Jim Chalmers:
There are 2 very big differences in the Budget and the Budget reply handed down last week. The first one is our Budget was one of the most responsible in memory, and the Budget reply was one of the least responsible.
Angus Taylor’s Budget reply is a recipe for much bigger deficits, much more debt and much more inflation. Angus Taylor’s got an uncosted, unfunded tax proposal which would add a quarter of a trillion dollars in debt over the next 10 years and cost the Australian people tens of billions of dollars in debt interest. One of the reasons why Angus Taylor’s Budget reply fell down all around him was, within half an hour of finishing his speech, he couldn’t tell the Australian people what it would cost.
So the difference last week was between a Labor government cutting tax 3 different ways, $2,800 a year for the average worker, versus Angus Taylor with his unfunded, uncosted, irresponsible Budget reply, which is all about staving off One Nation and not strengthening our Budget or strengthening the economy. That’s the first difference.
The second difference is when it comes to housing, we understand that the defining intergenerational issue in our society and in our country is housing, and we’re doing something about it. Angus Taylor thinks the current intersection between the housing market and the tax system is working perfectly well. We think the status quo in housing is broken and that’s why we took the difficult decisions in the Budget to try and fix it.
What we’re doing in the Budget is making it easier for 75,000 renting households to become home-owning households. Of course, when you make a decision like that, put in place a contentious change like that, there will be some people who will say or do anything to protect the current arrangements, to defend the current arrangements, which are locking too many people out of housing, and particularly young people. There are the usual scare campaigns full of lies from people with a partisan or a commercial interest in the status quo. But we’ve taken this difficult decision. We don’t want this problem to get even worse.
Now, a big mistake was made in 1999 by John Howard and Peter Costello. They introduced a distortion into the housing market, which locked hundreds of thousands of Australians out of housing and we are fixing the mistake that they made a quarter of a century ago. What that mistake has meant is, is that established housing has been overcompensated for, and other types of investment has been under-compensated for. And so, we are acting to make the capital gains arrangements more neutral, more fair across different kinds of investment classes.
The big differences in the Budget and the Budget reply: Labor with a responsible Budget, Angus Taylor with an irresponsible Budget reply. Labor doing something about the intergenerational issues in housing, and Angus Taylor and his cheerleaders are saying and doing anything to protect and defend the status quo, which isn’t working anymore.
Now I’m conscious that the PM has been up in the last little while as well. So, I’ll only take a couple of questions. I’ll throw to you.
Journalist:
Treasurer, if you find in the next year or 2 that you’re not getting more young homeowners buying houses and that landlords withdraw from the market, therefore, there won’t be enough rental properties or rents will go up because some people do need to rent. Will you revisit that policy?
Chalmers:
Well, a couple of important points about that, Natasha. First of all, anybody who is negatively gearing now can continue to do so, and people can continue to make new investments and negatively gear them if they’re investing in new housing supply. So, housing supply is still the main game. It is our main focus, but it’s not our only focus. People can continue to negatively gear a new property, and that’s because that means they’re making a contribution to adding more housing supply to our communities and to our economy more broadly. Now, when it comes to the impact of these changes, they’ll be felt over time – 75,000 additional homeowning households over the course of the next 10 years because we are fixing a status quo which is broken.
Journalist:
Now, the hidden death tax in the testamentary trust for people’s wills, was that a deliberate policy or an oversight? And how does taxing inheritances help intergenerational equity?
Chalmers:
Everything that you just said then was wrong. And let me tell you why. There are no changes to death duties or inheritance taxes in the Budget that we announced on Tuesday night. As the Budget papers make very, very clear, the deceased estates, fixed trusts, and existing discretionary testamentary trusts are all exempt from the changes that we announced on Tuesday night. Now, in the future, people are still able to set up fixed testamentary trusts if they want to avoid the minimum tax.
Now of course there will be campaigns run by people with a partisan interest in this or a commercial interest in this but we have made it very clear that there are not inheritance taxes or death duties in the Budget that we handed down on Tuesday night. Deceased estates are exempt. Fixed testamentary trusts are exempt. Existing discretionary testamentary trusts are exempt. If people want to avoid paying the minimum tax into the future with the kinds of testamentary trusts that they set up in wills, they can continue to do that if it’s a fixed trust.
Journalist:
But you just said that in the future it will be increased for certain, like the testamentary discretionary trust. The tax will be increased for future trusts.
Chalmers:
People are able to set up a trust to avoid the minimum tax if it’s a fixed trust. We made that clear on Budget night in the Budget papers and that’s because what we are doing here is not about deceased estates, it’s more broadly in the tax system, better aligning the tax treatment of people who earn a living through wages versus people who earn a living through other legitimate ways. And so, I know that there’s a campaign being run, we expect that when changes are being made in the tax system more broadly, but this is a scare campaign, pure and simple.
Journalist:
Treasurer, a poll in [inaudible] today found changes to negative gearing, capital gains tax and trust have decreased trust in the government with nearly half of all voters. How are you going to rebuild that trust before the next election? And if you can’t, do you accept voters may punish you?
Chalmers:
I understand that some people will focus on that element, but other people will focus on the substance of the changes that we are making. We did take a difficult political decision to come to a different view in these important areas, contentious areas and we understand that the politics of that will be controversial and we see that reflected today. I would be more surprised if there was some kind of Budget bounce in the polls today, given this Budget was full of hard decisions, not handouts, given a lot of people are under additional pressure from this global oil shock, given there are the usual scare campaigns based on lies by people with a commercial or a partisan interest in this. But we’re not doing this to help our primary vote, we’re doing this to help more people into housing. We didn’t expect to get some kind of boost in the polls. What we are looking to get is a boost in the number of people who can get a toehold in the housing market.
Now, the easiest thing in the world would have been to take the easy political decision and leave a broken status quo in place. We understood when we took this difficult decision that it would be controversial. We know that some people will focus on that element of it. The thing that matters more to us than the politics is fixing a broken system which has locked too many Australians and too many young Australians in particular, out of the housing market.
Journalist:
Treasurer, you forgave 20 per cent of HECS debt for all people who had a HECS debt just before the last election. Students today starting university after that cut came in are paying full HECS debt. How is that intergenerational equity?
Chalmers:
No, the decrease in HECS debt is ongoing and if you look at the repayment schedules, for example, that makes it easier for people who are repaying those debts. Now, our political opponents and others campaigned against those changes. People are under pressure. Young people in our economy, in particular, they’re getting a raw deal right now and we are looking to change that, whether it’s the way that we fund education or whether it’s the way that we are taking these difficult decisions in the housing market.
Now, we recognise, even if our political opponents don’t, it’s not much point having a ladder if the first few rungs are missing. And people like Angus Taylor don’t understand that not everybody’s born at the very top of the ladder. And that ladder that we hear about from our political opponents and others, not much point in the ladder if the first few rungs are missing. And so right across the board, but particularly in housing, we’re taking important steps to rectify that.
Journalist:
Just on capital gains, I had a…
Chalmers:
A lot of questions from you, Natasha. I’ll just go over here for a second.
Journalist:
Just a question from Canberra. Would you consider a capital gains carve‑out for startups?
Chalmers:
We’ve been engaging with the startup sector. We do acknowledge – we acknowledged privately before Tuesday night, publicly in the Budget papers on Tuesday night, that there are particular issues when it comes to the cost‑based calculation in start‑ups, particularly in tech, and when it comes to VC. And so I’ve done some of that engagement already, even before Tuesday. That’s become public and more formal since then. I think the Treasury has engaged with the Tech Council and the Investment Council already. There’ll be more of that because we recognise that there are specific issues here, and so it’s not unusual for there to be consultation on implementation after a big policy change is announced, including a substantial change in tax policy, and so we’ll engage in good faith, and we’ll try and find a way through that works for both of us.
Journalist:
Will you extend the wage subsidy for early childhood educators because it runs out at the end of November, and operating [inaudible] higher fees without government?
Chalmers:
We’ll work through all of those issues. We’re obviously conscious of the big and important steps that we’ve taken to support one of the most important workforces that we have. And for too long, I think early childhood educators were paid too little to do one of the most important jobs that we have in our society. And so, we took steps to subsidise wages for ECEC for educators. We’re obviously aware of how that plays out in coming months and years, and we’ll consider that at the relevant time.
Thanks very much.