David Speers: Jim Chalmers, welcome to the program.
Jim Chalmers: Thanks very much, David.
Speers:
So, let’s start on tax. You want to give working age Australians a fair go, most would agree with that, but does that mean some tax breaks for retirees will have to go?
Chalmers:
First of all, we need to ensure collectively as Australians that the fair go is the defining part of our future and not just the defining part of our past. That’s the principle at stake here.
We already have superannuation tax changes that we announced a couple of years ago, 2 and a half years ago, and that’s all about trying to deal with some of these issues in the system.
When it comes to tax reform more broadly, we haven’t changed our tax policies. We didn’t ask the roundtable to rewrite our tax policies, we asked them to inform them for the next budget and the coming budgets and beyond that as well. And that’s what they did a good job of doing.
We need to recognise we have a tax reform agenda already. It’s about cutting taxes 2 more times for 14 million Australian workers. It’s about introducing a standard deduction. It’s about considering road user charging. And it’s about making superannuation tax concessions still concessional but a bit more sustainable as well.
And so that’s the focus, delivering what we took to the last election. The best way to work out any additional steps beyond that is to do that in the government’s usual consultative and considered way, which is what we’re doing. But ultimately, decisions on any additional tax reforms will be a matter for the Cabinet and for subsequent budgets.
Speers:
But on this particular idea, let me ask you, Peter Costello back in 2007 introduced the changes to the superannuation system, tax-free super income in the retirement phase. Is that still justified?
Chalmers:
There was another step taken in between that. You’re quite right that Treasurer Costello made that change. But another change was made I think about 10 years subsequent to that by the Morrison government, or perhaps Scott Morrison as Treasurer, which was the transfer balance cap, which dealt with some of those issues that Treasurer Costello had introduced into the system.
I think people have been pretty clear, the change that we are proposing to superannuation, we haven’t changed our policy on that. We didn’t, at the conclusion of the roundtable, rewrite our policies in those areas.
More broadly, intergenerational equity has been a motivation for so much of what we’re already doing in tax. Cutting taxes for young workers, whether it’s –
Speers:
I understand that list, I understand that.
Chalmers:
– our housing agenda, building more homes to rent, climate change, skills. Intergenerational equity is already a central motivation for the government.
Speers:
I understand that. But just back to the question, is that mechanism of tax‑free income in retirement still justified?
Chalmers:
The way that I’m answering your question, David, is to point out that we do think that there are issues in superannuation, and that’s why we’ve proposed to deal with them in the proposal that I put on the table more than 2 years ago.
The change that you are alluding to is not something that we’ve been contemplating. Obviously, people around the room at the Economic Reform Roundtable have got views about that. People have had views before the roundtable, they’ll have views after it as well.
We have taken, I think, some important steps to make the tax system fairer, primarily when it comes to income taxes. Cutting them last year, cutting them next year, cutting them the year after. And I think that establishes our bona fides. We’ve had real ambition when it comes to tax reform –
Speers:
Okay, but just let me just try one more time here –
Chalmers:
– from budget to budget we do consider additional steps. The best way to do that is to do that in a consultative way.
Speers:
But do retirees still deserve tax‑free superannuation income?
Chalmers:
They still deserve concessional treatment to encourage people to be in superannuation and that’s not something that we have been proposing to change. Even the changes that we have put on the table have still meant that the concessional tax treatment in superannuation is still very, very concessional, but a bit more sustainable.
And so, I do acknowledge as a principle that we want to make sure there’s concessional treatment in super –
Speers:
– okay, but maybe not completely tax-free –
Chalmers:
There’s a whole range of views about how we go about that. I announced my view 2 and a half years ago.
Speers:
Concessional but perhaps not completely tax-free?
Chalmers:
That’s not something that we’ve been proposing to change, David. I’m running out of ways to tell you the same thing, is that we acknowledge that there are issues in superannuation and tax, and that’s why 2 and a half years ago I proposed what is a pretty modest change but a meaningful change which makes the system a bit more sustainable, but still maintains an element of concessionality when it comes to tax treatment in super.
Speers:
Just on that legislation that you do have, that you took to the election on the change to superannuation balances over 3 million, when will you legislate that? Is it coming this week?
Chalmers:
We’re not proposing to introduce it or reintroduce it this week. As you know, and as I’ve said a couple of times already, we’ve put it to the parliament before in the last term. We’ve had a whole bunch of other priorities queued up for immediately after the election that’s just been run and won. And so our focus has been in other areas, cutting student debt, making medicines cheaper –
Speers:
So, when will this come?
Chalmers:
– improving quality and compliance in early childhood education. Well, we’ve still got time, David. It doesn’t begin to be calculated till the second half of next year, and so we’ve got time to reintroduce that. But as I said, it’s been in the parliament before. People know where we’re coming from.
Our goal here is to continue to make sure that there is concessional tax treatment for superannuation, to make sure that that’s a bit more sustainable. That’s what drives the policies that we announced all those years ago.
Speers:
The second tax goal coming out of the roundtable was to incentivise more business investment. The Productivity Commission did put forward, ahead of the roundtable, a plan on company tax to lower the rate for most firms, introduce a net turnover tax for big firms and an immediate deduction.
I’m not sure you’ve offered a view on this idea from the Productivity Commission. What is it? Do you think it’s a good idea?
Chalmers:
One of the reasons that I didn’t come to a definitive view before the roundtable on this proposal is because I wanted to be respectful of the discussions that we would have there. And that’s the approach that I’ve taken. And similarly after the roundtable I think we owe it to people to work through these issues in our usual considered and consultative and methodical way.
On the detail of what the Productivity Commission has proposed, you need to remember, first of all, these are draft recommendations. The final report’s due at the end of the year. And one of the reasons why I think it’s good that this proposal is out there is because Danielle Wood, the PC Chair, and her colleagues have tried to incentivise investment in a way that we can afford. And those 2 goals are very important, and they’re interrelated.
I am open to tax changes which incentivise investment if we can afford to do it. And one of the good things about Dani and her colleagues putting this proposal out before the roundtable is because it puts the onus on people who don’t like that particular model but do want to see investment incentivised in a responsible way to come up with alternatives.
And so, there was a lot of discussion at the roundtable about that, about the draft recommendations that she put forward, and I think that’s a really good thing.
Speers:
The third objective, the final one, was on simplifying the tax system. I just wanted to ask you about the GST, because we often hear about the complexity, from particularly those in the food industry. Tiramisu is GST‑free, cheesecake is not, yoghurt is GST‑free, frozen yoghurt is not. Is this something you’ll look at?
Chalmers:
I can almost hear Shane Wright chuckling on your couch. These have been his sorts of obsessions over a long period of time, and I acknowledge that. Look, we haven’t been getting into that layer of detail. Obviously, the questions around the GST and desserts have a long and chequered history in the politics of our country.
But in terms of simplification and in terms of small business there was a really terrific presentation at the roundtable from the Tax Commissioner. And his objective, which I support 100 per cent, is to try and make it easier for businesses of all sizes, but particularly small businesses, to comply with their tax obligations in a quicker, more efficient way. There’s a role for technology there, there’s a role for something which gets a bit closer to what the tax boffins call ‘real‑time tax’, and so there was a good discussion about that at the roundtable.
If we can get those compliance costs down, if we can make it easier for small businesses in particular to do the right thing in the tax system, that’s good for everyone. And so I’ve got a really open mind to trying to progress that agenda.
You’re right that there were 3 objectives put forward by the group to guide our thinking on tax reform. And simplicity and sustainability are really, really important. For the reasons you imply in your question, we can do a better job there, and if we can, we will.
Speers:
How ambitious, Treasurer, do you want to be when it comes to tax reform, and will we see anything further on tax in your next budget?
Chalmers:
Well, it remains to be seen. I mean there is a lot of policy ambition around the roundtable last week, and there’s a lot of policy ambition in the government from the Prime Minister down. And our primary focus is on delivering tax reform in all of those ways we took to the election, as I keep mentioning: income tax cuts, considering road user charging, the standard deduction. These are important features of our existing tax agenda.
As I said, I think in the immediate aftermath of the roundtable, I think there are more steps to be taken on tax reform. The Prime Minister and I have both said in our National Press Club contributions that we consider our task to deliver what we took to the election, but also to build on that. We’ve got some time to do that. The roundtable was never about finalising tax policies, it was about informing tax policies for the next 3 budgets and beyond, and that’s the approach I take to it.
And at the end of the day, as I’ve said in lots of different ways over the course of the last week or so, fundamentally this is a decision for Cabinet Ministers to take in the usual way and on the usual timing, which is from budget to budget, when we look at the spending side of the budget and the revenue side of the budget on each occasion.
Speers:
I just wanted to ask you quickly on the road user charge that’s coming. You’ve got to work out the details with the states and territories. Is there a chance that motorists might have to pay both fuel excise and road user charge, or can you rule that out?
Chalmers:
No, our focus in road user charging is on electric vehicles. We’re not trying to work out ways to double‑tax internal combustion engines. We’re trying to make sure that people who drive EVs, increasing numbers of people who drive electric vehicles, are making a contribution to the upkeep of the roads that they use. It’s fundamentally about making the system a bit fairer.
We’ll take the time to get it right. The states are putting together an options paper for us to consider at our meeting, before long actually, the 5th of September, and so we’ll go through that.
The main point of contention at the reform roundtable was actually whether a road user charging regime focused on electric vehicles begins with heavy electric vehicles like electric trucks, and there’s some kind of sequence after that, or whether we be more ambitious earlier.
So, we’ll work through all of that. I don’t want to predetermine the discussions I have with the states or the considerations of our Cabinet, working with Catherine King and Chris Bowen and the Prime Minister and others. But we have made it clear, we do think a change is warranted here, and we’ll take the time to get it right.
Speers:
On artificial intelligence, you were happy with the conversation at the roundtable on this. It’s essentially a debate around how to get the most out of it but prevent, you know, too much damage coming through this as well. What’s your thinking at the end of the roundtable about how best the government should be approaching AI?
Chalmers:
Well, artificial intelligence will change everything, in our work and in our lives more broadly. There’s no use pretending otherwise. So, our job collectively is to maximise the benefits and minimise the risks. That’s the approach that the roundtable was taking, it’s certainly the approach that the government is taking as well.
And so that obviously applies in areas like regulation. We’ll do a gap analysis of regulation to see what’s necessary here. But artificial intelligence was really one of the most heartening aspects of the Economic Reform Roundtable discussions, because by sharing people’s understandings and priorities and ideas, people got a little bit closer to a shared understanding and some common ground when it comes to artificial intelligence. Whether it’s skills or regulation, or some of the important difficult spiky issues in artificial intelligence.
So even if only that was achieved in the course of the last week, the roundtable would have been worth it. Artificial intelligence was absolutely central to our discussions because it will be absolutely game‑changing in our economy and our society into the future.
Speers:
On spending, there was support at the roundtable from the likes of Ken Henry, Kerry Schott, Allegra Spender and others, for at least some sort of rules to be put into the Budget around spending.
I know you’ve delivered 2 surpluses, but spending has been creeping up. Why don’t you put some sort of rules around the level of spending?
Chalmers:
First of all, there are fiscal rules, that’s the first point. Secondly, when we came to office, spending as a share of the economy was almost a third, we got it down to closer to a quarter. I think that’s too easily dismissed.
There was a view around the table that we should further evolve those fiscal rules that are in the budget. Obviously, I take that kind of feedback seriously, and we have a look at those fiscal rules from time to time.
But there’s an important political point to be made here, David, as well. Of the dishonest and hypocritical things that our political opponents say about the economy and the Budget, 2 things stand out. First of all is their position on tax. They went to the election proposing to increase income taxes on 14 million Australians. Secondly is their position on the fiscal rules. They had fiscal rules which weren’t worth the paper that they were written on. They failed every test that they set for themselves. They said there’d be surpluses; there were deficits –
Speers:
– but coming back to your approach –
Chalmers:
They said they would get debt down, it’s skyrocketed –
Speers:
– you said there are fiscal rules –
Chalmers:
– and our approach –
Speers:
– what is the rule on spending –
Chalmers:
That’s what I’m getting to, David.
Speers:
And are you going to change it?
Chalmers:
Well, our rules are set out in the Budget. And they are about banking most of the upward revision to revenue, which we’ve been doing. They’re about improving the budget position over time, which is what we’ve been doing. You kindly mentioned the 2 surpluses. But also the $100 billion in savings. The $207 billion positive turnaround in the Budget, the biggest nominal improvement in a budget in a single term ever. We’ve got the debt down $177 billion. We’re saving $60 billion in debt interest.
Now, this is why I mention our opponents’ compared to our record, David. We have delivered the first surpluses in almost 2 decades; they only delivered deficits. And the difference between us and them is they had fiscal rules that they failed on almost every occasion. We’ve got fiscal rules in our budget, there is a view about tightening them up around the room at the Economic Reform Roundtable, but what really matters here is the outcomes. And if you think about the outcomes that we’ve delivered, the budget is in much better nick than it was when we found it and that’s why what our opponents are saying about this is dishonest and hypocritical.
Speers:
So finally then, Treasurer, on the NDIS, because this move during the week is in part about getting the growth in spending down on the NDIS. The Commonwealth and the states were meant to have finalised agreement on this over the last couple of years. That hasn’t happened. The states are wary now of what’s going to happen from here. What happens if they say no, or if these negotiations drag out? What’s the cost to the states if they don’t get on board with what you’re calling for?
Chalmers:
There are a couple of things about that. I mean first of all, we have been in discussions with the states, but agreement was struck at the end of 2023 to get the NDIS closer to its original intent and also to tie that to our discussions about the future of the hospitals deal as well.
And so, as always with Commonwealth‑state financial relationships, there’s a bit of back and forth about how we deliver, but that agreement was struck. And the reason why we need to do this, the reason why it’s in everybody’s interests is because just 4 years ago, spending on the NDIS was absolutely out of control. 22 per cent it was growing at. We’re getting it down to that 8 per cent target. Getting it to 8 per cent will be a good effort, but not good enough, as Minister Mark Butler has pointed out.
So, we will continue to work with the states on providing the support that people need and deserve, particularly in this instance when it comes to Thriving Kids. We’ve put a couple of billion on the table, and that’s because we want to work with the States, not at cross‑purposes, to make sure we can deliver for people in the NDIS. That means making spending on the NDIS sustainable, and it means providing the kind of support that particularly kids without permanent and significant disability still need, but elsewhere in the system.
Speers:
So, when you say this was linked to hospitals, if they don’t come to the party on the NDIS, they won’t get what they want on hospital funding?
Chalmers:
Well, that’s the ongoing discussions that we’ve been having. Whether it’s Treasurers, Health Ministers, NDIS Ministers, leaders, have been having this discussion since the deal was struck of what’s the best way to implement 2 deals, not one. They are closely related, there are billions and billions of dollars tied up in them, and so we’ve been trying to progress both of those deals at once for good reason, because there are swings and roundabouts for both of us.
Speers:
Treasurer Jim Chalmers, thanks for joining us this morning.
Chalmers:
Thanks so much, David.