KIERAN GILBERT:
Jim Chalmers joins us from Brisbane, Treasurer, thanks for your time. Let's start with this announcement today that's emerged in the newspapers, the foreign investment rules for properties and homes – you're going to increase the tax on those that keep these properties vacant. How big a problem have foreign investors been in terms of property and house supply?
JIM CHALMERS:
Well, this is all about making more homes available to more Australians. It's about boosting housing stock and getting more homes on to the rental market. It recognises that the rules here are already pretty tight but we want to make them tighter in at least four ways. First of all, tripling foreign investment fees for established homes, then doubling the vacancy fee for homes owned by foreigners. We also want to substantially boost compliance and I'll come back to that in a moment. And fourthly, we want to make sure that we incentivise more Build to Rent properties in our economy. Now the reason why we want to boost compliance and supercharge the ATO in this area, is because the nature of this problem is broadly understood but not perfectly defined and quantified. And so by powering up the work of the ATO and funding that appropriately, we can get a much better handle on the numbers involved here, the size of the problem. But we are confident by increasing the fees in this way that we will add to housing stock in this country, we'll put more properties on the rental market, that means more opportunities for more Australians to find an affordable home.
GILBERT:
And that message on compliance, is that basically saying that we don't know how many investors will be paying this extra vacancy tax, we don't know how many are buying properties and leaving them vacant right now?
CHALMERS:
We have a rough sense of how many people are buying properties but when it comes to leaving them vacant, by one estimate only about $5 million is raised a year in these vacancy fees. Only, I think in one of the reports today, something like 23 breaches were issued in the last year where we've got the available numbers. And so clearly, I think those numbers are likely to be underdone, but the reason to power up the ATO is to get to the bottom of it. We're confident that this combination of measures – not just the vacancy fees, but also the tripling of the foreign investment fees, also what we're doing with compliance and also incentivising more build to rent properties – we think the combination of those four things will shift the needle. And every extra house that is built in this economy, every extra property that goes on to the rental market is welcome.
GILBERT:
So what's your message to those foreign investors in the property market that might be leaving their homes vacant as we speak?
CHALMERS:
We want those properties on the rental market, if you're not using it. There are too many properties empty around Australia. Part of the challenge here is that we do have these tough foreign investor rules, but we want to make them tougher. We don't have enough homes in this country, there's not enough homes available to Australians who desperately need them. That's why we're investing billions of dollars in building new homes. But we also think there's an important role to play here in taking what are pretty strict foreign investment rules and making them much stricter. The other benefit here, of course, is we think that we will raise something like half a billion dollars from these changes that we are announcing today. And that will help us fund our broad and ambitious housing policy, which again, is all about making sure there are more homes in our communities, so that people can buy a home or rent a home in a much more affordable way. That goes to supply, that's what our broad and ambitious housing policy is all about, and that's what these announcements are about as well.
GILBERT:
And it's in the context of the Migration Strategy, which comes out this week – tomorrow. Can you give our viewers an update – what's the starting point? What was it last year, the total of net migration in Australia?
CHALMERS:
Last financial year, net overseas migration peaked north of 500,000 people and we expect it to come down substantially next financial year. And the reason why it peaked so high last financial year is – you'll remember during COVID, we had our population going backwards for the first time since World War II – then after that phase of COVID, the students came back pretty much at once, and our tourism industry was performing well, as well. And so the peak was last financial year, north of 500,000 people, you'll see that in the mid‑year update, but it will come down substantially next financial year. And what our Migration Strategy is all about, is making sure that we have a better calibrated, better targeted migration system that delivers in our national economic interest. A lot of work, a lot of consideration has gone into the policies that Clare O'Neil will announce tomorrow. We've gone through it in the usual considered and methodical way, when we want to better target our migration system so it delivers for our national economic interest, and that's what their Migration Strategy will be all about.
GILBERT:
The Resolve Poll out today shows it's a popular move as well. In an economic sense, it also has been a driver of what is and remains quite sticky inflation hasn't it?
CHALMERS:
Primarily, our inflation is driven by other things, including global oil prices in that September quarter, but some other drivers as well. And our job as a government is to recognise the job that the Reserve Bank has to do to fight inflation, and to recognise the job that we have to do. And that means rolling out tens of billions of dollars in cost‑of‑living relief in ways that don't add to inflation. It means budget repair, it means competition policy, investing in the supply side of the economy. But also when it comes to housing, making sure that we're building more housing supply – rents have been growing too fast – we've taken some of the edge off that with our increased to Commonwealth Rent Assistance, but we need more homes in our economy. That's what our housing strategy is all about and these changes to the foreign investor regime today are part of that strategy.
GILBERT:
So you've confirmed that net migration came in over 500,000. With MYEFO this week, can you give us a sense of what the gross debt will be? We know there won't be a surplus for the financial year but where does gross debt come in? Has there been a further decline?
CHALMERS:
I'll release the mid‑year budget update on Wednesday. It will be defined by one thing – responsible economic management. And one of the ways that we know this is because in the mid‑year budget update, people will see we have made some more really substantial progress when it comes to getting debt down and getting the budget in much better nick. So I can confirm for you, Kieran, that gross debt will peak lower as a share of the economy, as a consequence of our responsible economic management. People can expect to see that in the mid‑year budget update. But also to give you a sense of debt this year, in 23–24, the debt that we inherited from our predecessors was expected to be well north of a trillion dollars this year. Instead, because of our efforts, it'll be much closer to $900 million [billion] and that saves us tens of billions of dollars in interest costs. Now one of the fastest growing areas of spending in our budget is actually the interest costs on the debt that we inherited. By dealing with the debt, by getting the budget in much better nick, by delivering that surplus, by getting the deficits much smaller, we avoid a big chunk of interest costs. And that means we can use that money to either repair the budget, and invest in cost of living or relief or to invest in the future of our economy, and that's our strategy. We're making really welcome and encouraging progress when it comes to getting the budget in much better nick, and you'll see that in the mid‑year budget update.
GILBERT:
So gross debt, that is a significant improvement, would you – if you can over the next couple of budgets – like to see that come down even further? Is that your aim?
CHALMERS:
Dealing with this debt that we inherited and getting the budget in much better nick is not the task of one update or one Budget or even one parliamentary term. You can't just click your fingers and make all of this debt disappear. But working closely with Katy Gallagher and the Cabinet and the government more broadly, we have made some really substantial progress. The first surplus in 15 years, getting the deficits down, avoiding a huge chunk of this debt that we inherited and what that means for getting interest costs down as well. At the same time, remember as interest costs are going up because interest rates have been rising, that'll be a pressure on the budget, you'll see on Wednesday as well. But we've got the budget in much better nick, we've got more work to do, it's an important part of fighting inflation, but it's also about making room to ensure we can provide that cost‑of‑living relief and make those investments in our economy into the future.
GILBERT:
As you said, gross debt peaks lower, why does it peak later? What's the reason behind that?
CHALMERS:
The reason for that is because interest rates are higher. No Australian with a home loan needs explaining the consequences of higher rates on their home. loan. But what people might not understand, is that our borrowing costs go up as well when interest rates go up. That has implications for the budget too.
GILBERT:
We've seen in cost‑of‑living terms, you know and I know, in your electorate in Brissy and right around the country, people are hurting. Can you do more say, in terms of the duopoly of Coles and Woolies, they've got 70 per cent of the market and they've had massive profits in the last year or so, a big increase in their profits – more than comparable supermarket chains and other nations. Should this be more of a focus for you? Even the 'Choice' magazine gave the two big grocery giants the shonky award for 2023. Should the government be zeroing in more to rein in their approach to consumers, to punters?
CHALMERS:
We want our economy to be as competitive as possible and the big supermarket chains shouldn't be spared from that. We have said repeatedly that when the big grocery chains were passing on increases to prices, when inflation was really galloping, since before the last election, that we also want to see – as the cost of their inputs moderate as well – we want to see those savings passed on to consumers. There is a role, an ongoing role for the ACCC here. This is also something that we can consider as part of our Competition Review but we want our whole economy to be competitive and productive and dynamic. That includes the grocery chains. We say to them – as your costs moderate, as inflation comes down in welcome ways, we want to see those savings passed on to your customers as well, they've been loyal to you when prices were on the way up, we want to make sure you do the right thing by them as inflation moderates.
GILBERT:
And you will be keeping an eye on them, as you say through the competition watchdog, is that a priority for you?
CHALMERS:
Absolutely, the important work of the ACCC goes on, it looks right across the economy, including in this area. But when it comes to competition policy, we're also revisiting that via the review that I'm doing with Andrew Leigh.
GILBERT:
Big backlash from some of the business groups off the back of Tony Burke's 'same job, same pay' laws – the Closing the loophole legislation, as the government calls it – what reassurance do you have for those business groups, from major corporations about how this is going to operate?
CHALMERS:
First of all, as you imply in your question, this is about closing down the loopholes which risk undermining agreements, and which have been slowing wages growth in our economy. That's our objective. And I say to the business community – I understand that these changes are obviously not unanimous, industrial relations changes are often contested, but I listen to and respect the differing views that are put to us. I think we can work together to get wages growing, to make our economy more productive, to get conflict down, so that we can prosper together. And so my commitment to the business community and to the union movement and communities right around Australia and local economies, is to work together where we can to satisfy those shared objectives. We know from the last decade of weak productivity growth and weak wages growth, that we don't get a more productive economy by pursuing a policy of deliberate wage suppression and wage stagnation. We won't get a more productive economy if it's easy to undermine agreements or to steal people's wages. Overwhelmingly businesses are doing the right thing in this country, we want to make sure that they are not punished by anyone who is undermining or using loopholes inappropriately. That's what the legislation is all about, but I understand there are differing views about it. I speak with the business community about it all the time, I respect their opinion. We haven't got unanimity here but we have got an important change, which is about getting wages growing again, by closing down some of these loopholes which are undermining agreements.
GILBERT:
And is it basically about two companies, BHP and Qantas, and their use of those loopholes?
CHALMERS:
I don't see it that way but obviously, some companies use these sorts of arrangements more than others. We're not in the business of singling anyone out in this regard. We want to make sure the system is fair for everybody, we want to make sure that we close down these loopholes. We want to get wages growing, we want to get productivity growth going again, in our economy as well. This is about more and better agreements, it's about more productivity, more wages growth, less conflict so that we can prosper together.
GILBERT:
On to the energy front, Shadow Environment and Energy Minister Ted O'Brien is at the COP talks in Dubai. He made the pitch that there'll be no net zero without nuclear – with alongside him, I guess in many respects – some of our allies and friends that have committed to increase their nuclear energy sector. Is the government being too closed‑minded on this issue given so much of the rest of the world, comparable nations, are pursuing nuclear energy? It looks like this is going to be a key battle ahead of the next federal election, Treasurer.
CHALMERS:
A couple of things about that, Kieran, we've got a different set of advantages in this country and if the difference at the election is that the Liberals and Nationals want to build more reactors in more local communities, and Labor will build more renewable capacity because it's cheaper and we'll get it online sooner, then I say – that's fine. Let's have that public policy debate. I think it speaks volumes about the Liberals and Nationals after all of their failed policies, after the wasted decade, that the best they can come up with is a form of energy, which is more expensive, will cost Australians more and will take longer to get online. With this kind of approach, is it any wonder that they failed so spectacularly for the best part of a decade on energy policy? Renewable energy is the cheapest form of new energy. We're going about getting more renewables into the system, they say that they will build more nuclear reactors in more local communities. People have a choice to make at the election, I'm very comfortable with that.
GILBERT:
So it's been a big year, your final set piece event this week – just to clarify, confirming MYEFO – that will be on Wednesday, won't it?
CHALMERS:
Absolutely, it's going to be a very big finish to the year in the economy and in economic policy. We're going to sprint to the finish, Kieran. There will be the mid‑year budget update on Wednesday. There'll be the Migration Strategy released tomorrow. Today, we've made this important announcement on the foreign investor regime for housing. We are working as hard as we can for Australia to get the right policy settings in place. We know we've got a long way to go, we know people are under pressure, we know the economy is slowing but we're making welcome and encouraging progress. We've got inflation moderating, we've got wages growing, we've had two consecutive quarters of real wages growth, unemployment with a three in front of it, record jobs growth for a first term government, the gender pay gap is the narrowest it's ever been. We've got a surplus, we've got much smaller deficits, much smaller debt which is avoiding some of these interest repayments, and so we're making progress but we know we've got a long way to go. We have made some progress in 2023 but we know there's a heap more work to do in 2024.
GILBERT:
Treasurer, thanks for time, talk to you soon.