Tax cuts at centre of Tony Abbott's agenda

TONY Abbott has pledged to cut Australia's overall tax burden when the budget returns to surplus.

TONY Abbott has pledged to cut Australia's overall tax burden when the budget returns to surplus.

Mr Abbott says a 25 per cent company rate is a "sound idea" and that his "instinctive priority" has always been for more personal income tax cuts.

Interviewed by The Australian yesterday, the Opposition Leader said he would retain Ken Henry as Treasury secretary, and use his landmark report to produce a tax reform plan within 12 months.

He outlined the basis for a long-run, post-surplus reform agenda that involves lower taxation and a radical carrot-and-stick welfare policy to create more jobs.

"We've got to revisit Henry," he said. "The last thing we should do is pigeon-hole the report."

Mr Abbott was explicit: he did not blame Dr Henry for the resource super-profits tax that the Coalition opposed so vehemently.

"It's not Ken Henry who's the problem; it's Wayne Swan," he said.

Asked about his aims after the budget is returned to surplus three years down the track, Mr Abbott said: "This idea that we should pile up massive surpluses, year in, year out, I think is wrong, just wrong. It's not the government's money; it's the people's money.

"For good reason, Henry said we have to get the company tax rate down to 25 per cent. To be competitive we've got to have our headline business rate moving down. But instinctively our first priority is always personal income tax cuts."

On welfare reform Mr Abbott said he would be guided by the Henry review and proposals from indigenous leader Noel Pearson.

"For me, the part of the Henry review most appealing was raising the thresholds to reduce the poverty-trap problem," he said.

"Obviously that's very expensive and it's difficult to do at the moment."

Mr Abbott made it clear welfare reform would be a Coalition government priority.

He plans a welfare statement before the election. He wants to back the Pearson model not just to assist job creation among indigenous Australians but as a radical reform for the entire Australian community.

The Pearson proposal would require recipients to renounce their welfare rights for 12 months in return for a guaranteed job.

The aim is to ensure people don't easily retreat from work back to welfare.

"I am attracted to this idea and I want to engage Noel Pearson on this policy," Mr Abbott said.

On schools funding, the Opposition Leader repudiates Labor's plan to devise a new funding system for private schools to replace the socio-economic status model.

"The short answer is: yes, I am happy with the existing (SES) funding model." Mr Abbott said.

"And no, I don't think it should be changed.

"Does that mean it shouldn't be reviewed? Well, I am always happy to see if it can be improved, but it's a good model. We should just stick with it."

He rejected the push to rebalance funding between government and private schools because the latter were funded too generously.

"In terms of overall government funding, a child at a government school gets about 40 per cent more than a child at a non-government school," he said.

The Opposition Leader also said there would be no night of the "long knives" with senior public servants being sacked upon any change of government.

Asked if, when the surplus was restored, he would commit to a lower overall tax obligation for Australia, Mr Abbott said: "The answer is yes. I subscribe to the classic liberal-conservative position that government should be effective but lean, and taxes should do no more than pay for the necessary business of government and perhaps a prudent reserve."

The opposition is currently pledged to reduce the company tax rate to 28.5 per cent, although it proposes a temporary 1.5 per cent levy on the major companies to fund its paid parental leave scheme.