Ashleigh Raper:
Have you done tonight what Labor has always wanted to do on negative gearing and capital gains tax?
Jim Chalmers:
No, I think our government’s focus was overwhelmingly for the first 4 years on the major challenge, which is housing supply. But increasingly over time, it’s become clear to us that even though the challenge begins with supply, it doesn’t end there. There are other issues, particularly where the housing market and the tax system intersect, which warrant our attention. And so where we’ve come to a different view, on those key policies that we’re announcing tonight, we’re explaining why.
Raper:
You say it’s going to get 75,000 people into their first home. How is that going to happen, do you think that investors will no longer engage with the market as much?
Chalmers:
Well, we’re dealing with a big distortion in the market, really, for about a quarter of a century, there’s been a particular emphasis and incentive for people who are already doing quite well to invest in established housing. And that’s distorted the market. If you look at the 20 year period, there’s been overcompensating investment in housing, established housing, and undercompensating other types of investments. And so we’re trying to rebalance the system, to fix that problem in the capital gains tax arrangements. And by doing that, we hope to give another 75,000 people and hopefully particularly young people a toehold in the housing market. They’ve been locked out for too long.
Raper:
But are you picking a fight with cashed‑up baby boomers?
Chalmers:
Well, not intentionally. I mean, people will have views about it. There’ll be people who would prefer that we leave the existing arrangements undisturbed, and there’ll be the usual scare campaign from the usual people in places when it comes to these common sense changes. But we have to take the right decisions for the right reasons. They’re very well motivated. They respect and recognise the decisions that people have taken already. They don’t make any judgement about people who’ve done well under the existing arrangements. We want more people to do well, and that’s the motivation behind these changes.
Raper:
There’s going to be $250 coming back at tax time for workers, but not for at least 2 years. Don’t workers deserve a bit of that extra cash now?
Chalmers:
Well, we’re providing tax cuts in other ways, more immediately. There’s a tax cut on the 1st of July, and another one next year in July. There’s an instant deduction in the tax system, which provides a bit more tax relief, and then we’ve got this new Working Australians Tax Offset.
Now what this government is about is providing as much cost‑of‑living relief and tax relief as we can afford to do. The timing of the new tax offset is really designed to come into being closer to when we are raising taxes in areas like the capital gains changes, the negative gearing changes. So overall, across the tax reform package, we are giving back the money we raise, giving it back to workers, and to businesses in the most responsible way that we can.
Chalmers:
You talk about this being a responsible budget, but this is the biggest spending budget outside of COVID since the 1980s as a percentage of GDP. Are you making the Reserve Bank’s job harder?
Chalmers:
No, and you can see in the advice that we published from Treasury in the Budget papers, that we are playing a helpful rather than a harmful role in the fight against inflation. We’ve got the deficits down, we’re getting the debt down. Spending as a share of the economy at the end of the forward estimates is quite substantially lower than it is at the beginning of the forward estimates. We’ve got real spending growth down to a fraction of what it was under our predecessors. And that’s because we take this inflation challenge very seriously.
We have different responsibilities to the independent Reserve Bank, but we both want to see inflation come down and what this Budget does is it plays a helpful role in putting downward pressure on inflation, taking some of the inflationary pressures out of our economy by managing the budget the most responsible way we can, including historic levels of gross savings and the net policy decisions that we make in the Budget improving the budget bottom line every year.
Raper:
Thank you.
Chalmers:
Thanks, Ash.