and will be engaging in proactively, constructively but passionately.

TONY JONES: When the Government does not accept many of these recommendations, one assumes you'll keep using them to hammer the Government all the way to the election.

CHRIS BOWEN: The Government commissioned this report. The Government said that they could return the Budget to surplus without new taxes and now they're taking the tax rates back to levels we haven't seen since before Paul Keating started reducing marginal tax rates in the 1980s - who would have thought that we could see a Liberal Government increasing the marginal tax rates to pre-1980s levels. We're also seeing the Government make clearly cuts that they said they wouldn't need to make before the election, which we said they would. This is their voodoo economics catching up on them. They said we can return the Budget to surplus without new taxes and without any further cuts over and above the ones they announced during the election campaign. That was always, Tony, a lie, and is now being shown for the lie it always was.

TONY JONES: Let's stick, if we can, to the Commission of Audit, the thing that was released today, you claim that Joe Hockey will accept the vast majority -

CHRIS BOWEN: Well, he says that.

TONY JONES: ...of those recommendations.

CHRIS BOWEN: He says that. That's his test Tony, if he doesn't...

TONY JONES: He said that before he had the report.

CHRIS BOWEN: He said, "We've commissioned the report so we can accept the vast majority of recommendations." With all due respect, he should be held to account for the statement, not anybody else.

TONY JONES: He said it before he received the report.

CHRIS BOWEN: He said it. He said just this year, wasn't 12 months, wasn't five years ago, he said this year they'll be accepting the vast majority of the recommendation of the report. Now if he doesn't want to be held to account for his own statements he can explain that.

TONY JONES: As we know from what we just saw and it's really something for us all to remember, Peter Costello got a perhaps even harsher audit report and in the end very few of those harsh recommendations were accepted or adopedt by the government. The same thing will happen this time, inevitably, won't it?

CHRIS BOWEN: Well that comes down the too the Government's credibility. They've talked the big talk, hit their chest in typical Joe Hockey style, done the bluff and bluster about the age of entitlement and how tough he's going to be. Well we'll see. Now we will be engaging in the debate, in the national conversation constructively but passionately as I said. And we will assess measures, when the Government actually proposes measures - they've had the report for months, they've proposed no measures today, they've simply released the report. With they actually propose measures, we'll assess those measures based on impact of the Budget. There's a whole lot of recommendations here today with no dollars attached to them, we don't know what the proposed save recession for individual measures, and we'll assess it against principles of fairness and equity.

TONY JONES: You accept though that this not a Government policy document, this the ideas of a small group of quite conservative commissioners on how to, in a way, re-imagine the social contract. It's not the Budget.

CHRIS BOWEN: Clearly it's not the Budget. It is a report commissioned by this Government that they said they'd accept the vast majority of recommendation of.

TONY JONES: Where will you concentrate your attack, the threat against the universality of Medicare, the co-payments? Where does Labor see that it will be, from your point of view, most effective to approach the attack?

CHRIS BOWEN: We are outlined some principles. You raised Medicare, universal health care is the fundamental principle of Medicare. What are the fundamental underpinnings of Medicare? That the health of any us should be the concern of all of us, number one. Tow, that your health should not be determined by your wealth. And those principles determine we will oppose any moves to charge to go to the doctor. Where whether it be $6 or $15, if you're a family with children - plenty of families out there with four or five children and once one gets sick the rest get sick and before you know it - it is very expensive to have a family which has illnesses. We will not tolerate that. We will fight, fight and fight again for the principle of universal health care.

TONY JONES: On the disability support pension, the recommendation is to tighten assessment and participation criteria, I should say, for people under 35 with some capacity to work. Now it's clear that the Minister Kevin Andrews has been focusing on this area. Do you agree this does need serious reform?

CHRIS BOWEN: Of course, frankly, successive Governments have reformed the issue of disability pensions. We'd have to look at it in details of any proposals. We'd assess it against the criteria of fairness. Of course anybody who can be in work should be in work, but there are plenty of people out there who find it very difficult because of no fault of their own to find work and we need to assess any concrete proposals to ensure fairness in the way that -

TONY JONES: You're not out rejecting changes to the disability support pension as a savings measure?

CHRIS BOWEN: Just as a matter of principle as we go down this list, we got the report a matter of hours ago, it would be highly irresponsible of me on behalf of the Opposition to rule in or out a range of proposals from which we've only just seen, which have very significant and serious implications, both budgetary and for the people affected. As I've said the Government's had it for months, with all the support of the bureaucracy, they haven't felt they were in a position to declare their decision on many of the matters. If they're not going to be held to that level of accountability to say what would you rule in, what would you rule out, there are some matters of principle -

TONY JONES: You are asking Joe Hockey to rule in and rule out, aren't you, before the Budget and so basically we're just asking you the same questions.

CHRIS BOWEN: He has ruled things in and out. The report has recommended that his rolled gold excessive paid parental leave scheme be rolled back dramatically. He's refused to do so. So he's prepared to play pick and choose. What I've said is, and Bill Shorten has said, is that we will have matters of principle; GP, tax is one, the National Disability Insurance Scheme is another. This is scheme we can't afford to delay, it's not a matter of can we afford to do it, it's a matter of can we afford to delay it? It's well overdue, it's a scheme which looks after the nation's most vulnerable, which says to parents who may be getting on, if you have a disabled child there will be somebody to look after them. We can't afford to delay that any longer. Tony Abbott said before the election, we just saw it, he was doctor yes when comes to the NDIS. He should immediately say he will not slow down the roll-out of the NDIS.

TONY JONES: Some of the big decisions on superannuation, preservation age, aged pensions, asset testing and so on will not be introduced until 2027 according to the advice here. Do you back those kind of changes or are you worried that the younger generations are going to have to bear the burden for the Baby Boomers who seem to be getting away scot-free in most of this?

CHRIS BOWEN: Let me put it this way Tony, I completely accept that there are demographic changes which require adjustments to policy. I completely accept that and the demographic changes is the aging of the population. I more than accept it. I've said it for some time. And hence we took measures, not only to increase the age which you can access the aged pension over a long period of time, but also to encourage and to assist people to save for their own retirement through increasing the superannuation guarantee from nine per cent to 12 per cent. And provide low and middle had income earners with the capacity to save so much through their superannuation that they wouldn't need the full aged pension. The latter Joe Hockey is scrapping, so he should not be lecturing us and lecturing the Australian people about the need to deal with the sustainability of the aged pension when policies that he has implemented are making the aged pension less sustainable.

TONY JONES: What about the assets test, because that's something that Labor has tried to introduce itself in the past?

CHRIS BOWEN: We'd have to have a good look at the distributional effects of that, what it means for equity and what it means for the Budget. There's no dollars attached to this proposal, we don't know what the impact -

TONY JONES: You heard what Tony Shepherd said today. He said that an issue that actually targets wealthier Australians.

CHRIS BOWEN: We would have a look at that...

TONY JONES: Not rejecting it outright then?

CHRIS BOWEN: The matter of principle, Tony is that where there's a proposal like this, which is a substantial one, it would be irresponsible for us to say in a matter of hours that we've looked at it in great detail. Now they've put a threshold on the value of the proper, I think $750,000. Well, that means something in Sydney which it doesn't mean in other parts of the country. We'd have to look at the full distributional impacts, what it means for people affected. Again, if and when the Government actually puts forward a proposal to do so.

TONY JONES: Since Labor acknowledges the needs to be cost savings, there needs to be a way of paying for big policies, would Labor actually look at some of the issues that have been left out here, targeting superannuation tax breaks for wealthier Australians, for example, or negative gearing or the fuel rebates, the three areas that have been completely left out of this audit?

CHRIS BOWEN: I think you could expect us to be not only constructive in the debate about the Budget but proactive about the debate. On superannuation, I think superannuation should be - there should be a principle observed that changes should be made rarely because people deserve certainty in planning for retirement incomes. That's a principle which I enunciated when I was treasurer and I still believe now as Shadow Treasurer. On other matters we'll put forward proposals at the next election -

TONY JONES: So when entitlement is given you'd be reluctant to take it away?

CHRIS BOWEN: Well the principle I put in is that changes to superannuation should be made every five years through a proper process, transparent consideration through a council of superannuation guardians. That would continue to be the preferred approach I would take. On other matters, we would put savings proposals up at an appropriate time in the electoral cycle.

TONY JONES: You did have a long time in Government to put up really serious savings proposes.

CHRIS BOWEN: And we did. 130 billion of them Tony.

TONY JONES: You didn't - I don't recall any that would explain how you were going to pay for your giant policy reforms, like the NDIS or Gonski down the track. People have to think about those things now and work out how to pay for them.

CHRIS BOWEN: I completely disagree with the assertion there, Tony.

TONY JONES: How are you going to pay for the billions and billions of dollars down the track for both of these?

CHRIS BOWEN: This is the big lie Joe Hockey has conveniently and up with since the election. Before the election he says he was fully locked in to the NDIS. Now he says it's not paid for, it's cost more than I thought. If that's the case he can't read a Budget paper, because we put into the Budget not just a four year funding program, but beyond that. We took difficult decisions, like - like depressing the Medicare levy, like depressing the Medicare levy to pay for NDIS.

TONY JONES: At the same time the Budget was blowing out year after year after year.

CHRIS BOWEN: We put in place measures like abolishing the baby bonus, introduced by Peter Costello, we looked at it and said with the budgetary circumstances not sustainable, we abolished it. The fastest-growing area of the Federal Budget, Tony, was the private health insurance rebate. The single-fastest growing area, unsustainable. So we dealt with it. We means tested it. Not a word of support from the Liberal Party. They opposed it tooth and nail and it's still their official policy to reverse it. So we put in place those measures, because I do accept, more than accept, have been saying that there are long-term pressures on the Budget as a result of the aging population, increasing health costs are being dealt with by Governments, not only around Australia but around the world, but you do so sustainably.

TONY JONES: Joe Hockey makes the case that it wasn't sustainable, you're supposed to have a two per cent levy or two per cent limit on Government spending, a cap, and you burst through that according to him.

CHRIS BOWEN: Wrong. He's wrong. We comply would that spending cap post-GFC. We put that spending cap on after the GFC and complied would it. Every step of the way we complied with it. It is simply wrong for him to say that, and this is his great lie again. He says in the mid year economic forecast he took the spending cap out, which saw the Budget deficit blow out unsurprisingly, then last week he says, "I'll be putting a spending cap on," so he returns to a spending cap and says look I've reduced the Budget deficit. Well it's a two-card trick. But there are important principles here Tony; Budget sustainability is one of them, fairness and equity is another of them. When it comes to things like health care, you can go down this road, you can put charges on going to the doctor. Not only do you throw equity out the window, but you start to go down the road of the American system. Now that is an option available to Governments, but one we have rejected and Medicare is one of the best and most sustainable and fairest health systems in the world. We spend less on health care in Australia as part of GDP than about half of what America spends and we do it well, and that has been about -

TONY JONES: So many issues to talk about, family tax benefits, change is inevitably coming. These are not things you're going to roll back in the future, because one imagines you agree there needs to be changed?

CHRIS BOWEN: Well again, there are a whole range of recommendations here, some of which would cause us concern in relation to carers, for example, others of which are complex and detailed.

Jenny Macklin has begun a comprehensive process and review of the entire welfare system. We're doing that proactively, this is not just about being constructive it is about being proactive. She's been engaging with round tables, with academics, the community sector, private sector, about what the welfare system looks like in the 21st century. This isn't just looking at proposals that the Commission of Audit has come up with. We'll be looking at frankly a welfare system which has developed in an ad hoc fashion and it's been a long time since somebody looked at it in a holistic fashion. That's the process Jenny Macklin's been leading, so that will inform us and again based on very important Labor values.

TONY JONES: I still think and you'll have to correct me if I'm wrong, but I don't believe that Labor put in any recommendations to how it was going to pay for the many billions of dollars five years and beyond for the big policies.

CHRIS BOWEN: I will take you up on that, Tony, because they were fully funded in the Budget. Measures like, difficult measures like increasing the Medicare levy to pay for the National Disability Insurance Scheme, there were changes to family payments, there were changes to funding mechanisms all the way along, not just over the four years, but over the 10 and when Joe Hockey says otherwise, he is being misleading to the Australian people.

TONY JONES: Now the commission was meant to focus exclusively on expenditure but it did stray into revenue. It included a system whereby the States might be able to raise income tax for the delivery of services. This is part of a broader arrangement where the States would be much more responsible for delivering services than they are now. Do you agree with that principle or not?

CHRIS BOWEN: I find that very troubling, Australia took a big step towards a more efficient, more modern national economy in 1941, when we got rid of state income taxes. And then Chifley as Treasurer introduced a very worthwhile reform. I'm not sure it's a forward step to go back to the pre-1941 system for a couple of reasons. One, we are a middle-sized economy that can't afford to have our economy broken into eight different jurisdictions when it comes to income tax.

Secondly, it will provide a very significant administrative burden to business. If you're employing people across different State and Territory boundaries and you've got to deduct different levels of tax, then that's going to increase the cost to business substantially, I would submit. And you've got to look at where people are working and living. It becomes a complex system, which I say, we moved away from 70 years ago. I think this is in-principle a backward step. I would need a huge amount of convincing. We need to be heading in the opposite direction, that's where we've been heading, we've been harmonising regulations, harmonising workplace safety regulations, harmonising consumer laws across State and Territory boundaries, that's the right approach, going backwards and saying let's have different tax levels is, I think, counterproductive.

TONY JONES: The commission also suggests that it would be a good idea to re-examine both the rate and the base of the GST. You presumably reject this out of hand, but if a Government did that, as you've done in the past, you probably wouldn't roll it back, would you, because there's a source of revenue you could rely on.

CHRIS BOWEN: Again, Tony, what we see here is a values debate largely. We think the GST, an increase in the GST - I'm happy to have a long discussion about an increase in the GST, but it would affect low and middle income earners predominantly and therefore it's not a move we support, broadening the base or increasing the rate. And also I think you can have a proper discussion about tax reform which does want involve increasing the GST or broadening the base and hence we don't support that. Now if the Government promised that they wouldn't do that and I recall Tony Abbott saying would never ever happen going into the future, if he wants to breach that promise, then we'll deal with that.

TONY JONES: Well he's saying that it won't happen in this term.

CHRIS BOWEN: He said it would never happen.

TONY JONES: I understand what you're saying, but he said there's going be a tax review, they're going look at issues including the GST, which Labor ruled out from its tax review.

CHRIS BOWEN: We maintain the position that increasing the GST or broadening the base is not good policy, but I think we could have a good proper discussion at tax which doesn't necessarily include doing that.

TONY JONES: Chris Bowen, thank you for joining us.

CHRIS BOWEN: My great pleasure.