ANDREW CLENNELL:
What would you describe as the main theme of this Budget?
JIM CHALMERS:
This Budget is about cost‑of‑living relief at the same time as we invest in the future. It’s a responsible budget. It will be good for mums and middle Australia, good for families, pensioners, students and young people. And it will recognise the pressures that people are under. It will engage in this fight against inflation by showing restraint, by designing our cost‑of‑living policies in a way that take the edge off inflation rather than add to it.
CLENNELL:
So we can expect an increase in Commonwealth rental assistance?
CHALMERS:
You’ll have to wait until Tuesday night. I’ve seen with interest the daily speculation here on Sky about that. People will have to wait and see until Tuesday. But there will be additional cost‑of‑living relief in addition to a tax cut for every taxpayer. Those tax cuts are the foundation stone of the cost‑of‑living help in the Budget but there’ll be some more help for people as well.
CLENNELL:
I mean last year that increased by 15 per cent. Could we see something like that in terms of Commonwealth –
CHALMERS:
You’ll have to wait and see. I mean we’ve shown a willingness to take the pressure off people where we can, to ease these cost‑of‑living pressures where they’re most acute and you’ll see more of that on Tuesday.
CLENNELL:
The other thing I’ve speculated on, since you’re kind enough to mention it, is an extension of the existing energy bill relief scheme. Might we see that?
CHALMERS:
Again, we’ve shown a willingness in the past to take the edge of electricity bills and rent in previous budgets. The cost‑of‑living relief in this Budget won’t be identical to what we’ve seen in the past, but it will be substantial, and it will be in addition to that tax cut for every taxpayer.
If you think about that electricity bill relief, in the year to March electricity bills would have gone up almost 15 per cent if we hadn’t acted, instead they went up 2 per cent. And I think that has shown our bona fides when it comes to easing these cost‑of‑living pressures where we can so that we are part of the solution to this inflation challenge rather than part of the problem.
CLENNELL:
I mean you promised, and the grab keeps getting played, $275 reduction in power bills by 2025 during the election campaign, you, Anthony Albanese, several other now ministers. Is this the only way to get there, through a rebate?
CHALMERS:
Well that modelling was done in 2021 about an outcome in 2025. We’ve shown a willingness in the interim to take some of the pressure off these electricity bills in the last budget and in other ways as well, at the same time as we invest in the future of the generation of energy in this country.
CLENNELL:
Well it’s said that the energy bill relief, your childcare subsidy and the rental assistance last year reduced inflation by 0.5 per cent. Is that what you’re looking for again?
CHALMERS:
Well again, the cost‑of‑living help in this Budget won’t be identical to the last one, and one example of that is we’ve done the big change on early childhood education fees. But it is a good reminder that it is possible to provide this relief in the most responsible way, in a way that puts downward pressure on inflation rather than upward pressure on inflation.
CLENNELL:
Where does your reluctance to cut petrol excise come from?
CHALMERS:
Well what we’ve seen in petrol – I mean I acknowledge first of all that petrol is a big part of the cost‑of‑living pressures that people are under. In my neck of the woods around $2.30 a few weeks ago. It’s about $2.08 or thereabouts, the Brisbane average, today. And so we think instead of chasing the petrol price up and down we’ve found a more effective way to provide cost‑of‑living help to motorists and to the community more broadly. Tax cuts for every taxpayer will help there. The average tax cut’s about 36 bucks a week. But in addition to that some of these other cost‑of‑living measures that you are speculating about that people will hear more about on Tuesday.
So we’ve found a better way to provide that cost‑of‑living relief rather than chase the petrol price, which has been very volatile, and which might become more volatile given events and tensions in the Middle East.
CLENNELL:
So is it too expensive or is it people can’t even feel it anyway because the price is all over the place? What’s the view on it?
CHALMERS:
Well it’s hard to work out what the appropriate level of relief would be in a world where the petrol price might shift, 30 cents or 20 cents over the course of a few weeks. But we want to help motorists because we know that they’re under pressure, but we just think that there are more effective ways to do that elsewhere in the Budget rather than the sort of multibillion dollar outlays we’ve seen in the past when it comes to the petrol excise.
And also, once you do that with petrol excise it’s very hard, as we discovered, for that to end. People would like that help to go on indefinitely. The Budget can’t afford that. So we’re looking for value for money, we’re being responsible about it, we’re helping motorists with these cost‑of‑living pressures in other ways.
CLENNELL:
You’re about to pour $23 billion into the economy with the stage 3 tax cuts next year, and you have rejigged it at the lower year end meaning more will get spent. Look, I don’t think there’s going to be many of our viewers who oppose these tax cuts, but does the Budget model what effect that will have on inflation?
CHALMERS:
When we changed the tax cuts at around the start of the year we very deliberately put out the Treasury analysis that supported our thinking about inflation and the tax cuts.
And a couple of things are important there. First of all, the envelope is roughly the same as was already factored into the inflation forecast. That’s really important. We’re not, adding substantially to the envelope, the size of the tax cuts. But by rejigging them we think that it’s actually going to incentivise more labour supply. Labour supply’s been one of the challenges when it comes to inflation.
And so the Treasury analysis we released in January of this year made it very clear no additional pressure on inflation because the size of the tax cuts are broadly similar, and perhaps a modest improvement when it comes to labour supply.
CLENNELL:
All right. And the RBA’s monetary statement, they have inflation still at 3.8 per cent in December this year, 3.6 June 2025, 3.4 December 2025, 3.3 June 2026. Then we’re not even within the 2 to 3 per cent band they want inflation at in 2026. Could they be thinking they don’t cut rates by then or at least cut them maybe once and that’s it?
CHALMERS:
Well Governor Bullock’s had opportunities to talk about her own forecasts. Our forecasts take the Budget into consideration, so they’ll be a little bit different. It’s just a function of timing, not a function of opinion. So that’s one point.
The other point that is important to remember is even with that inflation figure that we got for the most recent quarter, we are still travelling better in annual inflation than we expected in the mid‑year update in December. We’re actually ahead of that. The near‑term Reserve Bank forecasts are broadly consistent with what we thought in December as well.
So we’re making progress in the fight against inflation, but it’s not mission accomplished because people are still under the pump and that’s why inflation’s a big focus of the Budget.
CLENNELL:
That’s all true but in MYEFO Treasury had inflation dropping to 2.75 per cent in 24–25. Now the Reserve Bank’s not saying that’s going to happen. Is that still your forecast for inflation?
CHALMERS:
We’ll update our forecasts in the Budget, as we would.
CLENNELL:
It’s gone up?
CHALMERS:
Well, you shouldn’t assume that necessarily because there’s also the impact of the Budget itself. So I’m not going to go through in any detail on the show today the inflation forecasts. They will be different to what they were in the mid‑year update. They’ll be different to the Reserve Bank’s only because ours takes the Budget into consideration and theirs doesn’t.
CLENNELL:
If there is another rate hike after this Budget do you take responsibility for that?
CHALMERS:
Look, I take responsibility for my part of this fight against inflation. You know, the government’s Budget is important when it comes to inflation but it’s not the only determinant of future movements in interest rates in either direction. It matters but it’s not the only thing that matters.
I take responsibility for the fiscal settings in the Budget. What you’ll see in this Budget is a combination of relief, restraint and also reform, and I take responsibility for that.
CLENNELL:
Let’s talk about migration. Your forecast for net migration for 24–25 in your last budget was 260,000. From what I’ve been reading that you’ve been telling journalists it’s remaining the same, but you’re now predicting 395,000 in this year after 518,000 last year, that’s 20,000 up on what you forecast in December.
How are you going to reduce that to 260,000 next year?
CHALMERS:
Well net overseas migration next year will be about half of what it was last year and that shows that net overseas migration is coming back to more normal levels. One of the reasons for that is the work that we’ve done, ending the pandemic visa, cracking down on the student migration system. All of this has had an impact.
What you’ll see in the Budget, yes, net overseas migration has been high in recent years, as the students largely but also overseas long‑term tourists have come back in stronger numbers than was anticipated before.
But net overseas migration is coming down, partly because of our efforts and partly because it’s normalising after that unusual post‑COVID spike.
CLENNELL:
Are you going to lift visa fees substantially in the Budget to help achieve this?
CHALMERS:
People shouldn’t expect to see that in the Budget. Obviously that’s something that we consider from time to time but on Tuesday there won’t be, you know, the kind of detail of those considerations.
CLENNELL:
You’ve said you have a wafer‑thin surplus this year, or you hope to, you wait until the final budget outcome. Isn’t it true without the level of immigration that we’ve had you wouldn’t have that surplus?
CHALMERS:
The Budget is in much better nick as a consequence of a range of things. In this Budget the main driver of the improvement is actually the labour market, the fact that more people are working, more people are earning more, is the primary driver of any upward revision to revenue in this Budget. That’s important.
Commodity prices are playing a role and have played a role as well. So there’s a range of sources. But what really matters when it comes to these revenue revisions in the Budget is what you do with it.
We will bank almost all of it again this year when these inflationary pressures are most acute, and that’s been the secret to getting the Budget in much better nick. That’s why we delivered the first budget in 15 years last year and why we’re shooting for a second this year.
CLENNELL:
But immigration’s helped, hasn’t it?
CHALMERS:
All of the time immigration has a role to play in our economy and it has implications for our Budget, not just in the course of the last couple of years. Australia’s migration program has been strong really since the war. It’s been part of the success of our communities and the strength of our economy.
But it’s not the primary driver of what we’re seeing in the Budget. A primary driver of that is what we’re seeing in the labour market.
CLENNELL:
You’ve reduced gross debt and you’ve talked about that, but it still climbs to over a trillion, doesn’t it? I mean you used to talk about a trillion dollars debt, we’re still going to get there, aren’t we?
CHALMERS:
We have saved so much debt by managing the economy much more responsibly than our predecessors, and the consequence of that is we’re going to save about $80 billion in interest on that debt over the course of the next 10 years because of our responsible economic management.
So we’ve got those debt levels down, in the year that we’re focussed on I think by about $150 billion lower than what we inherited from our predecessors and that’s important.
CLENNELL:
That’s still getting to a trillion.
CHALMERS:
The debt trajectory that we inherited when we came to office – a trillion dollars in Liberal debt – almost nothing to show for it, it’s been a big focus, a big reason for our responsible economic management, a big reason why we’re showing spending restraint when it comes to real spending growth in this Budget.
CLENNELL:
I had Jane Hume on earlier. She basically confirmed they’re going to go to the election with a different tax cuts package to yours. But she said it won’t be everything they’d previously had plus your package, if you understand what I mean. It won’t be what you – say it would cost $40 billion over 4 years. What’s your reaction to that?
CHALMERS:
Well let’s see whether they’re going to unwind our fairer cost‑of‑living tax cuts for middle Australia. You had Sussan Ley on last week, Jane Hume on today. They are all over the shop when it comes to these tax cuts.
If they’re going to give bigger tax cuts for people who are already on the highest incomes, they need to say on Thursday night how they’ll pay for that.
You know, they’re supposed to have a nuclear policy by now, a supermarket divestment policy by now. We don’t know what they think about tax. Sussan Ley said she wanted to unwind them, our tax cuts. Let’s get some clarity.
You know, we have got all of this nasty negativity from the Liberals and Nationals but no policy alternatives. There’s been 2 years now where we have absolutely no idea what their economic policy is, and that’s because their nasty negativity is no substitute for economic credibility.
CLENNELL:
Could you see a situation where you go again on tax cuts? If they come up with another proposal, you go to the election with yet another tax cut proposal?
CHALMERS:
That’s not something we’ve been contemplating or considering. We think there are other ways to provide that cost‑of‑living help and we’ve got $107 billion in tax cuts flowing in the coming years from July already. That will provide that average tax cut of $36 a week in addition to the other cost‑of‑living help that we are providing.
We do have fiscal constraints. We’re trying to get the Budget in much better nick. We’re easing cost‑of‑living pressures at the same time we’re investing in the future. All of those things are important and so you have to weigh up your priorities.
CLENNELL:
You’ve pledged more money for the urgent care clinics today. Can you tell me a bit more about the commitment to health in the Budget?
CHALMERS:
Yeah, so there’ll be $8.5 billion of new investment in the health system, almost $3 billion more to strengthen Medicare further, which is a huge priority of our government. And $227 million of that will be to open another 29 urgent care clinics.
These urgent care clinics have been spectacularly successful, particularly for families looking for health care for kids outside of hours. Incredibly successful the ones that we’ve already built. We want to build on that because out‑of‑pocket health costs are a big part of the cost‑of‑living challenge, and we want to ease those pressures where we can.
CLENNELL:
And you promised super on paid parental leave, what’s the cost of that to the Budget?
CHALMERS:
That’ll cost $1.1 billion in this Budget. But once it’s fully up and running it’ll be a bit north of $600 million a year. So a really substantial investment in the mums and dads of our country to make sure they’re still getting super when they’re on the government paid parental leave scheme.
CLENNELL:
Do you expect to deliver another budget in March ahead of an election?
CHALMERS:
Well that’s up to Anthony, when we go to the election. My expectation is we’ll go full term and I’ll be ready to go to deliver a fourth budget.
The reason why that is less relevant to me than you might anticipate is because what I’ve tried to do with this Budget and what we have tried to do is to make the right budget for the economic cycle rather than the political cycle.
My view is if you get the economics right the politics will take care of themselves. So whether there’s another budget in March or May next year or whether there’s not, I’ll be ready to go in either situation. But also our job is just to continue to make the right decisions for the right reasons, to be conscious of the economic conditions and the pressures that people are under, and the politics will take care of itself.
CLENNELL:
And what’s your bet on a rate cut before the election?
CHALMERS:
Nice try, Andrew. I mean I don’t know how many times we’ve spoken about this, but you know that I don’t come at those sorts of questions. I’m focused on my job. The Reserve Bank will do its job independently.
CLENNELL:
I look forward to the day we’re not talking about inflation. Treasurer, thanks so much for your time this morning.
CHALMERS:
Thanks Andrew.