David Speers:
Welcome to the program.
Jim Chalmers:
Thanks very much, David.
Speers:
So the Shadow Treasurer says they’re not going to stand in the way of this. Do you welcome that?
Chalmers:
Very tricky language I thought from the Shadow Treasurer, Angus Taylor.
No matter what they say today, you can’t trust Peter Dutton with Medicare, and we know that because he can’t find $600 billion for nuclear reactors which will push energy prices up without coming after Medicare again just like he did when he was the Health Minister.
Speers:
Now what about the money here, $8.5 billion, where will that come from?
Chalmers:
The $8.5 billion is a substantial investment, but it’s a responsible investment as well. It’s hard to think of a more appropriate use of public funds than to strengthen Medicare and help with the cost of living.
What this means is more doctors and more bulk billing and less pressure on household budgets.
Around $5.4 billion of the $8.5 billion that we’re announcing today we already provisioned for in the mid‑year budget update. This shows what’s possible when you help engineer a $200 billion improvement in the Budget, you knock out those 2 surpluses to pay down Liberal debt, and this is what’s possible when you do that. You make room for what really matters to Australians and in communities, and particularly in household budgets, and it’s hard to think of a more important investment than this.
Speers:
You mentioned the 2 previous surpluses, but you have forecast for the coming financial year a deficit of $46.9 billion. So will this additional spending require more borrowed money, or are you cutting somewhere else?
Chalmers:
We’ll have the best combination of budget improvements and investments like this one. What we have demonstrated in our first 3 Budgets, and we will demonstrate in the fourth, is to strike the right balance. We’ve found $92 billion worth of savings in the Budgets, we’ve banked most of the upward revisions to revenue from a stronger labour market and good commodity prices, we’ve delivered those 2 surpluses. We’ve got the Liberal debt down by more than $170 billion, we’ve acted on the structural pressures on the budget, whether it be interest costs, aged care or the NDIS.
What all of that shows is you can make room for these sorts of investments, we’ve already provisioned for most of this in the mid‑year budget update. The investment is important, it’s substantial and it’s responsible, but let’s not lose sight here of the main objective: strengthening Medicare to help with the cost of living. More doctors and more bulk billing means less pressure on household budgets. The cost of living has been a major focus of this Albanese Labor government, and that will continue.
Speers:
But listening to you, it sounds like, you know, everything’s fine with the Budget, and yet, as I say, you’ve got some big deficits forecast as far as the eye can see. Ken Henry, of course, the former Treasury Secretary, he says there’s no plan to control government spending. Is he right or wrong?
Chalmers:
No, he’s not right in this instance. You know that I’ve got a lot of respect for Ken. I worked very closely with him. But I think that ignores the very substantial progress we’ve made on the budget.
That $200 billion nominal improvement in the Budget is the biggest that we have ever seen. Those 2 surpluses were the first in almost 2 decades. The fact that we’ve got that Liberal debt down by $170 billion or so is saving us on interest costs, and all of this means that we can make room to invest in what really matters, and that is stronger Medicare and help with the cost of living. People are under a lot of pressure in their household budgets, and this will help to ease some of that pressure.
Speers:
The spending you forecast for the next financial year is the highest in about 40 years outside of the pandemic, 27.2 per cent of GDP. Will it now be even higher; will we see a Budget that lays all of this out before the election?
Chalmers:
What you will see in the Budget is that spending as a share of the economy peaked I think at about 31.4 per cent from memory during COVID, and we’ve been able to get that down, and we got all the way down to about 25 per cent. It settles around –
Speers:
But is COVID a fair comparison? Over 40 years outside of COVID, this is the highest it’s been.
Chalmers:
The point that I’m making, David, is we’ve got that down since COVID, that’s been deliberate. There are some pressures on the budget which come from things like the growth in the care economy, the fact that we have an ageing population, our responsibilities when it comes to national security. Again those are substantial investments but responsible investments.
What we’ve shown is an ability to manage the budget in the most responsible way, and that makes room to strengthen Medicare and help with the cost of living.
Speers:
Obviously the government’s been having a go at Peter Dutton over his plans to cut back on the public service. The Victorian Labor Premier is now doing the same. Jacinta Allan’s ordered a review. It could lead to thousands of public service job cuts. What do you think of that?
Chalmers:
We haven’t seen the outcomes of the review from the Victorian Government. What we’ve shown, as the Albanese Labor government, is we’ve found a way to wind back expensive contractors and consultants in the public service and to replace them by rebuilding capacity in the public service itself.
A lot of the numbers that you see bandied around are driven by the fact that we’ve had to clean up the mess we inherited in areas like the huge backlog, the shameful backlog in veterans’ claims, and so that’s driven some of the numbers that you’ll see. We’ve found $92 billion worth of savings in the Budget: we’ve done that in a responsible way.
Again there’s an important contrast here. Peter Dutton wants to build $600 billion worth of nuclear reactors, he says there will be cuts in the Budget, he told you that in the last couple of weeks, but he said we won’t tell the Australian people what those cuts are until after the election.
That can only mean one thing: you can’t pay for $600 billion in nuclear reactors without coming after Medicare again like you did last time, without coming after veterans and pensions and housing.
Speers:
On interest rates, you welcomed the rate cut on Tuesday as deserved and needed. Look, we may not get another one though any time soon seems to be the warning from the Reserve Bank Governor. We just heard earlier Michelle Bullock saying that the jobs market’s still a little bit too tight in her view. What do you think?
Chalmers:
I’m not going to make predictions about future movements in rates, I think it’s a good –
Speers:
But the jobs market, is it too tight?
Chalmers:
What we’ve shown as Australians is that we can deliver very low unemployment at the same time as we make substantial and now sustained progress on inflation.
If you look at the combination of developments in our economy, you can see that our economy is turning a corner in at least 5 positive ways. We’ve got inflation down, wages are up, unemployment is very low, we’ve got the Liberal debt down and now interest rates have started to be cut as well.
All 5 of those developments are very good developments. It shows we can get inflation down and we can see interest rate cuts without sacrificing the gains that we’ve been making in the jobs market.
Average unemployment under this Albanese government is actually the lowest of any government in the last 50 years. We’ve been able to do that at the same time as we’ve got inflation down. Inflation and interest rates were higher and rising when we came to office, now both are falling at the same time as we’ve maintained very low unemployment in our economy.
Speers:
Let me ask you about the $2.4 billion being spent to keep the Whyalla Steel Works going and upgrade it. Can you just clear this up: is the government going to own this plant or part of this plant?
Chalmers:
This is a reflection of our belief in the town of Whyalla, the broader region, the future of steel, the future of manufacturing and a Future Made in Australia. And what these investments are all about is keeping the steel plant open while we look for a more enduring, longer‑term solution.
If you think about what we’re doing in Whyalla, what we’re doing in relation to Rex, this is all about supporting regional communities and workers and jobs, it’s about supporting the national interest.
In both of those instances our preference and our objective is for a private sector buyer, but we are prepared to play a role, and that’s what you’ve seen, because we believe that Australia’s golden opportunity in this world of churn and change is at the intersection of our resources base, our industry base, our skills and the energy transformation, and the investments that we are making enthusiastically with the South Australian Government in Whyalla are a reflection of that.
Speers:
Okay. But if you can’t find the right buyer at the right price this will be a government‑owned steel works?
Chalmers:
Look, we’ll work through all the contingencies, but that’s not our preference.
If you look at the support that we announced with Premier Malinauskas during the course of the week, there’s some administration funding, there’s some support for the local community and local small businesses, and there’s support from the green iron fund, which is all about making sure that Australia can grab the opportunity which is presented by the way that the world is changing.
We want to be part of that, we want to get a slice of the action for our workers and communities, including in that great part of South Australia.
Speers:
You mentioned that green iron fund that’s been set up to pay for this improvement at the plant. What’s green about it?
Chalmers:
It will be a very robust and rigorous fund, and what makes it green is that the Guarantee of Origin scheme will help ensure that the investments generate emissions reductions in a really big part of our emissions.
From memory emissions in that part of the economy are about a 10th of the emissions, and so any progress that we can make here will be meaningful and we’ll have all of the right arrangements in place to make sure that the output is green.
Speers:
But they’re going to be using gas in the furnace.
Chalmers:
There are ways to measure the emissions reductions, obviously, in this really important part of the economy, big part of our emissions –
Speers:
All right.
Chalmers:
– and we’ll have all the robust and rigorous arrangements in place.
Speers:
Can you also clear up: will the government introduce quotas for local steel to be used in major projects in Australia? The PM hinted at this the other day. What’s the plan there?
Chalmers:
It’s something that we’re looking at. We’re looking at the procurement part of this, but already something like 75 per cent of the steel out of Whyalla goes to things like railways in Australia, infrastructure projects, so that there’s already a big opportunity there, and if there’s more that we can do, more that we can think through on that front, obviously we’ll do it.
Speers:
But, you know, there’s likely to be more cheap Chinese steel available though pretty soon. If you introduce quotas, could that push up construction costs in Australia if they have to use this locally‑made steel?
Chalmers:
We’ll think through all of those possible implications, but we want Australian steel used in Australian projects, there’s no doubt about that. Already there’s a big chunk of the steel that comes out of Whyalla used in Australian projects. That’s a very good thing.
Speers:
Okay.
Chalmers:
If there are responsible ways that we can enhance that, of course we’ll consider it.
Speers:
So quotas are on the table?
Chalmers:
We’re thinking through all of those options when it comes to procurement.
Speers:
So, look, whether you do quotas, all this government investment in steel works, aluminium fund, investing in making solar panels, quantum computer, maybe buying Rex, is there a danger that all of this government intervention and, you know, to be fair, Peter Dutton wants government‑built nuclear power plants as well, that this brings on Donald Trump’s tariff threat, he’s threatening reciprocal tariffs for, you know, these sort of local supports. Is there a threat here?
Chalmers:
I wouldn’t have thought so.
I mean already out of Whyalla, for example, 90 per cent of the steel out of Whyalla from memory is used for domestic purposes here in Australia.
Obviously there is an ongoing conversation about tariffs on steel and aluminium. Every country that produces steel and aluminium is thinking through the potential consequences of that.
But our relationship with the US is a mutually beneficial one, the Americans run a substantial trade surplus with us, they have since the Truman administration, 1952 or something, if memory serves, and so this is a mutually beneficial relationship. The Americans run that big trade surplus with us, and so they have nothing to fear –
Speers:
Have there been any further talks?
Chalmers:
– from the responsible steps we’re taking in Whyalla.
Speers:
Have there been any further talks with the Trump administration about the steel and aluminium tariffs that he’s threatening?
Chalmers:
Tonight, David, I’ll be departing for Washington DC to hold one‑on‑one conversations with my Treasury counterpart, the US Treasury Secretary, Scott Bessent. This won’t be the first time that I’ve met with Secretary Bessent, but the first time since he was confirmed in that new role, and trade and tariffs will be part of the conversation, but not the whole conversation.
That’s an ongoing discussion that we are having with our American counterparts. I don’t expect to conclude those discussions on steel and aluminium while I’m in DC.
But whether it’s the flow of capital or critical minerals and trade, there’s lots to talk about. This is a relationship which benefits both sides, the Americans and the Australians.
I’ll also be addressing the superannuation summit that you mentioned in your introduction. That’s all about stronger returns for Australians from stronger ties with the American economy. So lots to talk about when I sit down with my counterpart Scott Bessent in DC in the first half of this week.
Speers:
That’s really interesting, and that’s going to be an important meeting given a decision is due by Donald Trump by, I think it’s March 12, on the tariffs. So you’ll no doubt make the case on Australia’s part as to why they shouldn’t be imposed. If they are, do you agree this would damage the relationship?
Chalmers:
I’m not going to pre‑empt the outcome of those discussions, nor do I expect that those discussions will necessarily be concluded this week, to be upfront with you.
Prime Minister Albanese had a very productive conversation with President Trump. My colleagues Penny Wong and Richard Marles have similarly met with their counterparts already. That augurs well for the strength of the relationship, but I’m not going to predict or pre‑empt the outcomes of those discussions.
I’m looking forward to meeting with Secretary Bessent again, but for the first time since he’s been sworn in to his new role.
Speers:
And just on Donald Trump, I mean I know this is outside your lane a bit as Treasurer, but the comments that he’s made over the past week about Volodymyr Zelenskyy being a dictator, about Ukraine starting the war, I mean, you know, just bring us inside the thinking in the government on this. You know, this is someone who is clearly wanting to overhaul the trading system that we’ve seen in place for 80 years, and now alliances being put at risk, really upsetting the Europeans and obviously Ukraine as well.
How concerned are you about all of this?
Chalmers:
We say the same things privately as we say publicly when it comes to Ukraine. The Australian position is very clear, and it’s been really consistent. The war started because of Russian aggression. President Zelenskyy is the elected leader of a courageous country. Our support for Ukraine has been unwavering, and that will continue.
We’ve said that Ukraine obviously needs to be part of any peace discussions, and we’re pleased to see Secretary Rubio confirm that that will be the case.
Speers:
Donald Trump, we know, wants allies to boost Defence spending. Ours, I think has just ticked under 2 per cent, but it’s due to get to 2.4 per cent of GDP. Can you go higher, can you get to 3 per cent or more, or is that impossible?
Chalmers:
I wouldn’t anticipate that we get to 3 per cent, David, but it has been increasing on our watch. It is substantially higher than the trajectory that we inherited in dollar terms, and it means around 2 per cent now growing over the coming years. And that extra investment will help us make a contribution to the work that we do with our partners and allies, including our American friends.
That has been going up, it’s part of the case that we make to the Americans when it comes to the very important strategic, but also economic relationship between 2 great countries.
Speers:
And look, just finally, Treasurer, before I let you go, have you made a decision yet on whether you’ll allow the Qatar Airways bid for 25 per cent of Virgin?
Chalmers:
I received that advice from the Foreign Investment Review Board this weekend, and I’ll weigh up that advice. I hope to make that decision pretty swiftly, ideally this week if I can.
I will weigh up all of the considerations in the Foreign Investment Review Board’s advice. I’ll make a decision which is consistent with our national economic interest. But people should expect to see that decision quite soon, ideally this week.
Speers:
All right. Amidst your trip to – your quick trip to Washington, Treasurer, Jim Chalmers, thanks for joining us this morning.
Chalmers:
Thanks very much.