Kieran Gilbert:
Treasurer, thank you for your time. In your 3 previous Budgets and in fact, in your speech in the last week or so, you’ve spoken about the concerns internationally. They are no less stronger today than they have been at any point do you need to be more ambitious in terms of your reform agenda to deal with those threats like the, the Trump shock?
Jim Chalmers:
Well, good afternoon, Kieran. Thanks for the opportunity to speak to you from the Treasury. This is where the finishing touches are being put on the Budget next Tuesday. And it is being framed in really uncertain, unpredictable and volatile international conditions. And so in the first 3 Budgets that we handed down, there was a premium on responsibility and making our economy more resilient and that will be the case again in the fourth Budget.
This Budget is going to be a responsible Budget. It will be about helping people with the cost of living, making our economy more resilient, investing in building a better future for people in the context of these really uncertain global conditions that you reference.
Gilbert:
The Treasury Deputy Secretary up until this month is now the chief economist at the Commonwealth Bank has said the government, whoever it is after the election, needs to rein in spending after the election. Do you accept that’s the reality?
Chalmers:
Well, we’ve been doing that. We found more than $90 billion worth of savings in our first 3 Budgets and in the most recent mid‑year budget update, more than $90 billion. Remember, our predecessors had precisely zero in their last Budget in office and so we’ve been finding those savings. It’s one of the reasons why we’ve helped engineer a $200 billion improvement in the budget, the biggest ever in a single parliamentary term.
We’ve delivered those 2 surpluses, we’ve got the deficit this year down much lower than what we inherited when we came to office and so all of that, I think, demonstrates how responsible we have been with the budget. We have engineered a pretty remarkable improvement in the budget but if your question is, is that work ongoing? Of course it is, yes.
Gilbert:
Well, if you look at the government spending as a share of GDP, and I know when you came to office it was high, that was off the back of the pandemic. But if you look at that number and that graph from the 60s through to today, that is quite a surge. Are you cognisant of this challenge that the nation faces and the government faces to get that back to a more manageable level.
Chalmers:
Of Course we’re cognisant of it. Under the previous government, spending as a proportion of the economy from government was edging up towards a third. Now it’s got down a bit closer to a quarter. Part of our task was to get that spending down a bit from what we inherited. Whatever the reason for that spending, it wasn’t just pandemic spending, there was a lot of waste and rorts in those budgets making up that trillion dollars in Liberal Party debt that we inherited.
But what it also reflects, I think that would confront whoever wins the next election is that some of the pressures on the budget from the ageing of the population, the necessary growth in the care economy, for example, which accompanies it, some of those factors are weighing heavily on the budget and that’s why that $200 billion turnaround is so important.
The 2 surpluses are so important. The fact that we’ve paid down about $170 billion of that Liberal Party debt, saved tens of billions of dollars on interest repayments, that helps us make room for some of these necessary and unavoidable investments and to make room for the investments that we are really, really proud of, including strengthening Medicare and strengthening the Pharmaceutical Benefits Scheme.
Gilbert:
But are you making the room? That’s the thing. I mean you can make the investments, but you would remember this was the statement Kevin Rudd said when he was elected. He pledged to stop the reckless spending. Thirty‑four billion dollars more than that already this year alone. Is that the sort of spending that Rudd had promised to stop?
Chalmers:
First of all, we have our own approach to budgets, we don’t have to copy the language used by good predecessor but 18 years ago. In addition to making these commitments, we’ve still delivered that $200 billion improvement, still delivered those 2 surpluses, still paid down $170 billion in Liberal debt and so that’s important as well. But in addition to that, if you look at the sorts of investments that we have been talking about and announcing over the course of this calendar year, the vast bulk of those were already provisioned for in the mid‑year budget update. A huge proportion of what we have announced so far already in the budget bottom line, and I think that’s a point which is sometimes lost when.
Gilbert:
You look at the tax as a share of the revenue. I want to put this graphic up and show viewers of the role that income tax plays. Do you accept that income tax, you see that climbing as a percentage of tax revenue, well over 50 per cent by the end of the decade. Is income tax too much of the workhorse in our budget?
Chalmers:
Well, this is one of the reasons why we cut income taxes for every Australian taxpayer. Our opponents wanted millions of Australians to miss out on that tax cut and we made sure that everybody got one because there’s more than one way to return bracket creep and we’ve done it in the most effective way that ensures that every taxpayer benefits rather than people already on higher incomes and so that’s been part of the motivation.
But also on the other side of the ledger, if you think about the tax reforms that we have been either implementing or still pursuing in the Senate, the PRRT, multinational tax reform, the changes we’re seeking to make at the very top of superannuation, part of this is about doing that rebalancing that you’re talking about.
We’re providing income tax cuts, we’re trying to make the budget more sustainable in other ways in the tax system and that’s because we recognise the pressure that you’ve just identified in that chart. It’s a big reason why we gave everyone a tax cut in the middle of last year.
Gilbert:
Yes. Well, when you did redesign that, you reduced the top threshold from $200,000–190,000 a year. Let me ask you, do you think $190,000 a year is rich, particularly in places like Sydney, Melbourne, your hometown of Brisbane?
Chalmers:
Look, I don’t apply those kind of labels. I don’t use that kind of language. But when it comes to the tax changes, we lifted 2 tax thresholds and we cut 2 rates and that’s what makes it tax reform but tax reform that means that every taxpayer gets a tax cut. And this is a really important point, Kieran.
I’m pleased you’re asking me about income taxes, because the Australian working public should never forget that when it came to tax cuts, the Liberals and Nationals wanted 2.9 million of them to miss out. They wanted 84 per cent of taxpayers to be worse off than they are under our tax regime, 90 per cent of women and that’s a key difference between us. We believe in tax reform. We’ve provided and implemented tax reform from July of last year, we’ve done it in a way that makes sure that every taxpayer benefits and not just some.
Gilbert:
Ken Henry, the esteemed former Treasury Secretary, he says it’s intergenerational, an intergenerational tragedy. What’s happening in terms of the reliance on income tax? Will you look at more? Well, first of all. Will you consider further tax cuts if you win this election?
Chalmers:
Well, first of all, I think you and I have spoken about him before. I think the world of Ken Henry. I take his opinions very seriously. I worked with him very closely in this building, actually not that long ago and so I respect Ken and when he makes comments like that, I take them seriously and I do reflect on them.
And the fact that younger people were getting an especially rough trot, particularly during the aftermath of COVID, that inflation spike that we saw right around the world, that was one of the motivations for the way that we redesigned the tax cuts so that it was better for young people. You think about our housing policy, that’s about making things better for young people.
Cutting student debt, rent assistance – there are so many things that we are doing which I think responds to the challenge that Ken and others have identified which is this intergenerational challenge that we all have. Now, we’re not ignoring that, we’re responding to that in more than one way, but especially when it comes to tax.
Gilbert:
They want you to be more ambitious though, and look at more structural shifts in terms of the budget. Is that something that if you’re re‑elected, you will be open to in a second term?
Chalmers:
Look, I understand that people always want us to do more and they want us to go further and good people put that to us. And again, I’m respectful when they do. We’ve got an agenda already.
Our agenda is better for young people than the situation that we found when we came to office in all the ways that I’ve run through and if in the future we can do more to deal with some of these intergenerational challenges that you and Ken are identifying, then obviously we are prepared to consider that but we shouldn’t dismiss or diminish the very substantial effort that we have put in to support young people in education, with student debt, in housing, with cost of living, and especially when it comes to the tax cuts.
Gilbert:
Do you rule out any tax increases next term if you win?
Chalmers:
We’ve already got our agenda and we’ve made it clear, the tax changes that we’re still pursuing, some of them I talked about before, including in superannuation stuck in the Senate, billions of dollars that our opponents will have to find to make up for the fact that they want to unwind or not proceed with that pretty simple, pretty modest, but meaningful change that we’re proposing in the Budget.
So, we’ve already got a tax agenda. I ran through it before – PRRT, multinationals. Not considering any changes when it comes to that. And I think we’ve been asked on a number of occasions, in Question Time and elsewhere about that. We’ve got a tax agenda and we’re pursuing it.
Gilbert:
On to the NDIS, Allegra Spender today in the Financial Review wrote, unless it’s better defined and spending sustainable, she says, essentially, you will lose the goodwill that there is towards this. This what she called a proud achievement. It simply cannot retain public support and keep growing at 8 per cent per year.
Is this on your radar? The fact that you’re looking at the growth of this, as she said, a proud achievement, but public support will be diminished if it continues to grow at that rate.
Chalmers:
Look, again, I’ve got a lot of time for Allegra, but pretty strange for her not to mention that we’ve got investment on the NDIS down from 14 per cent a year, thereabouts, to 8 per cent a year. One of the things that has made the most meaningful structural difference in the Budget that I hand down on Tuesday is the progress we’ve made on interest costs, the progress we’ve made on aged care and the progress we’ve made on the NDIS.
Now, we designed the NDIS, we believe in it and we want to make sure that it continues to deliver for Australians with a disability. For that to happen, it does need to be sustainable and we’ve done more on that front than any government, and I think that should be acknowledged.
Gilbert:
You don’t want it… Obviously, the ones at greatest risk would be the most, the profoundly disabled, the people where the NDIS was designed to help. If this thing collapses, do you accept that those people will be most at risk?
Chalmers:
Well, we’re obviously not going to let it fall over. That’s the motivation for ensuring that every dollar in the NDIS goes to people who need it most and I pay tribute to Bill Shorten when he had the role and now to Amanda Rishworth, they understand the magnitude of the challenge, as does every member of our Cabinet.
We’ve made some good progress here. If you think about the structural improvements we’ve made to the budget, still spending on the NDIS, growing, still supporting people who need the NDIS, that’s our number one priority, but doing that in a more sustainable way. And again, I’d stack up our record on this versus our predecessors.
When we came to office, it was growing at an unsustainable rate, and we’ve been able to find a fair way to make that growth more sustainable. It’s something that we should be collectively proud of because we want to continue to deliver for people. And in order to do that, we need to make sure we can afford it.
Gilbert:
The IMF, and we’ve discussed this before, the IMF says means tested. Why would you not look at means testing at least part of such a mammoth and growing programme?
Chalmers:
Well, some things are appropriate for means testing and some aren’t. We don’t means test Medicare, for example, and there’s an important reason for that, and we don’t propose to do that when it comes to the NDIS. What we have shown under Bill and now under Amanda is we can crack down on the rorts, we can crack down on the dodgy providers, we can make this spending growth more sustainable, and that means we can continue to deliver for people who need it.
Gilbert:
The PBS big announcement today, another commitment on that. What’s your message to the United States, to the big pharmaceutical companies who might want to tweak it, or have you reduced the support for it?
Chalmers:
We’re strengthening the PBS, we’re not letting anyone undermine it – that’s the message from today in both ways. This is a really important investment in cheaper medicines, even cheaper medicines. One of the key achievements of this government, one of the key parts of our cost‑of‑living relief has been making medicines cheaper and that’s what today’s announcement is all about, strengthening the PBS, not undermining it.
We will stand up for the PBS because it’s such an important part of our health system and our community more broadly. The PBS and Medicare are the pillars of our health system and we will always defend both of them against attacks, whether they’re from Peter Dutton at home or from others abroad.
Gilbert:
When it comes to the trade war, if the US says you’ve got to pick sides – China or the US – what do you do in terms of iron ore exports if they, say, start to put pressure on us not to sell iron ore to China?
Chalmers:
I’m not sure that the choice is that stark here. And respectfully, our job is to recognise that as a trade nation, we’ve got a lot of skin in the game but we’ve got a lot of skin in the game when it comes to these escalating trade tensions. Nobody wins from a trade war, let alone us. We’re so heavily reliant on export markets. We want them to be diverse and reliable because they’re an important part of our economy and an important part of our prosperity.
And so, as I said earlier in the week, I spoke at some length about these escalating trade tensions. They are a recipe for slower growth and higher inflation around the world at a time when growth’s not thick on the ground and inflation has been a problem around the world over the last couple of years. And so I think they’re self‑defeating, I think they’re self‑sabotaging and that’s why we want to go down a different path.
Gilbert:
Do we need to be more creative in terms of investments in things like supporting our indigenous community? I want to raise this one very successful program that I’ve supported being involved in, the Australian Indigenous Education Foundation, a great organisation. They have a 94 per cent matriculation rate. Ambassador Rudd, former Prime Minister, he backed this as well. Do you need to start shifting public dollars more into programs like the Australian Indigenous Education foundation which have such a great impact on our indigenous population?
Chalmers:
Look, it is a wonderful organisation and I have spent time with some of the participants in the program before and with its leaders, and I commend you, Kieran, on your involvement in it as well. That program is going really well, even absent additional government investment. But as always, we consider these kinds of proposals on a case‑by‑case basis. That’s true of this organisation and that’s true of organisations doing good right around Australia.
Gilbert:
Five million dollars on the Voice. It would have been better spent on something like that, wouldn’t it?
Chalmers:
Look, I’m not going to go into the past of the referendum in years gone by. I think what our focus is on is putting this Budget together, making the budget more responsible, making our economy stronger, providing cost‑of‑living relief, making sure that we’re more resilient in the face of these global economic shocks. That’s the priority and that’s the focus and you’ll see that on Tuesday.
Gilbert:
Just, I know you’ve got to go, but the Business Council, others saying we’ve lost our energy price advantage. Will we get it back? Is there any way you can see us getting that back because they’re saying it feeds into everything – production, food, costs, right across the board.
Chalmers:
I work closely with the BCA on the energy transformation because we all have an interest in introducing more cleaner and cheaper and more reliable energy into the grid. We saw from the experts when they were talking about the default market offer in the retail sector, that one of the issues here is some of the older, unreliable, legacy parts of the grid and so we need to make sure that we’ve got more cleaner and cheaper energy being introduced. That’s our priority. I believe that’s a priority that the BCA shares and I work pretty closely with them on it.
Gilbert:
You, just finally. You were heckled at that speech at the Queensland Media Club, from the other side of the debate. Those that don’t want any gas in the system and certainly no nuclear, no coal or gas, was the message from this group. They interrupted Peter Dutton as well today. Are you worried about this trend in in our politics right now?
Chalmers:
I heard about today’s protest, but I haven’t seen the footage. I hope everyone’s ok. In my case, I was pretty relaxed about it. I was surprised to see old mate with me up on the stage, if I’m honest but I thought he was there to fix the microphone.
I quite like living in a country where people have opportunities to express their view. I’d rather they didn’t express the view in the middle of my speech or Peter Dutton’s speech, frankly but no harm was done in my instance. I hope no harm was done in Peter Dutton’s instance today and a couple of other ones.
Gilbert:
The Labour Force number today, I know we’re out of time, but what does that say? Are you worried about what that number suggested in terms of maybe a softening?
Chalmers:
We are seeing a bit of a softening in our labour market but we’ve still got incredibly low unemployment by historical standards. Even with all the challenges in our economy, domestic and global, we’ve had the lowest average unemployment under this government than any government of the last 50 years and what it means is we’ve got inflation down, unemployment is low, real wages are recovering, interest rates have started to come down and growth has rebounded solidly in our economy. So that’s the platform for the budget.
We know that people are still under a fair bit of pressure and that’s why our cost‑of‑living help will be so important. But we have built together, as Australians, a pretty remarkable platform for the future. We have a combination of economic data which not a lot of countries have, and low unemployment is a really important part of that story.
Gilbert:
And Angus Taylor, has he agreed to a debate yet?
Chalmers:
He hasn’t. I’m told that he’s participating in a local candidates debate in Western Sydney. He won’t debate me, but he’ll participate in a local candidates debate for a seat that he’s not running in, bizarrely. I issued the challenge to Angus Taylor, I think, on Andrew Clennell’s show almost 3 weeks ago now. Haven’t heard peep from him since then about it. I think the economy should be front and centre in this election. I’m prepared to debate Angus Taylor weekly if necessary, but ideally at least 3 times, as I said to your colleague Andrew Clennell. I’ve written to Angus Taylor again today to suggest that there are multiple debates.
I think the Australian public deserve to see these debates, to have our economic plan laid out and that will give Angus Taylor an opportunity to come clean on his secret costs and his secret cuts and what that means for real people in communities and for the national economy more broadly. So, let’s have those debates. I’ve written to Angus Taylor again today. I hope I hear back from him soon because I didn’t hear a peep from him the first time I suggested these multiple debates.
Gilbert:
Let’s see, Treasurer, thanks. We’ll see you on Tuesday for the Budget. Thanks for your time.
Chalmers:
Appreciate it, Kieran. Thanks.