JOHANNA NICHOLSON, HOST:
The Treasurer Jim Chalmers has revealed that Tuesday’s Budget will include a near $33 billion increase to social security payments, mostly as a result of high and persistent inflation.
FAUZIAH IBRAHIM, HOST:
Mr Chalmers has told the ABC that Tuesday’s Budget, which is his first as Treasurer, will be family-friendly, but he concedes that wages are not expected to equal or exceed inflation until the year after next. He sat down with the ABC’s Political Editor Andrew Probyn.
ANDREW PROBYN, JOURNALIST:
Treasurer, thanks for joining us. You’ve variously described your first Budget, this Budget, as a bread and butter Budget, workman-like, not flashy or fancy, but one that’s got tough decisions. What’s the central theme?
JIM CHALMERS, TREASURER:
This will be a family-friendly Budget which recognises that our pressures on the economy come from around the world, but they’re felt around the kitchen table. So it will be a responsible Budget. It will be solid, sensible, and suited to the times, because when you’ve got all of this uncertainty around the world, the best possible response is a responsible Budget at home, and that’s what this will be.
PROBYN:
Inflation is public enemy number one here. Will Australians have to put up with higher cost of living for longer?
CHALMERS:
Inflation is the primary influence on this Budget. It guides our approach to cost of living relief. It guides our approach to targeted investments in a stronger, more resilient economy. And it guides our approach to starting to unwind some of the wasteful spending that we’ve seen in the budget.
So we expect inflation to peak towards the end of the year – higher than we would like. And then it will persist for a little bit longer because of the impact of the natural disasters, but most substantially the impact of the war in Ukraine, which is pushing up energy prices for longer.
PROBYN:
But you said it’s going to be lingering a bit longer. It’s actually going to be five and three-quarters you say by the middle of next year. It’s going to be about three and a half in mid‑2024. This is all pretty grim. When do you anticipate wage growth to at least match inflation?
CHALMERS:
On the current Treasury forecasts, inflation will persist for longer than we’d like, and wages growth, which is beginning to happen in our economy, will cross over with inflation some time we think the year after next.
So we’ve been upfront with people. We do have falling real wages. That’s a big influence on what we’re trying to do in the budget. It has two parts: first of all, how do we get wages moving again in this country, and the budget will be about that. But also how do we help inflation moderate over time. You do that by making sure your cost-of-living relief is responsible and that your investments in the economy don’t push up inflation. And those are key elements of our strategy.
PROBYN:
But that effectively means that Australian workers will be going backwards for another two years, doesn’t it?
CHALMERS:
We’ve been upfront about what’s happening with real wages. Real wages were falling before the election, and they’ve been falling since the election. That’s because inflation is higher for longer as a consequence of the war in Ukraine, natural disasters and issues in our own supply chains here at home, and also a consequence of a decade now of wage stagnation. Our predecessors had a policy which was that wage stagnation was a deliberate design feature of their economic policy. We take a different approach. The Budget will show that wages will move substantially, but they won’t cross over in our estimation or the Treasury’s estimation, until we get that inflation under control.
PROBYN:
Cost of living not only affects workers, families; it also affects government payments. Ensuring that the most vulnerable are protected, that’s costing you a pretty penny too, isn’t it?
CHALMERS:
One of the most important elements of our Budget is the $33 billion in extra funding for pensions and payments. And that is partly a consequence of the indexation which is there to try and keep up with inflation, particularly when it’s high, as it is right now. And of that $33 billion in extra funding for pensions and payments, about a third of that is the aged pension, another third of that is JobSeeker. And we know that people are still doing it tough, but one of the pressures on the budget is making sure we can find room for that indexation so that people who are on pensions and payments get a little bit of help twice a year to try and keep up with this skyrocketing costs of living.
PROBYN:
So given all of this – the pressure on households, the fact that your Budget is going to be absolutely awash with extra revenue, about $100 billion I understand over the next four years – what extra help can you give households to protect them from this relentless cost of living?
CHALMERS:
First of all, that very welcome improvement in revenue in the near term doesn’t make up for some of these structural, persistent spending pressures on the budget. For example, the fastest growing area of spending in the budget is actually the interest rates, the borrowing costs on the trillion dollars of debt that we’ve inherited. So that’s a big and growing area of spending. Same with the NDIS and aged care and health care and defence. And so that temporary boost to revenue is very welcome, but not sufficient to cover some of those costs. When it comes to providing relief for people in the economy, we’ve chosen to make sure that any cost-of-living relief that we provide has an economic dividend. That’s why we’ve got a focus on child care and paid parental leave, cheaper energy costs, cheaper medicines and getting wages moving again in a sustainable way.
PROBYN:
But not every household will benefit from cheaper child care, fee-free TAFE. Surely there’s something else you can do for households.
CHALMERS:
In addition to that we’ve supported a decent pay-rise for minimum wage workers. We’re supporting a pay-rise for workers in the care economy. We’ve got those indexation arrangements for people on payments and pensions. But we do understand that people would like us to be there when times are tough, and we are, and we will be in this Budget. But our responsibility when we’ve got lots of inflation is not to spray money around in an indiscriminate or untargeted way because that would make our inflation problem worse.
PROBYN:
So, you’re going to bank it rather than spend it?
CHALMERS:
We will take a really responsible approach to these revenue upgrades. That’s another difference between us and our predecessors. Because when inflation is high and interest rates are rising and there’s uncertainty around the world, you need to rebuild our buffers in the budget. The budget’s got a big structural problem that we need to deal with. We welcome the near-term improvement in commodity prices and tax revenues, but it doesn’t make up for some of these structural issues that we need to deal with.
PROBYN:
What do you say to the 10 million Australians who will be paying extra tax, higher tax, from July 1 next year because you are removing the low and middle-income tax offset?
CHALMERS:
I don’t think there’s an expectation in the Australian community that that low and
middle-income tax offset was going to continue. I think that is been clear now for at least a year, if not more, that that is coming off, in the same way that some of the other supports have come off. And I want to level with your viewers, Andrew, and with people around Australia. There are lots of things that we would like to do in this budget that we can’t afford to do. When you’ve got all of this global uncertainty and all of this inflation, you need to put a premium on what’s solid and sensible and suited to times, and that’s what we’ve done in this Budget.
PROBYN:
One of the structural problems you’ve got with your Budget is the National Disability Insurance Scheme. Is it at risk of becoming an economic albatross with its growth?
CHALMERS:
I don’t see it that way. I see it as an opportunity important to support Australians with a disability. We want to put people at the centre of that. One of the reasons why Minister Shorten has got the review into the NDIS was because we want to make sure that every dollar that we spend on that we’re getting maximum value for money. And I think that’s what people expect of us. I think it’s self-evident that the costs of the NDIS are rising. And this is one of the things that we need to make room for in the budget at the same time as we make it as efficient as possible.
PROBYN:
But you worry about its sustainability?
CHALMERS:
It will be a feature no matter what, going forward. But we need to make sure that when the costs are growing, as they are, that we’re getting value for money. And we judge that value for money by what it means for Australians with a disability. We want them to be central, front and centre, as we review the scheme via Minister Shorten. And we hope that we can make it the best version of itself. We created it, we believe in it, it will be central, and we need to make sure that it’s efficient and we’re getting value for money in it.
PROBYN:
You said this week, or you remarked that in the time, the short few months that you’ve been Treasurer, there have been four British Chancellors of the Exchequer. What lesson is there in the Liz Truss economic plan for your first Budget?
CHALMERS:
First of all, we don’t take shots at the domestic politics of another country. And on a personal level I wish Liz Truss well and Kwasi Kwarteng well. I had the opportunity to spend some time with him quite recently. But I think there are very clear lessons from economic policy in the UK. You need to get your fiscal policy and your monetary policy nicely lined up. You need to make sure that governments aren’t working against the difficult job that central banks are asked to do. And I think what we’ve done in the Budget is we have nicely lined up those two things. I think that’s the primary lesson.
But I think as well if you want to make big changes in the Budget you need to have a run-up, you need to explain them to people, you need to make sure that you’re bringing people along on the journey. And I think that’s another lesson from what we’ve seen.
PROBYN:
Lastly, Treasurer, if Tuesday’s budget, your first, is mostly a reconciliation Budget, will May be the reform Budget?
CHALMERS:
I think there’ll be elements of both of those things in all of the Budgets that we hand down this term. There’ll be at least three possibly four Budgets in the life of this parliamentary term. There’ll be elements of tidying up wasteful spending and there’ll be elements of reform in every Budget I do.
But I think it is right to see this October Budget as the foundation of our efforts in the budget to make it more sustainable and to make our economy stronger, more modern, more resilient into the future. This Budget will be about building a better future for Australia. It will be more than just battening down the hatches; it will be about backing in families, bringing people together and building a better future together as well.
PROBYN:
Treasurer, thanks for your time.
CHALMERS:
Thanks, Andrew.