Charles Croucher:
Treasurer, thanks for sitting down with us. Are we done with the lies now?
Jim Chalmers:
I think the statements that we made at the time of the election reflected the government’s overwhelming focus on supply. We’ve maintained that in the Budget, but we’ve come to a different view on a number of key policies, and we’ve explained why in the Budget that has been made necessary by the fact that too many Australians have been locked out of the housing market. We’re taking this action to try and address a challenge which has become increasingly clear to us, is a bigger problem over time.
Croucher:
I promise to get to it, and this was still a challenge at the Budget and the election last year, but if we can’t trust you on something you said so many times at the last election, I mean death tax? Franking credits? Are they coming?
Chalmers:
I think you know that we’re not acting on those fronts because –
Croucher:
It’s something we heard on stage 3 and it’s something we heard on this.
Chalmers:
The difference is Charles, where come to a different view, as we have, we put out the reasons why we’ve done that, sitting here explaining to you why we think that different view is necessary. That is because, overwhelmingly the challenge is supply in the housing market, but it’s become increasingly clear to us that we can’t ignore the problem which is created by the intersection of the housing market and the tax system. Too many people, especially young people, are being locked out of the housing market, and tonight we take decisive action to address that.
Croucher:
I’ll let you explain that last question. Did the Prime Minister lie, did you lie, when you said 15 months ago this wasn’t going to be part of your policies?
Chalmers:
No, that reflected our position at the time.
Croucher:
So, it’s changed in 15 months?
Chalmers:
Yes. I think it’s appropriate that when a government comes to a different view, as governments do from time to time, that they explain why and that’s what we’re doing.
Croucher:
Why do negative gearing?
Chalmers:
Well, there’s substantial issues in the tax system, particularly where that interacts with the housing market. For too long now, too many Australians have been locked out. That problem is in our view becoming a bigger and bigger problem. The easiest thing would have been to leave it unattended and pretend that it wasn’t a major issue. It is a major issue. The problem begins with supply, but it doesn’t end there. What we’re doing in the budget is making it easy for an extra 75,000 Australians to become owner occupiers, to own their own home, which is a really important outcome that we’re seeking by taking the political risk and changing this policy.
Croucher:
There’s not any change for people that already have the home, so someone’s twelfth property can still be negatively geared while a couple’s second property can’t. Is that the fair system you’re looking for?
Chalmers:
Well, there are important transitional arrangements here which recognise and respect the decisions that people have already taken. We’re not making judgments about people who’ve done well. We want more people to do well. That’s really the motivation in these, behind these changes. It’s also important to recognise that people can continue to invest in new properties, adding to housing supply in this country, the primary challenge that we have. But also remembering that most properties become positively geared over 5 or 10 years.
Some of these investments that people have had and made, which we are recognising and respecting, over time some of them will phase out when they become positively geared in the usual way.
Croucher:
On capital gains, a lot will depend on valuation as of July 1 next year. Logistically, how does that get done?
Chalmers:
Well, it’s 2 calculations. It’s a calculation to 2027, and a calculation from there. That’s not especially complex in a system like –
Croucher:
No, the actual system. Going out and valuing everyone’s property, every single person’s investment invested as a July one.
Chalmers:
Well, again, it sounds more complex than it is. In a system which has got a lot of complexity, some of which we’re addressing in the changes that we’re making, in a system like that it’s not especially complex to do that. Again, we just think it’s the right way to recognise and respect those decisions that people have already taken and to minimise the market disruption.
Croucher:
On that scale, is it open to rorting or false claims and disputes?
Chalmers:
The ATO will do a lot of professional work and minimise those kinds of outcomes, but we’re recognising and respecting those decisions that people have already taken. We’re applying the changes prospectively, and we think that strikes the right balance.
Croucher:
This is a big shift. I think you get more money from the trust tax that comes in and changes tax arrangements there. Are you worried that, given we’re going through a trillion dollars debt, this might be missed opportunity to do more, to do more on budget repair, to get more coming in in terms of receipts?
Chalmers:
Well, there’s always people who would like us to do more on tax reform. I think this is a big, bold, ambitious tax reform package that we’re putting to the people tonight, but there will always be people who say that we do more. We’re returning the money that we raise from things like capital gains and negative gearing, we’re returning that to workers and businesses with our tax cuts, and so over the forward estimates of the budget is broadly neutral. That means that where we are repairing the budget, and we are quite substantially, the heavy lifting there is being done by savings and by spending restraint, not by raising more taxes.
Croucher:
The shift seems to go from people’s investments to a focus on labour, on people out there working. How long has that been going on in the wrong direction?
Chalmers:
Well, it’s certainly a challenge in the tax system which needs addressing. One of our motivations here is to try and better align the tax treatment of people who work for a living with the people who earn their income from other sources. Again, not making a judgment about people who’ve made their money in a legitimate, legal, understandable way, but the tax system is out of whack and the status quo in the tax system is not good enough to people who work for a living. That’s why we’re cutting taxes 5 different ways over the last couple of budgets.
Croucher:
We’re running short on time. Just quickly, what would have been different had Donald Trump not gone to war?
Chalmers:
There are elements of this Budget that wouldn’t have been there and were it not for the war in the Middle East. Obviously, the fuel security package, which builds on the progress that we’ve made in securing more fuel for Australian motorists and industry to keep the place ticking over. A big fuel security package wouldn’t have been there in February if we handed the Budget down then. It also changed how we came at the cost‑of‑living relief. Obviously, finding $3 billion for a fuel tax cut has been something that we weren’t anticipating over the summer.
Croucher:
The war has been quite good for the budget bottom line though. It there a weird situation here where Australians are worse off but your Budget is better off and [indistinct] from that war?
Chalmers:
When it comes to revisions to revenue, some of it is because of the war in the Middle East, but most of it isn’t. And also the important thing there Charles, is that every dollar of extra revenue that we weren’t anticipating has been banked to the bottom line to try and get the deficits down, get the debt down, so we’ve taken the most responsible approach possible when it comes to those revisions to revenue, and there’s even one year where revenue is being revised down so it’s not a consistent story across the board.
Croucher:
Last 2. Small businesses have an instant write off. It’s something they’ve been asking for a long time. Is this enough to revive industries in pressure and under pressure?
Chalmers:
Oh, there’s a number of measures we’re taking to support small business and venture capital and startups, the more innovative and dynamic parts of our economy. The instant asset write off, changing the treatment of losses so that people can get a bit more relief when they have a bad year. All of this is about recognising and supporting the absolutely crucial role that small business plays in our economy.
Croucher:
Final question, there’s an increased to the passenger movement charge, it’s only 10 bucks. But when you couple if with the increase to the cost of passports over the last few years, you’re now looking at, for a family of 4 to get new passports and just leave the country to go and visit Grandma or go to Bali, it’s well over $1200 to $1300 before they even buy the tickets. Is that reasonable for Australians that have been doing it tough and deserve a break?
Chalmers:
We understand that some people would prefer that we didn’t make these kinds of relatively modest but responsible changes, but we have to fund the system where there are, the system at the border, the customs arrangements and the like. It’s the important way of trying to make sure that people are making a contribution to keeping our country safe and keeping our borders secure.
Croucher:
Treasurer, thank you.
Chalmers:
Thanks Charles.