ANDREW CLENNELL:
Jim Chalmers, thanks so much for joining us.
JIM CHALMERS:
Good morning, Andrew.
CLENNELL:
Now, Treasury boss, Stephen Kennedy and Treasury have confirmed that on December 11 last year they were tasked with finding cost‑of‑living relief that wasn't inflationary, and that occurred in a meeting between you and Dr Kennedy, or a conversation. Did you or your office direct him then or in the weeks afterwards to look at the stage three tax cuts?
CHALMERS:
Well, it's now a matter of public record, Andrew, because of the testimony from the Treasury and what we've said publicly that we made it clear to the Treasury that we were looking for more cost‑of‑living options. We needed them to be bigger and broader are but still not inflationary, the Prime Minister made that point publicly and privately, as did I.
What the Treasury did at that meeting on the 11th of December was indicate that they thought the best way to satisfy those objectives was via the tax system. It became increasingly clear to us over the course of the summer that in needing to go bigger and broader with cost‑of‑living relief without putting upward pressure on inflation, that the proposal that the Cabinet decided on the 23rd of January was the best way to go.
CLENNELL:
So Stephen Kennedy told you at that meeting the best way was changing these tax cuts.
CHALMERS:
He indicated to me around that time – I didn't keep a record of it, but the Treasury officials have said it's the 11th of December and I've got no reason to dispute that. He indicated around that time that he thought this was the best way to go and he communicated that to his officials but it was already, I think, broadly known that the government was in the market for more ideas for more cost‑of‑living help for more people and that's what we delivered with the tax cuts that the Cabinet determined on the 23rd of January.
CLENNELL:
Did he have any other options?
CHALMERS:
I'm not going to go into the ins and outs of the discussions I had with the Treasury Secretary. I think as he made clear, I talk to him all the time; I've got a terrific collaborative working relationship with him and with his Treasury colleagues, we meet very, very frequently, we speak very frequently as well. He knew that we were in the market for cost‑of‑living ideas, the Treasury knew that as well. It became increasingly clear, I think, to all of us between that period and the Cabinet decision towards the end of January that this was the best way to go, and the reason it's the best way to go is because every taxpayer gets a tax cut up and down the income scale, but there's more relief for more people to deal with the cost of living.
CLENNELL:
Was the LMITO looked at, was cutting the petrol excise looked at? Did Treasury present these as options either verbally or in writing?
CHALMERS:
Well, a couple of things about that. First of all, I've indicated publicly that the petrol excise wasn't in the mix. When it comes to the LMITO, we found a better, a permanent way to provide tax relief to more people, including people on low and middle incomes with an emphasis on people on low and middle incomes, so we found a much better way to do that.
The LMITO is a very different way to deliver tax relief, and as Josh Frydenberg said, and as Jane Hume has said, it was never intended to be a permanent measure of the tax system. The Coalition has made up all kinds of stories about that since then, but Josh Frydenberg and Jane Hume made it clear at the time when they budgeted for it to end in 2022, that it wasn't an ongoing feature of the system, and what we've found is we've found a way to deliver a permanent tax relief.
The Opposition leader was just talking about $400. The average worker gets something like $1,500 – which is more than double what they were receiving under the old stage three. So we found a better way to do it, a permanent way to do it, with a much bigger emphasis on low and middle incomes at the same time as we deliver a tax cut to every taxpayer.
CLENNELL:
All right. You first floated changing these stage three tax cuts in about September 2022. How did you talk the PM around this time?
CHALMERS:
That's not exactly the right way to think about it, Andrew. When we came to office in the first half of 2022, Katy Gallagher and I made it really clear that we were going to run a ruler over the whole budget; that's what incoming governments do. We were inheriting a trillion dollars in Liberal Party debt with almost nothing to show for it, and so in ways that I'm comfortable with, I began a conversation about budget repair. This is a very different proposition – what we have put to the parliament for the support of the parliament. What we're talking about now is delivering the same amount of tax relief, but in a much, much better way, better for relief and better for economic reform, more relief for middle Australia, and the sort of economic reform which will boost labour market participation and work incentives.
And so what we're proposing here is really important. It will give people a bit more help, but it will also reform the economy. There's more than one way to reform the tax system, and what we've proposed is the best way.
CLENNELL:
All right. Mr Chalmers. Let me play you this evidence from Stephen Kennedy, your head of Treasury, to a Parliamentary Committee on Friday.
[Excerpt plays]
MATT CANAVAN:
Have you had any discussions with the Treasurer or the Treasurer's office, Dr Kennedy, about changes to negative gearing?
STEPHEN KENNEDY:
I talk to the Treasurer about every single part of the tax system. In fact we published a report a couple of weeks ago called the "Tax Expenditure Insight Statement" that shows the distributional features of all parts of the tax system including negative gearing. So I'm talking to him about all parts of the tax system.
[Excerpt ends]
CLENNELL:
Okay, Mr Chalmers, in your time as Treasurer, have you ever sought or received advice from Treasury in terms of changes to negative gearing?
CHALMERS:
I think as the Treasury Secretary makes really clear in the clip that you've just played, I speak with him about all aspects of the tax system, I'm briefed from time to time on different elements of it, and again, as he has rightly pointed out, we released at the end of January the Tax Expenditure Statement which covers all of these kinds of issues.
I think it would be strange, frankly, if there were large parts of my portfolio that weren't a subject of discussion between a Treasurer and a Treasury Secretary. I'd be surprised if that wasn't the case under my predecessors of both political persuasions as well.
CLENNELL:
In which case, have you sought or received advice in terms of changes to Capital Gains Tax?
CHALMERS:
It's not something that we're considering, Andrew, no. It's not something that we're proposing, it's not something that we're working up. And the reason why I think you're asking me about this, the reason why our political opponents make such a big deal of this is because they would rather us talk about what we are not proposing, because they can't defend their position on what we are proposing –
CLENNELL:
Okay, all right. Have you –
CHALMERS:
What we're proposing here are bigger tax cuts for more people to help with cost of living –
CLENNELL:
Let me take you back to the question.
CHALMERS:
I understand our opponents want to defend their position –
CLENNELL:
Mr Chalmers, let's forget your opponents –
CHALMERS:
And that's why we're having this conversation –
CLENNELL:
Let's forget your opponents for a second. Let's just say it's me and you. Have you ever sought or received advice in terms of changes to the taxing of trusts, while Treasurer?
CHALMERS:
I have exchanges with the Treasury Secretary about all elements of the tax system, not because we are proposing to change that or the other example that you gave a moment ago. I like to understand all elements of the budget, all elements of the tax system. I think it would be strange if my predecessors, and indeed my successors didn't take that approach.
CLENNELL:
Would you like to make changes to negative gearing?
CHALMERS:
No, that's not something that we're proposing, not something that we are considering, not something that we are working up. We've got, I think, a very broad and very ambitious housing agenda, and we've got a pretty full book when it comes to tax reform, and our focus is on legislating that, not just our cost‑of‑living tax cuts for middle Australia, but also changes to the PRRT, changes to superannuation tax concessions; we've got a whole multinational tax agenda, issues around compliance, cleaning up after the PwC scandal. There's a whole bunch of tax reform under way. That's our focus. Our opponents and others want to focus on the things we haven't proposed because they can't defend their position on the things that we have proposed.
CLENNELL:
Why wouldn't you look at restricting negative gearing, the ability to negatively gear, claim that tax deduction to one or two properties per person? Why in Australia do we have people with 20 properties who can get a tax deduction on each one?
CHALMERS:
Well, I think what we've shown over the course of the last 18 months is we've found a whole bunch of other ways to support the housing market and try and build more homes. We do have a huge challenge in our economy when it comes to vacancy rates, when it comes to rents, and that's why we are investing billions and billions of dollars in new initiatives, a number of new initiatives, to try and build more homes, and that's been our focus. And as I said a moment ago, we've got that big agenda on housing, we've got a big agenda on tax reform which is already out there, and much of it is before the parliament, and that's our focus.
CLENNELL:
Isn't it just because it's too hard politically for you to do that, in your view?
CHALMERS:
I think what we've shown, Andrew, particularly in the last couple of weeks, is that we are prepared to do something if it's politically difficult, if it's right for people and right for the economy –
CLENNELL:
Okay.
CHALMERS:
That's the approach that we've taken when it comes to our cost‑of‑living tax cuts. We knew it would be contentious and contested but we did it because it's the right thing to do, and we fronted up and explained why we changed our position.
CLENNELL:
Now are you considering changing the taxing of trusts, because you have taken money, legislated due money off PAYE taxpayers who earn more than 150K a year. Don't a lot of people who earn over that avoid tax through trusts? Isn't that worth targeting?
CHALMERS:
First of all, people on more than $150,000 get a tax cut, in fact they still get a generous tax cut and I heard the way that you just described it then, and others have described it that way. Every taxpayer gets a tax cut right up and down the income scale, even as we've established this bigger emphasis on the working families of middle Australia and young people. So people are still getting a tax cut, and a decent tax cut at that.
We are not convinced by the arguments that say that our changes to the old stage three tax cuts will make a big difference to the way that people manage their tax affairs when they're on the highest incomes, and that's because they're still getting a tax cut.
CLENNELL:
What about trusts? Are you going to look at trusts?
CHALMERS:
No, that again fits into the same category as the others, Andrew, that's not something we've been working up or considering. Our focus has been on these cost‑of‑living tax cuts for middle Australia. We're very proud of them, we're very happy to explain why we've come to this view and what it means for people, and again, there's this focus, unfortunately, on what we're not proposing, when I would rather focus on what we are proposing because it will make a bit of a difference to the people who are facing these cost‑of‑living pressures –
CLENNELL:
All right, let's focus on what you're proposing.
CHALMERS:
If our political opponents, Andrew, don't like these tax cuts, if they don't like these tax cuts, why are they voting for them? –
CLENNELL:
All right. Again –
CHALMERS:
And if they think we are wrong, why aren't they doing what Sussan Ley did and say that they'll repeal them?
CLENNELL:
In my past two shows I've asked Anthony Albanese and Tony Burke whether someone earning $160,000 a year is in middle Australia. In your view are they in middle Australia?
CHALMERS:
I think so, Andrew, and that's why we're giving every Australian taxpayer a tax cut. I think of middle Australia as the people who get up and work hard to provide for their loved ones and get ahead. And what we've been able to demonstrate here, and there were figures in the last couple of days in The Australian, a piece by Troy Bramston showed the benefits for working families, the benefits for young people, the benefits for people in the care economy and blue collar workers and people in the services sector where we're going to need workers into the future.
And so what we've been able to do here is we've got a very firm focus on middle Australia, people in the suburbs and regions, people who work hard to provide for their loved ones and get ahead and that's what middle Australia is all about.
CLENNELL:
There was a memorable exchange between you and Paul Keating reported in The Australian a couple of years back about your home area of Logan and his of Bankstown. Do you know what the average median house price in Logan and the average median house price in Bankstown is these days?
CHALMERS:
I don't have all of the averages for every town written on the back of my hand, Andrew, but I know that people are under pressure in both of those communities –
CLENNELL:
All right, let me tell you –
CHALMERS:
I'm proud to represent Logan City, that's where I'm coming from here today, and I know that Paul was very proud to represent his community too. We both grew up in the communities that we represent, we're grounded in our local communities, and that's why I'm doing everything I can to deliver, not just for the workers of this community, but the workers of every community around Australia.
CLENNELL:
Well, okay. Let me – I'll tell you; I wouldn't expect you to know that. In Logan it's $525,000, in Bankstown it's now – wait for it – $1.2 million for a house. Does that surprise you, and does that give you a bit of pause when it comes to what constitutes well‑off in your city compared to what's well‑off in Sydney?
CHALMERS:
I do understand that in different parts of Australia the pressures are different. In some parts of Australia the pressures are more intense than others, but that's one of the motivations, frankly, for trying to get a much, much better outcome for middle Australians, because people are under the pump, we understand that, and housing costs are a big part of the story.
And the answer to that is not to just kind of curl up into a little ball and leave the old stage three tax cuts in place, even though they dudded people on low and middle incomes, but to do something meaningful to try and help people who are under mortgage pressure and under housing pressure, whether they're homeowners or renters, and that's what we're trying to do here with our cost‑of‑living tax cuts for middle Australia, is recognise those pressures, but more than just acknowledge those pressures, try and help people with them.
CLENNELL:
Now Peter Dutton just said, if elected, he'll reverse the Right to Disconnect Law, assuming it's going to go through. What's your reaction to that?
CHALMERS:
Well, first of all, they had an opportunity in the parliament to vote against this being a criminal matter, and they voted to leave that in place, and that just shows they'll always put politics before the working people of this country.
These Right to Disconnect Laws are just about making sure that people get a bit of down time, you know, a bit of time with their families and with their loved ones. It's a common sense change. It just says if it gets out of hand you can go to the Commission, and it's all about recognising that our economy is changing, technology is changing, the workforce is changing, and we don't want people to have to be on call 24/7 and just to be paid for a fraction of that.
So it's a common‑sense change, I know that there's a range of views, I know the Coalition will play their usual nasty and negative politics about it, but I think the Australian working people of this country know that we're trying to make sure that as our economy and our society changes and as work changes, we want people to be beneficiaries rather than victims of that change, and sometimes that means closing loopholes or doing the sorts of things that we're proposing with the Right to Disconnect.
CLENNELL:
And just finally, you would have seen this incident involving Barnaby Joyce during the week. You, yourself, have said you probably overdid it on the drink before in an article last year. Do you have a reaction to this? Should he go from the front bench, do you think? I should point you hardly drink at all now.
CHALMERS:
I haven't had a drink for more than four years now, Andrew. I think that question that you asked me is really a matter for the National Party. I know that people will have a view about it; I know that people will have their fun with it.
From a personal point of view, I don't like to see anyone in that state. I find it a little bit disturbing, and so I'm not going to take shots at Barnaby about it. He needs to explain it and I'll focus on doing my job.
CLENNELL:
Treasurer, Jim Chalmers, thanks so much for the chat this morning.