LAURA TINGLE:
Treasurer Jim Chalmers joins me now from Canberra. Treasurer, welcome to 7.30.
JIM CHALMERS:
Thanks very much, Laura.
TINGLE:
You said again today that you would prefer to under-promise and over-deliver when it comes to the Budget. What have you over-delivered on in the mid‑year budget review?
CHALMERS:
The Budget is in substantially better nick as a consequence of our efforts. Our responsible economic management has helped engineer an historic turnaround in the budget position. And we have been able to do that – not at the expense of rolling out cost-of-living help or investing in the future of our people and their economy – we have been able to do that by taking an especially responsible and disciplined approach, a careful and methodical approach, so that the numbers that we released today have a substantial improvement on what we saw in May. There are still pressures in the budget that we are dealing with and that we are attentive to, but we made good progress today.
TINGLE:
Strong commodity prices have played a huge role in getting the forecast budget deficit down quite sharply to just $1.1 billion for this year, from 13.9 at Budget time, and the numbers for the next few years have also improved considerably. Is it possible you could potentially even see budget surpluses for the next four years?
CHALMERS:
That’s not something that we’re expecting at the moment. It is certainly true that this year, that very small deficit puts us within striking distance of a surplus this year, but we’re not there yet. And there are very good reasons to be cautious and conservative about that. Our revenue expectations can be quite volatile and so we want to make sure that we’re not, as you rightly imply in your question, overpromising and under-delivering. We want to make sure that we’re taking a deliberately cautious and conservative approach to the numbers. Now, the commodity price story is an important part of our budget, but only about half of the improvement. Some of the rest of the improvement can be explained by a labour market which is much stronger. More people are earning more in our economy and that’s a good thing. It’s also good for the budget.
TINGLE:
Many people will be disappointed there weren’t any explicit cost-of-living measures in the mid-year review but the latest numbers reflect that interest rates have been much higher than were presumed in the Budget, even for the cost of government borrowings. Did you consider in that context whether further top‑ups may be needed or should be considered?
CHALMERS:
Of course, we consider on an ongoing basis whether we are providing the help that we can in a way that takes some of the edge off inflation rather than add to it. The ABS has said that the policies that we are rolling out right now are putting downward pressure on inflation and that’s a good thing, and some of those initiatives are still rolling out as we speak. We will consider whether there is room in the budget and a need in the economy to provide further cost‑of‑living relief as we get closer to the May Budget. But the cost‑of‑living relief that we already budgeted for is still rolling out. It’s playing an important role in the economy.
TINGLE:
The Government has taken a number of measures on migration, including in the last few days, and you made changes to the foreign investment rules on foreigners owning property in Australia. Have you been able to quantify what impact the post‑COVID migration surge may have had on housing prices and supply?
CHALMERS:
That’s not a number that we can isolate or publish in the documents that we released today, but we want to make sure that that migration is in our national economy interest and that’s what the Migration Strategy is all about. And as a consequence of those changes that Clare O’Neil released on Monday and spoke with you about earlier in the week, we expect about 180,000 fewer migrants as a consequence of that tightening up, making sure we’ve got the right system for our economy and for our country. There’s been a fast economy, particularly in student numbers but also tourists. That has been helping the economy and helping the budget but we need to make sure that it satisfies all of our national economic interests and that’s what the strategy is all about.
TINGLE:
Peter Dutton has questioned that assertion that the migration numbers are actually going to be lower. He says that the numbers on which MYEFO are based are showing that the numbers are actually going to be higher than forecast in the Budget, that there will be 1.625 million people instead of 1.495 million forecast in the Budget. Is he right?
CHALMERS:
Peter Dutton is notorious for playing politics with these kinds of issues and he knows almost nothing about the economy. He should know that what we’re talking about here is there would be 180,000 on top of those different forecasts had we not taken the steps that we proposed to take on Monday when Clare released the Migration Strategy. We have been up‑front for some time. As I said, the students came back faster than anticipated even in the May Budget, the tourism has been strong. He should know that. It wasn’t that long ago he was calling for more tourists and more students, and even as recently as this week he’s talking about getting more migrants in. He will play the usual Peter Dutton–style negative and nasty politics. Our job is to manage the economy and the interests of the Australian people. That means putting in place a strategy which will result in 180,000 fewer migrants than would have been the case in the updated forecast that I released today.
TINGLE:
Could I ask you about the intergenerational equity of Australia’s economic settings? A number of economists have observed that what happens now with interest rates is that while they are hurting a lot of younger people who are borrowers, one of the different effects of a successful superannuation policy is that older people are cheering every time interest rates go up. And I also wonder whether the tax treatment of older Australians, with the tax breaks they get through super, are pretty unfair compared to young people. Is this an issue that you are considering – that you think there is a generational equity issue in the budget to contemplate and do something about?
CHALMERS:
Well, I do think there is an issue that when times are tight and particularly when interest rates are rising, the impact of that does fall disproportionately in our community and our economy. There are a number of levers that need to be deployed here and are being deployed here which recognise that the inflation fight or the inflation – the pain of inflation falls disproportionately and so our response needs to recognise that.
When it comes to the intergenerational issue that you raise, I mean, this is one of the motivations for the changes that we’ve got before the Parliament when it comes to tax concessions for people with very high superannuation balances. There will still be tax concessions, quite generous, for people with big balances, but they will be slightly less generous for half a per cent of the population who have got those big balances, and that’s partly to recognise that we need to work out where our tax concessions and our investments more broadly can do the most good. There are issues in the disproportionate way that our policies affect different people on different levels of income and different ages, and that’s one example of one of the things that we are doing to recognise and address that.
TINGLE:
These new forecasts say that real wages will start to actually rise early next year, which a lot of people will be very happy about, but real incomes have been falling and inflation has been rising – two things that weren’t really anticipated when the stage three tax cuts were introduced some years ago. Doesn’t that suggest you need to adjust those cuts, even if you don’t want to break your word on delivering the cuts that you’ve promised? People at lower income levels aren’t really going to be getting any tax relief next year. Is that something that you want to look for given that intergenerational equity issue?
CHALMERS:
First of all, we’ve had real wages grow in the last couple of quarters, but you’re right that we expect annual real wage growth next year. And we do recognise that those stage three tax cuts are contested. People have got views about those tax cuts and I welcome people’s feedback about them. What we’ve been able to do is to help people on low and middle incomes in different ways. Our cost‑of‑living relief is targeted at people in middle Australia, and also the most vulnerable –
TINGLE:
If you recognise those changes, Treasurer, do you think you need to still look at the potential to adjust the stage three tax cuts?
CHALMERS:
We haven’t changed our position on the tax cuts. We think there’s an important role for returning bracket creep where governments can afford to do that. Those tax cuts, as you know, and we’ve talked about before, were legislated some time ago. I guess the point that I’m making is recognising that we can do other things for people on more modest incomes and we have been doing that, whether it’s income support, changes to early childhood education, rent assistance, electricity bill relief – really right across our cost‑of‑living package we recognise that we can provide help sooner for people on low and middle incomes.
TINGLE:
Treasurer, thanks so much for your time tonight.
CHALMERS:
Thanks very much, Laura.