DEBORAH KNIGHT:
Jim Chalmers, good evening to you, is this the tune you now demand is played every time you walk into a room?
JIM CHALMERS:
Not exactly. I do love that song, but I think I’ve learned from some of my predecessors not to get too carried away about these surpluses. They are important, they show that we’re trying to manage the Budget in a much more responsible way, but the most important thing is by getting the Budget in better nick we can provide this cost‑of‑living help to people and invest in the future at the same time.
KNIGHT:
You better tell the Prime Minister not to gloat too much because he was gloating in Question Time today. But this surplus, it’s a happy accident, thanks to strong employment, high taxes, surging iron ore prices, and it is going to be short‑lived.
CHALMERS:
A couple of things about that. We’re very grateful for the big contribution that the resources sector makes to the economy and to the Budget, but on this occasion it’s almost entirely driven or overwhelmingly driven by the labour market being a bit more resilient than was anticipated, but also in addition to that, what really matters is if you get a little bit more tax revenue in the Budget, what matters is what you do with it.
And overwhelmingly over the course of our 3 Budgets we’ve saved it rather than spent it, and without taking that much more responsible approach we wouldn’t have got near these 2 surpluses.
KNIGHT:
A lot of spending is in this though; $24 billion over the next 4 years, including the $300 in power bill discounts for every single household and $325 for small businesses from July 1. Why not means test it?
CHALMERS:
We think that these cost‑of‑living pressures are being felt up and down the income scale. We think that we could have done what we did last time, which was to concentrate this energy bill relief just to people on pensions and payments, but we know from being tapped into our communities that middle Australia is hurting too, and once you start providing this energy bill relief a bit more broadly, it’s the easiest, most efficient, most effective way is to provide it to everyone.
KNIGHT:
But it’s not just middle Australia who will be getting it, it’s everyone, and I’ve got listener after listener getting in contact on the text line saying they don’t need it. John in Saratoga saying, ‘I don’t need a subsidy for my electricity bill, I’m fine’. And I suspect he says this Budget will be inflationary or at best neutral regarding interest rates, which we can talk about in a moment, but a lot of Australians don’t need any economic help when it comes to power bills.
CHALMERS:
I’m happy for John, but I don’t agree with the assessment that a lot of people don’t need help. I think a lot of people are doing it tough, and in our cost‑of‑living package it’s got a number of elements. Some of them are broad, a tax cut for every taxpayer, energy bill relief for every household, and some of them are more targeted: rent assistance, for example, cheaper medicines, help with student debt, and so it’s a good balanced package, it’s substantial, but it’s responsible, and it recognises that a lot of people are doing it tough, and because of this Budget more help is on the way.
KNIGHT:
And inflation is of course the overarching concern here. Do you really think that extending energy subsidies, rent relief, tax cuts, the spending that we’ve got, that it won’t add to inflation? Because it’s basic economics that if you spend taxpayers’ dollars to help those struggling, it will free up more money that’s able to be spent making inflation potentially worse.
CHALMERS:
First of all, I don’t think people have got a lot of spare cash lying around. Secondly, we’re talking here about the difference of a few billion dollars in the context of a $2.6 trillion economy, and also it’s not the unanimous view of economists the position that you’ve just described.
There’s a lot of opinions about this, I accept that. I typically welcome there being a range of views, but the very firm advice from our Treasury advisers is that the way we’ve designed this cost‑of‑living package will put downward pressure on inflation, it will take about half a percentage point off inflation next year because of the way we’ve designed it, and it won’t add to inflationary pressures elsewhere in the economy.
KNIGHT:
The Treasurer’s with me, as is John Stanley from 2GB and 4BC. Your question to Jim Chalmers.
JOHN STANLEY:
Treasurer, a lot of our listeners aren’t economists, so if you’re lauding the surplus as an achievement, can you just explain to them how you then produce a $28 billion surplus next year and a $42 billion –
KNIGHT:
Deficit.
STANLEY:
– deficit, rather. A $28 billion deficit, and then a deficit of $42.8 billion in the third year. So how does it go from 9 to 28 and then out to 42; is that then planned mismanagement?
CHALMERS:
No, and I’m pleased you asked me that, John. It’s nice to hear your voice again. What’s happening in the Budget is that we’ve been able to get it in much better nick in the near term by saving these changes to revenue that Deb asked me about, and by showing spending restraint at the front end, but some of the spending pressures on the Budget start to intensify after that, rather than ease.
The big ones that are putting pressure on the Budget are aged care, the NDIS, healthcare, Defence and the interest costs on the debt that was already in the Budget, and that spending unfortunately grows, and there’s a bunch of unavoidable spending too: extending some health programs, making sure that we can continue things like myGov, all of this is expensive, and that’s a big reason why the Budget deteriorates, particularly next year.
But we know we’ve got a big job ahead of us. I’m not the kind of guy that thinks just because we’ve got 2 surpluses in 2 attempts that the hard work of responsible economic management ends there. We know we’ve got more work to do, we’ve been upfront about that.
STANLEY:
Can I just ask if you don’t mind because I know we’ve got the news coming up and we’ve got to go across to all of that. The commentators are lining up tonight, I don’t know if you’ve seen it, they’re going to be writing columns tomorrow, this is all about an early election and a Budget framed around an early election, so you don’t have to stand up next year and deliver a much, much bigger deficit that we’ve seen for many years.
CHALMERS:
Let me put them at ease, John. I’d be very happy to go again, to do another Budget next year, that’s in Anthony Albanese’s hands, but if he said to me, ‘Let’s go again and do another Budget’, I’d be very happy to do that, I’d be raring to go.
KNIGHT:
So you don’t think we’ll be going to an election before May next year?
CHALMERS:
I don’t think it’s decided yet, but my job is to just be ready.
KNIGHT:
This Budget’s framing up for one.
CHALMERS:
I don’t think so. I mean there’s some difficult stuff in the Budget too. There’s some savings in the Budget, there are some tax changes in the Budget. We’re getting the Budget in much better nick, and that’s all about the economic cycle, not the political cycle.
If the boss wants me to do another Budget this side of an election, I’ll be happy to do that; if he wants me to do it other side of the election, if we win, I’d be happy to do that too.
KNIGHT:
All right. Julie‑anne Sprague is with us as well from 6PR in Perth.
JULIE‑ANNE SPRAGUE:
You have been described, Treasurer, as being on a diet successfully for 2 years, and now you’ve got a bucket of KFC in front of you.
CHALMERS:
I read that.
SPRAGUE:
So it does feel like –
KNIGHT:
I want some KFC now.
CHALMERS:
That sounds like something that Phil Coorey would write from the Australian Financial Review.
KNIGHT:
Correct.
SPRAGUE:
Yes. Their menu of choice is pizza, I believe. But look, from Western Australia’s point of view, Western Australia is usually bursting at the scenes. We’ve seen records of numbers of people come to WA.
CHALMERS:
Yep.
SPRAGUE:
The mining industry is firing, but a lot of people are frustrated, they can’t find houses to live in.
CHALMERS:
Yes.
SPRAGUE:
You’ve got working people living in their cars. What’s in this for those people where you have to sort of manage those difficulties between business wanting more migration to fuel the economy and the everyday punter saying, ‘Could you just stop please’.
CHALMERS:
Yes, so a couple of things. First of all, on migration, we’re cutting the permanent intake a little bit. We’re also making sure that the net overseas migration next year is half what it was last year. That’s by making sure that we’re doing the right thing in the international student markets, about making sure we’re ending things like the COVID visa. All of that is helping to get the net overseas migration number down to back more normal, more manageable levels.
But in addition to that there’s a huge investment in housing in the Budget. An extra $6 billion as part of a $32 billion Homes for Australia package, and that’s because we recognise that great cities like Perth and in other parts of Australia we need more housing. We’re starting a long way back; the housing pipeline’s not very good.
So we need to make a contribution as a Commonwealth government, we’re doing that. States and Territories need to help us, they’re doing that, we’re training more workers as well, which is obviously a perennial challenge out West in your fast‑growing part of the economy.
So all of those things are happening at once. We know our responsibilities there and we’re going to meet them.
SPRAGUE:
And now Treasurer, did you factor in the additional spending from the state governments, the West Australian Government throwing another $400 at power bills, Queenslanders another thousand dollars. Is your job on the line here if interest rates in fact go up, they don’t do what you’re expecting?
CHALMERS:
It wouldn’t surprise you to hear me say I don’t see it that way. I think it’s a good thing that state governments that can afford to are helping people with the cost‑of‑living pressures that they’re under. I think they’re overwhelmingly doing that in a responsible way, and frankly, I welcome the help.
We’re all trying to help people with these cost‑of‑living pressures, which are still more persistent and more intense than we would like them to be, we’ve all got responsibilities.
I talk to Rita Saffioti out your way from time to time about these kinds of pressures that people are under, and I think it’s a good thing that she’s come to the table to help people out in the same way that we have in this Budget tonight.
KNIGHT:
Is the power rebate extension to everyone, the $300, is that an admission of failure that the $275 promise of cheaper power bills at the last election just was never going to fly?
CHALMERS:
Well it’s better than – that’s the first point.
KNIGHT:
But is it an admission that you couldn’t deliver?
CHALMERS:
No, of course not. No, because what we’re talking about there with that figure that you cite is a forecast in 2021 about an outcome in 2025, and it’s 2024 and we’re helping people with their energy bills right now, and we did in the last Budget too.
KNIGHT:
But the whole Budget is predicated on forecasts and outlooks, and you could argue that with most the measures here.
CHALMERS:
Yes we take seriously the best assessment of the Treasury when they tell us how they think the economic conditions are going to unfold, and one of the reasons why we are proud to be providing energy bill relief for people is because we know that this is one of the sharpest parts of the cost‑of‑living challenge, and that’s why it’s in the Budget. And we know as well, rent’s a big part of the story, there’s action on rents. Medicines, out‑of‑pocket health costs.
KNIGHT:
I’ve just got a question from Denise actually, one of our listeners. She’s saying, ‘Will landlords decide to increase rent knowing that renters will be receiving assistance?’ She says it’s wrong, it’s unfair if landlords were to do this. So she’s asking who will be policing it to make sure that the renters aren’t hit with a rise?
CHALMERS:
Yes, we take that concern very seriously, and we did last time as well. This is actually the second time we’ve increased Commonwealth Rent Assistance, and one of the very pleasing parts of when we did it last time is that the Australian Bureau of Statistics showed very clearly that we took some of the edge off rents. They weren’t added to the total cost of rents.
Rents are still too high, that’s why we went again with another round of assistance, but we were pretty pleased with the assessment of what happened last time, and the concerns which Denise is right to raise and within her rights to raise didn’t eventuate last time and we’re anticipating that it won’t happen this time either.
KNIGHT:
And Gary and Barvic have texted in wondering why they didn’t hear anything in the Budget about Defence spending.
CHALMERS:
That’s not true. That was an important part of my speech, maybe the guys were making a cup of tea at the time, which is fine, I don’t expect people to sit there for 30 minutes of a budget speech, but there was a big emphasis on Defence Industry and Defence spending in the speech.
I mentioned it very specifically because I believe in investing in keeping our people safe, and I also think there’s a benefit in terms of our jobs and industries in the big investments that we’re making.
STANLEY:
Does it worry you that out to 2035 the biggest growth in government payments is in interest on the debt, that’s going to be 10 per cent?
CHALMERS:
Yes, it does, John. And that’s less than what it would have been were it not for all the debt that we’ve paid off.
I’ll give you a couple of numbers. I’ll try not to snow you with lots of numbers, but this year on the projections that we inherited debt was supposed to be more than a trillion dollars, it’s 900, that’s still too high. But the fact that we’ve been able to shave about 150 billion off debt this year means that we will save about $80 billion in interest repayments over the next 10 years.
So the number’s still too high, it’s growing too quick, but it’s a bit better than it was when we showed up a couple of years ago.
KNIGHT:
All right. Treasurer, we thank you for your time this evening. I know you’ve got this hard sell to continue, and it’s good to hear from you tonight. Thanks for joining us on Money News.
CHALMERS:
It’s really nice to talk to you. Thanks for the opportunity.