MEL CLARKE, HOST: Prime Minister, thank you for joining AM this morning.
PRIME MINISTER: Good to be with you, Melissa.
CLARKE: Now, we've just heard about the details of the changes to negative gearing and capital gains and trusts. Do you have a mandate for this, given you ruled it out at the election?
PRIME MINISTER: Well, we have changed our position, Melissa, but we want to produce a Budget in the first year of this term that's about resilience and reform. The truth is that we've thrown everything at the housing supply issue, but young people still aren't getting a crack. So, we need to make sure that we don't say goodbye to the Australian dream this generation. We can't develop into a society where you can determine how successful people are by whether they're homeowners, some to own multiple properties and others that are simply locked out of the market.
CLARKE: There is significant grandfathering across these tax chains. Does it actually go far enough to really shift the dial to achieve that aim?
PRIME MINISTER: It does. 75,000 people will be able to enter the housing market directly as a result of these changes.
CLARKE: That's over 10 years. That's not a lot each year.
PRIME MINISTER: What it will do is to make a substantial difference by giving people that opportunity to aspire to their own home. It will also, of course, boost supply over time as well. Everyone is grandfathered in the current system, so if you have an investment property, you'll continue to be able to do it, existing rules will continue to apply for as long as you have that investment. But the difference is people will still be allowed to do that, but by doing it for just new supply, they'll not only be investing in their own future, they'll be investing in the future of the nation as well by ensuring that supply is added to.
CLARKE: There's a lot of complexity in the system now, if these changes pass through Parliament, particularly when it comes to capital gains tax. I mean, some assets that have been held for a long time, they could have three different systems of capital gains tax treatment. Are you creating an accountant’s picnic?
PRIME MINISTER: We're not. What we are doing though, is making sure that we grandfather changes so that – we didn't want people who have made decisions to be disadvantaged. I think that's a fair thing to do. But going forward as well, take for example, when it comes to negative gearing, the average time is around about five years before people either dispose of a property or it becomes positively geared. But we do have to have a transition and that's because we wanted to look after people who had made decisions based upon a system that had been there for a while, but a system that increasingly simply wasn't working.
CLARKE: These changes will help fund the Working Australians Tax Offset so that people earning a wage or a salary get an extra $250 in their tax return. You've previously put in place other income tax cuts in stages. Why don't you just bite the bullet and index tax brackets?
PRIME MINISTER: What we've done, Mel, is have five different tax reductions and they all add up to us making a substantial difference.
CLARKE: It could be a much simpler system if you just index the tax brackets though. So, why not do that?
PRIME MINISTER: What we have done with the way that we've designed the WATO, the Working Australians Tax Offset is designed so that it benefits people who actually work. We also of course have the reduction in the first marginal tax rate that we're doing on 1 July this year and then again 1 July next year. And the other thing we're doing to simplify the system is the thousand-dollar instant tax deduction. And what that will do of course, is for all those people who don't have an accountant, don't want to go through the complexities, they'll get that automatic deduction every year.
CLARKE: There are around 4 million Australians who fall below the income tax-free threshold. That's a lot of part time and casual workers. They're probably the ones who could really do with a bit of assistance to help with cost-of-living and they'll miss out. Why do those working Australians miss out on this support?
PRIME MINISTER: Well, if they fall below the tax-free threshold, they literally are not paying tax by definition. So, it's pretty hard to provide tax cuts to people who don't pay tax.
CLARKE. So, in your view, this isn't about helping people with cost-of-living, it's purely around a tax reduction measure. It's not a cost-of-living support measure?
PRIME MINISTER: No. Well, you can do both and in this case it does both.
CLARKE: But it's a cost-of-living measure that will not help the most needy.
PRIME MINISTER: Well, it does help working people who are low- and middle-income earners. It helps them very directly, like our other measures have.
CLARKE: Prime Minister, the Budget figures and these plans, they're predicated on oil supplies improving mid year and having the consequences of the Iran war washing through the economy by mid next year. Is that the Government’s hope or is that your expectation, that things will be on the improvement in a couple of months’ time?
PRIME MINISTER: Well, Melissa, that is a Treasury forecast, but we have been upfront about the uncertain times that we're in. But of course, this conflict, we're not protagonists in it, but I think the Government has shown that we can act to protect Australians from the worst of the impact up to this point, by the fact that there is more fuel in Australia today than there was on 28 February. And that's due to the range of direct interventions we've done, whether it be changing fuel standards, whether it be the releasing of 20 per cent of the fuel reserve, whether it is a reduction in fuel excise or the arrangements that we've put in place to secure additional fuel supply through Export Finance Australia, these measures are working. And in addition to that, Australians are doing their bit by not storing additional fuel that they don't need, which we did see with the demand spike post 28 February in the immediate weeks after before Easter.
CLARKE: Prime Minister, thank you very much for speaking with AM this morning.
PRIME MINISTER: Thanks very much, Melissa. Have a great day.