DAVID SPEERS:
Treasurer, welcome to the program.
JIM CHALMERS:
Thanks very much, David.
SPEERS:
So does lowering the migration intake make housing more affordable?
CHALMERS:
I think what we saw with Peter Dutton’s Budget reply, David, was that he hasn’t thought through the impact of these numbers that he has plucked out of the air. If you think about the relationship between migration and housing, for example, of the less than 5,000 homes purchased by foreigners in the most recent data, around 1,300 of them were established homes.
And so this will make nowhere near the difference that he is claiming that it will, and that’s because he hasn’t thought it through.
This is what happens when you have an Opposition Leader whose primary objective is to divide the community, and that will damage the economy as a consequence.
His Budget reply was dark, it was divisive, intentionally so, and the net effect of all of that would be that he would destroy the budget and damage the economy.
SPEERS:
Well just on that, just to unpack what you’re saying, that this would destroy the budget and damage the economy. He is saying he wants to reduce the permanent migration intake from 185,000 down to 140,000, but also the net overseas migration number, which is the bigger number, including permanent and temporary migrants, from 260,000 down to 160,000. What would that do to the economy and the budget?
CHALMERS:
Well, he hasn’t thought through any of these numbers. He was scratching around for something to say in a Budget [reply] which was completely bereft of alternatives or vision, and so he’s come up with these numbers by plucking them out of the air.
What he hasn’t thought through is the impact, not just on the economy but on the skills base of this country. I mean who does he think, in addition to the workers that we will train with new money and new investments in the Budget for training more builders and construction workers, but we need a sensible migration program to find the nurses and the builders and other people that we need to ensure that our economy can continue to grow into the future.
And this is what happens, when you’ve got arguably the most divisive Opposition Leader in memory, a Budget reply which was completely bereft of cost‑of‑living help or a vision for the future, which is what the 2 things our Budget was built on.
Instead you get these numbers plucked out of the air. It fell apart, more or less, on the Friday morning. Experts and industry came out to pan it, and that’s because he hasn’t factored in the damage that he will do to the economy with these numbers he’s plucked out of the air.
SPEERS:
But could you give us any measure of what’s his – can you give us any read on what that damage would be in your view?
CHALMERS:
Oh, it will cost the economy billions of dollars, but even the kinds of estimates that you will see are conservative, because it’s not possible to fully capture the damage that Peter Dutton would do to the skills base of this country; to our hospitals, on our building sites, the sort of things that he hasn’t thought through. His Budget reply will cost the budget tens of billions of dollars. He’s got at least a $40 billion hole in his budget by our estimation. But it will also cost the economy billions of dollars and that’s before you factor in the damage he’s doing to the skills base that we need to build the future.
SPEERS:
So this would cost the budget tens of billions of dollars. It prompts the question, does the budget rely on those high levels of immigration?
CHALMERS:
No, I’m saying his Budget reply will cost the budget tens of billions of dollars. He says he’ll reinstate the old stage 3 tax cuts, which were skewed to the wealthiest Australians, they say they’ll spend more on defence, he announced a billion dollars in new spending in the budget –
SPEERS:
– to be fair, they’re going to announce a tax policy closer to the election they say. But just on the migration issue which we’re talking about here, the budget impact of that, what would that be?
CHALMERS:
We factor in the budget impact of our decisions, not Peter Dutton’s decisions. It’s clear though what he’s proposing here will cost the economy in terms of lost activity and it will also cost dearly when it comes to the skills base.
SPEERS:
Okay. But does that mean you’re not willing to shift your own forecasts on migration, both the permanent migration number and the net overseas migration number?
CHALMERS:
Well, that’s a good opportunity to remind your viewers, David, that already net overseas migration next year will be half what it was last year, and we’ve taken an extra 5,000 off the permanent migration program.
And the difference between how we’ve gone about it and the numbers that Peter Dutton has plucked out of the air is that we work through these issues in a considered and a methodical way, conscious of the impact on the economy, conscious of the impact on the skills base, and because of that, we have been able to moderate the migration program that we inherited from Peter Dutton.
We are seeing a really substantial winding down of net overseas migration over the next couple of years –
SPEERS:
– and is this as far as you can go? Can you go further or is this it?
CHALMERS:
Well, we’ve struck the most effective and most appropriate balance, which recognises that we need to get that net overseas migration number down and the permanent number down a little bit as well, but we can do that in a way that doesn’t smash our economy and doesn’t smash the skills base of our economy, which is just as important.
SPEERS:
Is the plan that that will help on the housing front?
CHALMERS:
Well, we’ve got a much, much broader, much more ambitious agenda for housing, and Peter Dutton wants to pretend that these 1,300 established dwellings purchased by foreigners in the most recent data will fix the housing pipeline –
SPEERS:
Well, that’s a part of it. He is talking about the bigger cut in permanent and net overseas migration [inaudible]. But your cuts, will they help the housing crisis?
CHALMERS:
Well, we’ll help the housing situation by investing an extra $6 billion in the Budget as part of a $32 billion effort to build more homes for Australians to make it easier to build and rent and buy; you know, housing’s one of the big –
SPEERS:
– but will the migration change help the housing problem?
CHALMERS:
Nothing that you do in migration, nothing that you do in some of these other areas that people have been floating is a substitute for the kinds of numbers of homes that we need to build together, and that’s why we’ve got this ambitious but achievable target of 1.2 million homes in the 5 years from July, it’s why we’re –
SPEERS:
– and I want to ask you about that, but sorry to press this, but we’ve heard from plenty in the government before. I’m just wondering if there’s a reluctance now to say it again, cutting migration will help in part on the housing front.
CHALMERS:
The changes that we’re proposing to migration are about making sure that the levels are more manageable. Obviously that has implications for housing and for infrastructure, but the point that I’m making, David, is that without building more homes, none of these other things can be substitutes for building more homes, and that’s why that’s one of our main focuses in the Budget.
SPEERS:
But does cutting migration help?
CHALMERS:
At the margins at best. But the best way to wind down this migration program is to do it in a careful and methodical way, and I don’t think you can describe what Peter Dutton is proposing as either considered or methodical.
SPEERS:
So the target to build 1.2 million new homes by the end of the decade that you mentioned, we saw in the Budget that the last financial year dwelling investment fell, same this year, next year it’s set to remain flat. How confident are you about hitting that target?
CHALMERS:
Well the housing pipeline’s really concerning, and that’s why we’re investing billions of dollars in new funding, in building more homes for Australians, and in doing that we’ve shown a willingness to invest quite substantially.
We’re working closely with the States and Territories and local governments, and we’re also training more workers to build the homes that we will need in our communities, and on top of that we’re building the infrastructure which is necessary to connect those communities up as well.
So a very broad, very comprehensive, methodical and considered plan for housing and for infrastructure to make sure that we can build the homes that people need, because rents are too high, the construction pipeline is not what we need it to be, and that’s why we are investing so substantially and so enthusiastically in trying to turn that around.
SPEERS:
Will you hit the target?
CHALMERS:
That’s our intention, David, but it’s ambitious. I understand that it’s a big ambitious target, but it’s achievable if everybody does their bit and we’ve shown in the Budget that we’ll be doing our bit.
SPEERS:
Let’s talk about spending in the Budget. The Budget increases net spending by a further $24 billion over the next 4 years, as a percentage of GDP, spending rises to its highest level for a non‑COVID year since 1986. Is all of this spending really unavoidable?
CHALMERS:
Well certainly when you look at the spending next year, which is responsible for those net policy decisions that you describe, we’re talking here about things like making sure that myGov continues to be funded, making sure that health programs are extended, plus the cost‑of‑living relief that we are providing for people.
And so I think any objective observer of the sorts of investments that we are making in those areas would conclude that that is unavoidable spending.
But David, I’ve got to say, I’m really grateful for the quite sophisticated conversation on the couch a few moments ago which recognised the really substantial progress that we have been making when it comes to budget repair.
We have been turning big Liberal deficits into Labor surpluses. Even the deficit next year is $19 billion smaller than what we inherited. We’ve been banking most of the upward revisions to revenue, we saved $150 billion worth of debt this year, we’re saving $80 billion in debt interests costs, real spending growth is a fraction of what we’ve seen in the last 30 years –
SPEERS:
– but it is growing –
CHALMERS:
– and all of this means that we’re getting the budget in much better nick so that we can fund cost‑of‑living relief and invest in the future.
SPEERS:
Okay. But it is growing, and yes, many of the things you mentioned there are no doubt difficult to avoid, but what about a big one, and that’s the GST deal with Western Australia. It’s now going to cost nearly $53 billion over the next 10 years. Can you really sit here and say that’s unavoidable spending?
CHALMERS:
Well, that’s the deal that we’re committed to, and yes, it’s expensive, and I think that’s a reminder to all of the other states, that the Commonwealth has been willing to top up their GST allocations to make sure that they’re not worse off from the deal that was done with Western Australia. We’re committed to that deal.
SPEERS:
But WA is the richest state, it’s got surpluses I think as far as the eye can see in their own budgets. You’re about to go back into deficit. How is this responsible?
CHALMERS:
Well, it’s responsible because we made the commitment and we want to make sure that Western Australia, which is such a driver, such an important contributor to our national prosperity, gets their fair share of the GST. I say that on the west coast, and I say it on the east coast as well. But to all of the other states –
SPEERS:
– but can you also say to those who wanted some spending on domestic violence supports, an increase in JobSeeker, can you sit here and say: no, no, no, WA was more important?
CHALMERS:
Well, first of all, it doesn’t come at the expense of helping people with the cost of living, it doesn’t come at the expense of strengthening Medicare, and all of these other things that we’re doing, investing in housing. But it’s a deal that was struck, it’s a deal that we’re committed to, and that figure that you cite is a reminder to all of the other states that the Commonwealth has stepped in to make sure that they’re not worse off.
SPEERS:
Alright. On the energy bill relief, $300 to every household, should the Fair Work Commission factor in that and your other cost‑of‑living measures in its minimum wage decision?
CHALMERS:
We want to see decent wages for people in addition to, not instead of, easing their cost‑of‑living pressures. You know, the cost‑of‑living package in the Budget was substantial and responsible and additional to the decent wage outcomes that we want to see for all workers, but especially for people on the lowest incomes.
And so we designed the cost‑of‑living package to supplement decent wages, not supplant them. We want to see a decent pay increase for minimum wage workers on top of the government’s efforts to ease people’s cost of living.
SPEERS:
Right. Would you like to see the minimum wage rise higher than inflation this year?
CHALMERS:
Our view is consistent with the submission that we’ve already submitted, and you and I have probably spoken about this in the past, we don’t want to see people go backwards. We know that people are under cost‑of‑living pressure up and down the income scale, but particularly people on low and fixed incomes. We don’t want to see them go backwards.
The government is doing its bit, providing substantial but responsible cost‑of‑living help, and we want to see a decent pay increase on top of that.
If you think about the government’s motives here, ease cost of living, help people to earn more and also to keep more of what they earn, with a tax cut for every taxpayer. Those are our objectives, and the Fair Work Commission’s got a role to play there.
SPEERS:
Let’s talk about your Future Made in Australia plans, nearly $14 billion in tax credits for processing critical minerals and producing green hydrogen. What do you expect you’ll get, or the nation will get for that investment? Has there been any work done on what the likely return is meant to be?
CHALMERS:
Yeah, there has been some, and I think your question is a good reminder that the bulk of the $23 billion or so over the decade that we’re investing to attract private capital into a Future Made in Australia is overwhelmingly tax concessions, tax breaks, to encourage this kind of investment, and the most advanced calculations and modelling that we have done is for the renewable hydrogen production tax credit.
And so for that $6.7 billion we expect to leverage around $50 billion in private investment, so about $7, $7.50 for every dollar of Commonwealth tax breaks provided. And that gives you a good indication of our objective here, which is to attract more private capital into a Future Made in Australia, to make ourselves an indispensable part of the global net zero transformation, so that our industries and our workers and our communities are the big beneficiaries of these shifts that are underway around the world.
SPEERS:
If new gas fields are opened up under your gas strategy, will that make green hydrogen less viable?
CHALMERS:
I don’t believe so. I think it’s very clear that gas has a role to play, even as we engage and invest substantially and enthusiastically in more renewable power.
You know, the focus of the Budget was on renewable energy, becoming a renewable energy superpower, billions of dollars of investment to leverage multiples of that in the private market, and we are very confident that renewable hydrogen has a big role to play in our industrial base, but also in our export offering, and the same goes for refining and processing critical minerals and other opportunities.
SPEERS:
Look, the tax credits for hydrogen and critical minerals, as you say, it’s sort of pay on delivery; you’ve got to produce it before you get the benefit. Why aren’t you using that same approach when it comes to solar panel and battery making in Australia? You’re giving them – it’s $1.5 billion upfront. Why the different approach there?
CHALMERS:
Well, different opportunities are at different stages, and they require different levels of investment. And the investment in, whether it’s batteries or clean energy manufacturing, sometimes the assistance is best provided for innovation at the front end, sometimes it’s best provided as a production tax credit, as you rightly point out.
And so for some of these other opportunities, using really robust frameworks and bodies like ARENA and other investment vehicles, that support is best provided at the innovation stage rather than at the production stage.
SPEERS:
When it comes to making solar panels and batteries, it’s heavily concentrated in China, as we know, but as your own Treasury department points out, plenty of other countries are getting into this space to break that concentration; Europe, the US, Canada, France, India. These are friends, they’re allies, as Treasury says, you know, accessing cheap solar panels from offshore supports Australia’s ambition to become a renewable energy superpower.
Treasury’s not saying that we need to make them here, is it?
CHALMERS:
First of all, I’ve never said that we are trying to make 100 per cent of the world’s solar panels here. And it makes a lot of sense that our friends around the world are getting into this market as well, because they share our concern that the supply and the production of solar panels is far too concentrated in one country, in this case China.
And if you think about that Treasury paper that we released with the Budget, the National Interest Framework, there’s a big emphasis there on resilience and security, and making sure that we’re dealing with our vulnerabilities, and one of our vulnerabilities is the way that these supply chains have been too concentrated.
And so we’re not pretending we’re going to make every single thing here. We’re not pretending we are necessarily going to replace the scale of some other big economies. What we are saying here is that whether it’s solar or some of these other opportunities, there is a chance here for us to make ourselves more resilient, and part of making ourselves more resilient is dealing with those vulnerabilities in the supply chain and playing a role there.
SPEERS:
Treasurer, Jim Chalmers, appreciate you joining us after a busy Budget week. Thank you.
CHALMERS:
Thanks very much, David.