JIM CHALMERS:
This will be a responsible Budget for Australians doing it tough. It has three main goals, which is to provide responsible cost‑of‑living relief in a targeted way for the most vulnerable, but also lay the foundations for future growth in our economy all at the same time as we put the Budget on a much more sustainable footing.
ANDREW PROBYN:
Okay, well, let's go straight to the cost of living. Will Tuesday's Budget put downward pressure on inflation?
CHALMERS:
Well, we've designed and calibrated this Budget so that it takes pressure off the cost of living rather than add to it. Our aim throughout, whether it's our cost‑of‑living package or our broader investments in energy and in other ways to grow the economy with low inflation, is to make sure that this Budget is part of the solution to high inflation and cost‑of‑living pressures, not adding to the problem.
PROBYN:
So, how will you make sure that the financial help you give pensioners and those on government payments doesn't put pressure on inflation?
CHALMERS:
Well, the cost‑of‑living package in its entirety will take the pressure off inflation next year because, for example, in areas like our energy bill relief, that will take some of the edge off these high electricity bills and therefore have an impact on the consumer price index, the measure of inflation. And there are other ways that we can do that as well. But we've been really cognisant all along ‑ we're very aware that whatever help that we provide needs to take the pressure off the cost of living, not add to it. And that's one of the key design principles behind the Budget.
PROBYN:
Now, you've had to negotiate, as I understand, eight different energy agreements with states and territories subsidising power bills for small businesses and those at particular pressure. How does that translate into what sort of dollar figure we are we talking about per household?
CHALMERS:
Well, more than five and a half million households will get some assistance with their electricity bills and around a million small businesses will be eligible as well. And they will all be eligible for several hundred dollars to help with their electricity bills to take some of the edge off what is the key drivers of these cost‑of‑living pressures. And so, we have had to strike arrangements with each of the states and territories. It will be different depending on where you live and what the electricity prices look like. We'll make all of that clear on Tuesday.
PROBYN:
Can you give us a sneaky on the maximum household benefit?
CHALMERS:
People will be getting several hundred dollars if they're on pensions and payments or a small business. But as I said, depending on where you live, depending on what the price pressures are, depending on how much the states and territories are prepared to kick in because this is a co‑investment with them.
PROBYN:
Does your fear of worsening inflation explain why you will resist giving all JobSeeker recipients a boost to their payment?
CHALMERS:
First of all, I would encourage your viewers to be careful about the assumptions that people are making about the Budget on Tuesday night. There will be cost‑of‑living relief which extends beyond one age cohort or another. But clearly what we've tried to do with the Budget broadly, particularly the cost‑of‑living package, is to try and take some of the pressure off inflation rather than add to it. That is the case across the cost‑of‑living package next year. It will have a number of elements, it will be targeted to the most vulnerable and it won't just be limited by age.
PROBYN:
Okay, you're changing the indexation for government‑funded services. What does this mean for mental health services, homelessness, housing?
CHALMERS:
This is a really important change because it makes it easier for community organisations and service providers to pay their bills and pay their workers. They are under substantial pressure. And what the Finance Minister is doing with this change, this $4 billion change, is to make it easier for people to pay their bills and pay their workers so they can continue to provide these absolutely essential services in our communities.
PROBYN:
Right, so that sounds like, what, billions of dollars?
CHALMERS:
$4 billion in total, roughly. And what it means is if you are a health provider, you're a service provider, you might be doing suicide prevention, you might be providing other key services in our communities – it makes your funding base stronger, more sustainable, and it means you can pay your bills and pay your workers.
PROBYN:
Wages are starting to pick up, which is a good thing. But when precisely will wage growth actually overtake inflation?
CHALMERS:
We're doing a little bit better on wages and the inflation forecast will be a little bit better over the next couple of years as well. And what that means is, instead of expecting real wages growth in the middle of next year, we're expecting it at the beginning of next year. And this is what happens when you have a government which has wages growth as a central economic priority versus our predecessors who tried to suppress wages for the best part of a decade.
PROBYN:
From a $37 billion deficit in October. We're back in black, aren't we?
CHALMERS:
All will be revealed on Tuesday night. Andrew, as you'd expect, there will be a substantial improvement in the Budget in the near term, but the pressures on the Budget after that intensify rather than ease. We'll make clear on Tuesday night what the Budget position is. What's already clear is that you wouldn't even be asking me this question if we hadn't taken a really responsible approach to these upward revisions to revenue in the Budget, banking, almost all of it, so that we can get the Budget in a much stronger position. This is a very different approach than what our predecessors do.
PROBYN:
Well, let's assume for a moment we are back in black. Has it all come from the
commodity boom?
CHALMERS:
No, that's a common misconception about the improvement in the Budget. Commodities are an important part of the story, but not the biggest part of the story. Only about a fifth of the improvement is from higher commodity prices. The biggest part of it – the 40 per cent contribution – is from improvements in the labour market, lower unemployment and higher wages growth. That makes the biggest contribution 40 per cent, 20 per cent is commodity prices and there are other contributors beyond that. So, commodity prices are important, but not the biggest part of the contribution.
PROBYN:
You've referenced restraint a few times, but there's a lot more money needed for defence, disability, aged care, health and the like. Where's all this money coming from?
CHALMERS:
I think every Budget needs to have a combination of spending restraint when you get upward revisions to revenue combined with savings. And there will be substantial savings in the Budget on Tuesday, as well as modest but meaningful tax changes which make the Budget more sustainable as well. So there was a combination of that in October, there will be a combination of that on Tuesday as well because we do need to make room for these spending pressures. Everything that we want to do in our economy and in our communities needs to be built on a foundation of responsible economic management and that's what will define the Budget I hand down.
PROBYN:
Well, you have been looking at options to improve the taxation from oil and gas companies. Where have you landed?
CHALMERS:
Well, we're announcing today a change to the PRRT, which means that Australians will get a fairer return on their resources sooner. And what this change means is about $2.4 billion in the forward estimates, which the gas companies wouldn't be paying, the offshore LNG projects wouldn't be paying were it not for this change. Now, this means more tax sooner from these projects and it means that it can help fund our cost‑of‑living package and other priorities in the Budget.
PROBYN:
You've been negotiating with all of the oil and gas companies. What are they telling you about this option? I understand it's one of a few that were put to them.
CHALMERS:
The Treasury put three options to us, but recommended the path that we're going down today. And there has been, I think, as people would expect, a substantial amount of consultation with the sector. Because what we want to do is we want to make sure we get more revenue sooner but we also want to recognise that we want to see investment in the sector, we want to see supply out of these projects and we want to be careful with our international relationships. And so, this option that we've settled on is the one that brings more revenue into the forward estimates, but it also is cognisant of those other pressures.
PROBYN:
This will have to be legislated. You won't want to be dealing with the Greens who want to bring down the oil and gas sector as a whole. What's your message to the Liberals?
CHALMERS:
Well, I think the whole Parliament should support what we're proposing today. This is about more revenue sooner, a fairer return on resources, but making sure that we are cognisant of investment and supply. My message to the Greens in the Senate is if they vote against this, they're voting for lower taxes from these projects. And my message to the Coalition is that every time they vacate the field on important, modest, responsible, but meaningful changes like what I'm proposing today, they deal the Greens in. And that's not something the industry wants.
PROBYN:
On migration, this Budget is going to show a big surge – 400,000 this year, 315,000 the next. If economic growth doesn't keep up with the growth in population, are we going to have a per capita recession?
CHALMERS:
Well, the Budget will forecast a pretty substantial slowing in the economy and it will slow per person as well. Those numbers that you cited are accurate, but they're not government policy. They're not a target that the government has set. It's a consequence of the students coming back faster than anticipated and the long‑term tourists coming back faster than anticipated, plus more Australians staying at home. That will help our economy, but it does create pressures elsewhere. That's why we want to see the Parliament pass the legislation to build more homes. It's why we've got a whole range of measures to make sure that we can accommodate the students and the tourists in ways that help our economy.
PROBYN:
So, it is possible we have a per capita recession?
CHALMERS:
You’ll see all the numbers on Tuesday night, but what I'm telling you is that the economy will slow and it will slow per person, and it would slow much quicker were it not for the contribution being made by students and tourists.
PROBYN:
Lastly, on stage three tax cuts, you've had all manner of people, including folk on your own side, urgently asking for a recasting of those tax cuts. Former Treasury boss Ken Henry says that without them, we're not going to recover any of the bracket creep. Is he right?
CHALMERS:
Well, a couple of things about that. I mean, the tax cuts are in the Budget because our position hasn't changed and they were legislated some time ago. They don't come in for more than a year now and so they haven't been the focus of our deliberations for this Budget. The point that Ken makes about bracket creep, I share people's concerns about bracket creep, but there is more than one way to return bracket creep to people. There is more than one way to provide tax relief. And one of the features of these particular tax cuts, which is too often ignored, I think, is that they kick in around $45,000 a year. We have always supported tax relief for people on low and middle incomes. Part of the motivation of that is returning bracket creep, but it hasn't ‑ changes to stage three haven't been a focus of our deliberations in this Budget.
PROBYN:
Jim Chalmers thanks for your time.
CHALMERS:
Thanks for yours.