A redesign of Australia’s welfare system is the only way to ‘ramp up’ defence spending

Added: 2026-06-03

[00:00:00]to major error from Treasury. Key figures were that were used to justify the unpopular Albanesei government tax package. Well, we now find out those figures were wrong. This relates to a speech last week from the Treasury Secretary Jenny Wilkinson who last Thursday told economists that new modeling showed that under the settings for negative gearing capital gains tax and trusts quote the median income earner is assessed as having benefited to the tune of around 15 $5700 so 5,700 over their working lives. Well, that's wrong. But no apology from Jim Charas.

[00:00:43]In fact, he's doubled down.

[00:00:46]>> Whether the average worker is better off by five or $10,000, the comparison that she was wrong treasurer, I mean, they're completely wrong.

[00:00:53]>> The comparison that she's making is with the top 1% benefiting by 700,000.

[00:00:59]>> Right. Here to discuss this and more, former Treasury Assistant Secretary David Pearl. David, thank you. Um, a pretty significant error on a very polarizing policy.

[00:01:13]Good evening, Peter. It was a significant error and it was an embarrassing one. Treasury, having worked there for over 20 years, I can tell you uh should get the numbers right and this was a headline number. It wasn't some obscure footnote. So, that's embarrassing. But I don't think it was the big story from Jenny Wilkinson's speech. She crossed two lines for Treasury Secretaries. one, she openly cheerled this tax package by describing it as the most significant tax reform in 25 years and comparing it to the Howard Costello and Keading Hawk tax changes, which I thought was ridiculous for a public servant to do. And then secondly, she's the first ever Treasury Secretary to my knowledge, Peter, >> who has said that uh savings income should be taxed in exactly the same way as labor income.

[00:02:04]Um, no other Treasury Secretary, no serious economist who understands savings taxation would maintain that, but she's come out and said that and she said not one thing about how savings are funded from post tax income. So they've already been taxed once.

[00:02:22]>> I was going to make that point.

[00:02:23]>> Our savings, >> how investment is subject to risk and uncertainty and how investment results in capital formation, economic growth, and high living standards. She did not make one reference to the importance of savings and investment to growth and living standards. I think that's staggering.

[00:02:42]Yeah, I think it's a point that that gets lost in this debate if I'm honest, David, and I think this is something that the opposition's got to make more of. The fact that we we we talk about savings and we talk about that investment property. It's all bought with dollars that the government's already taken half or basically half from most Australians. So, they've already paid tax on them. This idea that they're somehow getting a, you know, a windfall gain is wrong.

[00:03:09]>> It is. And unless you inherit your wealth from your parents, which I think very few Australians are in the position of doing, your savings come comes from your labor income, your post tax labor income. So again, Jim Charas and Jenny Wilkinson drawing this false distinction between people who earn labor income on the one hand and capital income on the other, implying that they're completely separate. That's kindergarten politics.

[00:03:40]All right, let's go to these accusations today when we found out a little bit more about the legislation that there'll be all these areas in the bill that are even when it passes the parliament, I might add, that are reserved back for the treasurer down the track. I'm assuming this is via a regulation or something else where he'll get to fill in the blanks. So, doesn't matter what gets passed through the parliament. In the end, it'll be up to Jim to decide, you know, what number goes in here or what class of asset gets taxed in a particular way. It looks like he's above the parliament.

[00:04:17]>> I'm not sure about that. You might be right, Peter. I haven't checked the detail. My understanding was that Charas was saying today that they would be disallowable instruments that he would have the discretion to make important definitional calls but that the ultimate regulations if you like could be challenged by parliament but the bigger picture here Peter again is that the government's philosophy is to direct capital into politically favored or other favored areas and they've assigned a massive tax advantage for new dwellings to attract residential investment. And that's why Jim Charmers has to worry about the definition because you're going to create the risk of a cottage industry or a larger industry to basically take existing dwellings and convert them into new dwellings by certain types of renovations. And I think that's what Treasury and Charas are worried about.

[00:05:15]They've created this tax advantaged asset and you wait and see. there'll be a big industry springing up overnight to take advantage of it.

[00:05:25]>> Yeah, you are right that they are disallowable instruments in the Senate.

[00:05:28]There's a number of Senate working days that you can move to disallow you table and move. Uh but of course Labour's got a lot of the numbers up there with the Greens and the Greens will only want it worse than perhaps Charas puts it into the books. What about the accusation that Labour's cooked the books? You know, they've got this macro number for what they're spending on defense, but when you dig through, as the report in the Australian did today, $10 billion of the defense number that we all think's on ships and airplanes is actually on wet veterans welfare. There's another two billion that we're putting into our intelligence agencies. And you and I know they're not even in the defense department. These are over in the home affairs department. So, it's not a fair figure. It's smoke and mirrors.

[00:06:14]Well, unfortunately, I think the Australian government's following the lead taken by the NATO, European NATO governments because I think Donald Trump has allowed them to use some of these accounting tricks to boost their military spending. But my understanding is that the Australian government has gone even further. Um, we're at about 2% of GDP. Paul Dibb, the father of Australian defense policy in the 80s, came out today, Peter, you would know and said that our spend should be 3 to 4% of GDP. Well, to get to 4% or even 3 and a half% of GDP from where we are now, to give your viewers an idea of the orders of magnitude, you'd have to abolish the NDIS overnight at the very least. um in order to maintain tax at reasonable levels and ramp up defense spending, we would have to basically redesign the entire welfare state. And that's the hard choice we face and that the coalition and labor need to be upfront about and even one nation too.

[00:07:14]>> But the other point I'd make, Peter, is that >> please David. Yes. Oh, just very quickly, Peter, and you and your viewers know this, if we doubled, tripled defense spending, would we have any confidence that the defense establishment in Australia would spend it soundly and rationally? I think that's the other problem. It's uh the waste and incompetence at Russell in the ACT.

[00:07:36]>> You were not wrong. As soon as you asked that question, I think we both knew the answer there. I'll leave it um at that point, David. Thank you.