Mark Kenny:
G’day there and welcome to another Democracy Sausage. I’m Mark Kenny, Director of the Australian Studies Institute at ANU.
Marija Taflaga:
And I’m Dr Marija Taflaga from the School of Politics and International Relations.
Kenny:
Marija, it’s our great pleasure this week to welcome back to Democracy Sausage the Treasurer of Australia, Jim Chalmers, former alum of ANU of course. G’day there, Jim.
Jim Chalmers:
Hi Mark, hi Marija. Thanks for having me back on.
Kenny:
It’s terrific to do so, especially in this period just after the federal Budget, perhaps one of the most important budgets. You’ve certainly described it as the most significant budget that you’ve delivered and it is one of the most, I think, game‑changing in a range of ways for many years. And so that’s significant in itself.
But it’s also encountering what, if you were in the aviation business, you’d say is a little bit of turbulence. Maybe a need to buckle the seatbelt and wait a bit longer for the cup of tea or whatever it is. There’s certainly a fair bit of noise around this Budget. So we want to talk about some of those things today. The reaction to it, the philosophy behind it and the politics, I suppose.
I thought, Jim, a good place to start though might be just to get you to take us back to the intent of the sort of key things in the Budget. And I’m thinking particularly, Marija reminds me of course that the cuts to the NDIS are foundational to some of the other things that you were able to do in the Budget in terms of freeing up money, and that’s important. But if we just go back to the original intent of the idea of taxing assets the same as earned income, could you just talk us through that? Perhaps even bearing in mind that some people will be more familiar with this than others. Perhaps even taking us back to the original intent in 1985 of Paul Keating when he introduced the capital gains tax, and then where you are now.
Chalmers:
Thanks Mark. The capital gains tax was introduced in ‘85 and then a big change was made by Howard and Costello in ‘99. And really the ‘99 change is the policy mistake that we’re seeking to rectify, because what happened in 1999 was the capital gains tax became based on an arbitrary number, a 50 per cent discount. It massively over‑compensated investment in fixed housing, and you can see really from that point on this big disconnect, this big decoupling, between house prices and incomes.
That in lots of ways was the kind of original sin that put housing out of reach for subsequent generations of people, and particularly younger Australians. The objectives of the Budget broadly are to help people through this difficult global oil shock and then reform our economy and our tax system for the future.
Within the tax reform package, which is ambitious and it is contentious, it’s really about 3 things. The first thing is to make it easier for people to own their first home. The second one is to make sure that we are cutting income taxes for workers for the fifth time in the 4 years of this government, 5 income tax cuts provided using 3 different mechanisms. Then the third objective is the one that you touch on, which is to try and better align the way that we tax labour in this country with the way that we tax legitimate income from assets. Somewhere along the way, including in that 1999 policy mistake, those 2 things got out of whack, and so people were being undercompensated for their work and overcompensated when it comes to investments in things like established housing.
That’s the status quo that we’re trying to fix, and a lot of people will have strong views about defending the status quo. But our job is not to rationalise or defend the broken system, our job is to try and fix it, even if that invites that level of political turbulence that you describe in your intro.
Kenny:
In the lead‑up to this, and we can’t avoid the fact that this represents a broken promise in respect of, you know, areas of the tax system that you had sworn off, the Prime Minister had repeatedly sworn off at the last election. Essentially these are the changes that Labor took to the 2016 and 2019 elections, and then swore off for 2022 and 2025, which of course wasn’t that long ago.
So you’ve had to kind of consider the implications of that and factor those in. I imagine you would say the policy substance justifies, you know, the friction, the umbrage, the political cost that comes from that switch, that back‑flip. Just going to that, what changed between 2025 election and now that you needed to make this? Because your description of it just then in terms of the sort of philosophy of it, it’s applied really for most of the time since 1999. Certainly as housing has become more and more expensive, and more and more frequently as an investment vehicle for wealthier Australians.
Chalmers:
First of all, it’s not identical to the package we took to the 2019 election. But I’m not quibbling with that characterisation, there are some differences and there are some familiar elements as well. Obviously we knew when we came to this different position that it would be contentious, that there would be people who would focus on the fact that the government had come to a different view about a very contentious set of policy issues. None of that is surprising that there’s been a focus on that. I don’t think it’s necessarily unfair either that people would point to the different view that we had at the election when we were –
Kenny:
If you were in Opposition, that’s exactly what you’d be doing, right? You’d be saying, ‘the government’s broken a promise here, this is what they said 12 months ago and now they’re doing something else?’
Chalmers:
I can understand why some people are focused on that, but I don’t think it’s the most important thing. I think, as you anticipated in your question, the most important thing is that we get the policy right. Even if that necessitates a change in view or even if that means we get some political grief about changing our mind, I do think it’s worth it to get to the right outcome.
Kenny:
Can I just jump in there, Jim, and just ask you, was it wrong to break the promise? What was worse, making the promise or breaking the promise?
Chalmers:
I’m not sure I’d come at it in that kind of binary way. What we tried to do, Mark, is not to quibble with the idea that we’d come to a different view, we’re not pretending it’s exactly the same view as we held before. We’re being upfront and owning a change of position and explaining to people why our position has changed, which is at the core of your question. It became increasingly clear that a problem of this magnitude, which was locking so many people and especially young people out of housing, this intersection of the housing market and the tax system risked consigning another generation of Australians to outsider status – not just in our housing market, but in our economy more broadly.
We became increasingly of the view that we couldn’t leave this to another generation to fix, and if we had done that this problem would have got worse. Part of that realisation was recognising that the problem begins with housing supply, and that’s still our overwhelming focus, but it doesn’t end there. There are issues around the composition of the market too. It’s too hard for too many, especially young people, to get a toe‑hold in the market. If we left that for someone else to fix, it would have got worse.
Kenny:
Just before I go to you, Marija, one further question on this, Jim Chalmers. So, the debate leading up to the election, in fact the debate’s been going on for a long time, it’s been about negative gearing and capital gains tax and its particular impact on the housing market and on housing affordability, and so forth. This has been a long‑standing debate.
You’ve finally arrived at this position. What’s been absent from that debate mostly has been the notion of changes to, of winding in, those advantages for the investor class. What’s been missing is the idea that that would extend to other asset classes, at least from the public debate. So there’s been quite a sort of a reaction, I think it’s fair to say, from particularly people involved in the sort of high‑growth tech sector, start‑up sector, who are running these campaigns this is sort of a, what I’ve called a meme tide of response that has occurred.
Some of the advocates in this space openly accept that it’s not accurate what’s being said in some of these things, you know, the suggestion of the government being a 47 per cent stakeholder, or Anthony Albanese in particular being, you know, a silent and negative partner in the business. What’s your reaction to all of that?
Chalmers:
There’s a lot in that. Let me try and unpack it efficiently. First of all, in terms of applying the capital gains tax change broadly rather than specifically to housing, the advice that we got and accepted was that there was little point in removing one distortion and replacing it with another. So, this is a fairer, more neutral way of taxing capital gains.
We analysed a 2‑decade period, and what it showed us was that existing housing had been over‑compensated, while other kinds of investments, including in things like medium‑density units or in some instances shares – depending on the return and how long you held on to them for – were under‑compensated. By making this change and applying this more neutral treatment in the tax system some investments will be better off relative to housing, and that’s because we’re taking the big distortion out of the system. That’s the policy rationale.
You’re right that that’s been a big focus since the Budget was handed down and you’re right that there’s a lot of misinformation and disinformation about this change. There is still a capital gains tax discount after the change is made, it’s just calculated differently. It’s calculated based on inflation rather than a made‑up number, an arbitrary number of 50 per cent.
The 47 per cent campaign is essentially rubbish. Even the creator of that campaign has said that he was going for impact rather than accuracy, and that shows a bit what we’re up against. We’re making a very sensible, very common‑sense change. We’re recognising and respecting past investments and we’re doing this in a way which is consistent with the advice. We’re applying fairer and more neutral treatment, and some people will do a bit better, some people will pay a bit more tax.
If you look at the change in the average capital gain, the number that I put out in a Bloomberg speech that I gave on Tuesday in Sydney, at the end of the decade the average goes from about 19 per cent to about 21 per cent. Obviously, some of these numbers which are pushed around deliberately are wrong, and that’s because there’s still a capital gains tax discount, it’s just calculated in a way that recognises real gains that people are making.
Kenny:
One of the problems that people are saying though with it is that they’re saying, you know, a start‑up business starts with a very low cost base. Therefore, if that business is sold, you know, 5 years down the track or whatever, its capital gain is almost its entire wealth, its entire value, and that in that year that person, that sale, goes straight into the top tax bracket. It’s a significant portion, perhaps not quite 47 per cent allowing for the tax‑free threshold and everything else, but a significant portion of the value of that sale goes into tax.
And so I’m just wondering, you’ve talked about the possibility – you say you’re listening to the sector, you’re talking this through. I understand people like Saul Eslake, I think, have made this point that actors and athletes and others who have lumpy income year to year, some years will earn not very much and other years will earn a considerable amount, that in some cases those classes of persons are able to spread their income or average their income over a number of years. Is that the sort of thing that you could be looking at doing to smooth out this sort of problem?
Chalmers:
First of all, we do recognise that start‑ups are different. We haven’t just recognised that in reaction to the post‑Budget commentary, we were engaging privately before the Budget with the start‑up sector. We actually put in the Budget papers themselves that we recognised that there was a different set of considerations when you calculate the cost base in the tax system for start‑ups. We’ve been doing some consultation now, before the Budget, and now publicly since the Budget. I’ve done a bit of that myself, informally, but the Treasury Department’s been doing a bunch of that formally. My colleagues have been doing that too, and that’s because we recognise there’s a difference here. I don’t want to pre‑empt where that might land, but it’s a genuine consultation because we recognise some of those issues that you raise, Mark, are genuine issues.
Taflaga:
Thanks very much for that, Jim. I want to open up the frame of this conversation a little bit more. One of the things that you sought to do in this Budget is to sort of frame it in the social compact. Some of the framing around this has explicitly been about intergenerational inequality and looking to, I suppose, potentially reset that. I think one of the reasons why you’ve had so much grief recently is because you’ve really taken some interests, and we can see in the public backlash against them.
At the same time we’ve also seen that the government is going to take out more than $37 billion out of the NDIS. So, as someone who was a student of Labor history, as someone who is familiar with the brutal academic literature on the Labor Party, I suppose, how does this Budget reconcile with the kind of nation that Albanese said that he wanted us to be at the last election, to be taking so much out of social services, one of the largest cuts to social services in a budget for many years?
Chalmers:
I’ll come to the NDIS specifically because I think those changes are really important. But if you get to what we’re trying to achieve here, when it comes to what you described as the social compact. We want ambition and aspiration and opportunity to be the defining characteristics of the future of this country, not just some relic that people read about in history books. We want the ‘fair go’ to be part of our future, not just something we admire in the past.
That means recognising that from time to time difficult changes are required to do justice to that national ethos. There will be – as we’ve touched on in a number of different ways already in this conversation – people who prefer things exactly as they are, even though most objective observers looking at the housing market, looking at the tax system, looking at our economy and our society, would understand that we can do better.
Where that matters in the international context, in the global context, is that the big difference in our politics now are people who look around the world and see the social and political dislocation as a path to be avoided – that’s our view – and people who look around the world at this extreme social, economic and political dislocation as something to be replicated. That, I think, is one of the big fault lines in our politics.
One of the reasons why there’s a sense of urgency here, to come back to Mark’s question, is because we don’t want to go down that path. Too many people already feel disconnected and disregarded in our economy and in our society and if you care about that – I do, I care deeply about that – then you have to take some political risks to try and address it. So, that explains a lot of the thinking behind the Budget strategy overall.
You asked me specifically, as others have and I understand it’s of interest, the other changes that we’re making to the NDIS. Here I pay tribute to Mark Butler and Jenny McAllister and Katy Gallagher. We’ve all been working on this for a long time and the reason why these changes matter, the reason why I’m a big believer in these changes, and in the NDIS more broadly, is because we’ve got to save the thing from itself.
What worries us deeply is that the way that spending on the NDIS was growing so quickly, some future government of a different political persuasion would have been tempted to either knock it off or cut it in ways that we would find unacceptable. We did take responsibility for making the NDIS sustainable, not because we think that we shouldn’t be providing a decent level of care and support; on the contrary, because we can only do that if we can afford to pay for it.
As big believers of the NDIS we believed that we had to fix it, to get the shonks out, to make sure that the growth is sustainable so that we can do what matters most – which is to provide a decent level of care and support for people who need it.
Taflaga:
I think it’s really interesting that you described the national ethos and Labor’s aims being about ambition, opportunity and the fair go. They’re not words that neatly map on to, I suppose, a social‑democratic vision. And as you’d know from reading the literature on the Labor Party, it’s been debated whether or not it’s that kind of a party for a long time. But I suppose, for you, what is the light on the hill for Labor? What kind of a party is it?
Chalmers:
For me it’s all about social mobility and economic mobility. If you look at the changes that we’re making in the Budget, they’re about recognising that too many people are either already – or at risk of – being disconnected from the benefits of a decent economy.
One of the reasons I’m in the Labor Party, and one of the reasons why I front up every day despite the criticism that you get about these difficult changes that we’re making, is because I deeply believe – deeply, desperately believe – that the most important thing about this country is the idea that you can get ahead no matter what the circumstances are of your birth. Because I’m from Logan city maybe that’s ingrained in me as it’s ingrained in others in our movement. But social and economic mobility matters most.
If you think about this word picture that our opponents have tried to paint about the changes in the Budget, they talk about the ladder. And from our point of view there’s not much point in a ladder if the first few rungs are missing. There’s nothing aspirational about stacking the deck against younger people or people who don’t already have big advantages.
I don’t think Angus Taylor understands, when he talks about the ladder, that not everybody’s born at the top of the ladder like he was. I do believe in aspiration and opportunity and ambition, and they are Labor words, because they go to the core of what we’re trying to achieve here which is – as the Prime Minister says – an economy that works for more people.
Taflaga:
One last point on that, and I suppose to link what you just said to the NDIS, many critics of the changes would sort of say that, you know, you’re taking out the ladder rungs for those individuals who rely on this service.
I suppose what I’m kind of asking is, I know that you’ve said that the sustainability of the scheme is the main motivator, but what are the other parts of society that kind of need to step into this role if it’s not going to be government, or is this actually like more of a federalism story? How do you reconcile, I suppose, opportunity and creating opportunity for the sort of mass of Australians and then compare to those who have this particular and special class of claims on the state?
Chalmers:
I think the NDIS is about not just providing that level of care and support that I’ve referenced, but also making sure that more people can participate in a meaningful way in our society.
Don’t forget that the investment in the NDIS still grows over the Budget, it just grows in a way that we can afford. I respect the perspective that you’re bringing to this, Marija, but I don’t quite agree that we are trying to diminish the NDIS. We’re trying to improve the thing, and that means there’s rorting in the NDIS that we’re trying to deal with, which doesn’t help anybody with a disability. There are layers of ticket clippers that aren’t helping people with a disability. In trying to deal with that, we’re trying to make sure that we can provide the standard of care and support that we can be proud of.
I do understand and acknowledge that when you’re making important changes there’s a level of anxiety that comes with that, and particularly amongst people who are already vulnerable in our community. I acknowledge that. But we’re taking responsibility. You asked about federalism; there’s a state element to this when it comes to the provision of services, but we’re taking responsibility for fixing something that we care deeply about. The NDIS is an institution, but more importantly than that, our responsibilities to people with a disability are making sure that we can continue to fund that care and support.
Kenny:
Treasurer, I just want to go back to the capital gains tax concessions, the shift in policy around that. I mentioned Saul Eslake, the economist, talking about averaging of income and you’ve indicated that you do accept that there are some unique things about the start‑up sector that are worthy of further discussion. I understand you don’t want to be prescriptive about that at this stage.
Another economist – or economic voice, she’s an economist as well – Judith Sloan, has talked about indexing the threshold, I suppose, that exists in terms of what qualifies as a small business. I think that’s $2 million – you might be able to clarify this for me – $2 million of turnover, is that correct?
Chalmers:
Yes, in the concessions in the capital gains tax system there are basically 4 carve‑outs and concessions and we’re not changing any of them. One of the thresholds is $2 million, and one of the thresholds is $6 million for assets.
Kenny:
Yeah. And what are the other ones?
Chalmers:
There’s 4 different ways, about how long you’ve run the business, whether the business is active or not – there’s 4 concessions built into the existing CGT arrangements. We’re not changing them.
Kenny:
Yeah. I wonder whether there’s the prospect of indexation of those thresholds, because that is what Judith Sloan was talking about yesterday when I heard her on the road, and I thought that’s interesting, because I think that’s been – they’ve been static thresholds up until now.
Chalmers:
I didn’t hear that interview with Judith Sloan or I haven’t seen her comments on it, but the Small Business Lobby, the COSBOA and others, they have made representations in the past about lifting those thresholds. We haven’t done that in this package. We’ve kept the concessions and carve‑outs as they were before.
There’s probably half‑a‑dozen sort of quite substantial chunks of disinformation or misinformation in this regard and one of them is around small business, people pretending that we’ve changed the carve‑outs and concessions for small business. We haven’t done that, but we know that the small business lobby, as is appropriate, has been campaigning to lift those thresholds. I hadn’t heard the indexation idea from Judith Sloan, but I’ve heard otherwise that people would like us to lift those.
Kenny:
I wonder if I can ask you now about another area of, let’s say indexation, and that is the Liberal Party’s, Angus Taylor’s approach – which is the indexation of tax thresholds to stop people, you know, going into higher tax brackets. That’s certainly attracted a lot of attention, and it’s also attracted a reasonable amount of support from, you know, hard‑thinking economic policy people.
What’s your reaction to it? Obviously it’s pretty expensive, but you would argue you’re doing it a different way through the Working Australians Tax Offset that you’ve announced, that’s one way in which bracket creep can be returned to people. But you’re obviously not in favour of what the Liberals have proposed. Why not?
Chalmers:
First of all, I do think it’s important to acknowledge we are a government which has been cutting income taxes. We had our 4‑year anniversary on Thursday, we’ve cut income taxes 5 ways now. We’ve lifted thresholds, we’ve cut rates 3 times, we’ve got the instant deduction which provides tax relief and now we’ve got this tax cut particularly for workers that we’ve introduced, a new bit of architecture into the system. So, we have been cutting taxes and we do that enthusiastically because we are trying to rebalance, or better align, the tax on work versus the tax on legitimate income from assets. That’s the first thing that I think is often lost.
This is not a choice between an Opposition who wants to cut taxes and a government that doesn’t. We’ve been cutting taxes, and it means the average worker gets about an extra $2,800 a year because of our tax cuts.
The difference here is we think it’s best to cut taxes in a way that recognises the economic and fiscal conditions and constraints that governments face. The reason why the Fraser government abandoned the indexation of the thresholds all those years ago is because it couldn’t properly take into consideration the conditions at the time. If you look at what’s proposed by Angus Taylor and barely mentioned by Tim Wilson at the National Press Club, but mentioned in the Budget in reply – probably the least responsible Budget reply I’ve ever seen, and I’ve seen a few – the policy problem with it, first of all, is that the same people who have been railing about government debt would add about a quarter of a trillion dollars to government debt over the next 10 years. That would cost the Australian people tens of billions of dollars in interest. That’s the first point.
The second point is what he has effectively announced – after railing about inflation for all of this time – is that the model he has chosen means that he would pour more money into the economy when inflation is at its highest. He has basically, I think inadvertently, compromised his main arguments. He says that debt’s the main game; he would very significantly increase debt, deficits would be much bigger and there’d be heaps more debt. That’s his first argument torpedoed.
The second one, about inflation and managing the Budget responsibly; he would turbocharge inflation when it’s at its highest. These are the reasons why every government has sniffed around the history of indexation of the thresholds. The reason that sensible governments haven’t gone down this path is because you don’t want to make inflation worse when it’s at its highest, and you also have to be conscious of the fiscal constraints.
If you asked me – if this government was to govern into the future – whether it’s more likely than not that we would cut taxes again, the answer would be yes. One of the reasons why we’ve been managing the budget in such a responsible way, finding the savings, making these difficult tax reforms, is so that we can create more room for tax cuts in the future but to do that in a responsible way which recognises the economic conditions and the fiscal constraints of the day.
Mark Kenny:
It’s really fascinating, actually. You’re saying that under Angus Taylor’s proposal, because that indexation would occur each year that would be delivering a tax cut and delivering, therefore, more spending power to fuel demand in an economy commensurate with – that is, the tax cuts would be higher – by virtue of inflation being higher, right at the time when the Reserve Bank would be trying to fight that inflation. You’re saying the government would be putting more money into the pockets of people?
Chalmers:
Yes, and you would both know – you follow the political contest over inflation and over debt – in all the things that he says matters most, he would make worse. His Budget reply was genuinely and objectively a recipe for bigger deficits, more debt and more inflation.
Marija Taflaga:
I saw an analysis that came out of the Australia Institute that actually showed that if you pegged immigration to housing numbers, that immigration would actually go up as well, because of the rate of growth of housing supply. I haven’t done those calculations myself, but I found it a very interesting piece of analysis.
Chalmers:
I saw a version of that, I think Alan Kohler. I was on Insiders last weekend, last Sunday –
Kenny:
Yes, I saw Kohler referred to it.
Chalmers:
Yes, Alan Kohler referred to it on the couch and he’s got a long‑standing interest in the housing market. It’s certainly the case that commencements, housing commencements, have gone up about 26 per cent in the last full year. They were falling 28 per cent when we came to office. When we came to office, net overseas migration was surging and commencements were falling. Now we’ve got net overseas migration down about 45 per cent from its peak, and we’ve got commencements growing at 26 per cent.
I think the point that Alan and others have made goes to the fact that this is not really a solution‑seeking policy from our opponents. It’s not an economic strategy, it’s a political strategy to chase One Nation votes. That’s really the difference – the Tuesday night Budget, Thursday night Budget reply, a budget which was more responsible than usual and a Budget reply less responsible than usual.
What we tried to do was to have a genuine 5‑part economic strategy to strengthen the economy. Angus Taylor’s response was really about trying to stave off One Nation. That’s because if you look at what’s happening in our politics right now you can see that the Coalition is effectively being turned into a minor party by the inroads being made by One Nation. Almost everything that Angus Taylor says is about self‑preservation in the context of the One Nation threat to their right.
Quite bizarrely, and you both followed the history of One Nation over a long period of time, Howard and Costello back in the day spent – I think in honourable ways – some political capital in rejecting the divisive politics of One Nation. These characters now embrace it, and the net effect of that is that One Nation is eating them alive and cannibalising their vote. That’s the difference.
Whether it’s the so‑called migration policy in the Budget reply or all of these other elements, what we’re really seeing is a very ineffective strategy from Angus Taylor to prevent One Nation turning the Coalition essentially into a couple of minor parties.
Taflaga:
Speaking of One Nation, on my way to work this morning I saw like the highway a whole bunch of people holding up banners about, you know, ‘Honk for gas, honk for a gas tax’. So I guess I’d like to ask, you know, has this campaign for a gas tax sort of overshadowed some of the things you were trying to do? And it’s also brought together quite an interesting coalition actually of advocates for gas that seem to have different ideas about how to do it, you know, from the Greens through to the Teals, to One Nation – who actually kind of wants to operate a sovereign wealth fund. A policy that kind of comes out of Norway, which I suppose –
Kenny:
It’s such a bizarre development.
Taflaga:
I love it, I think it’s great. But you know, I mean I –
Kenny:
I didn’t have you down as a One – but look, fair enough.
Taflaga:
No, I love a sovereign wealth fund. It’s more the Norwegian soft, light socialism. I think my record speaks for myself. Anyway, my questions are, I suppose, these. One, is a sovereign wealth fund a good idea in the first place? And 2, you know, is the gas thing a distraction and how difficult is it making your life?
Chalmers:
On the sovereign wealth fund, we’ve got a Future Fund which is performing very well. And our strength when it comes to a big pool of long‑term capital is really our superannuation system. A lot of people who say that we should have a [Future Fund], first of all, you’ve got to deal with the pressures on the budget right now. The sovereign wealth fund story is a bit complicated by us having a Future Fund, by us having super, and by having some of these pressures in our budget which are partly a consequence of the big spending during COVID and before it.
On the question of a gas tax – it is a very prominent campaign – and obviously when you get stopped in the street, often it’s about this. We try to be upfront with people and say the reason why we haven’t made that a priority. The reason why we think there are 2 bigger priorities, is because we’ve got this big global oil shock, so we’re prioritising these 2‑way supply arrangements with our refining partners in Asia. Secondly, there’s this very, very significant policy change we put in place which is gas reservation – which is a big and difficult policy to land – but it’s about decoupling Australian prices from the roller coaster ride which is the global market for gas.
I understand that people have got really strong views about it and I understand the arguments. I reformed the PRRT in our first term so that we got more revenue sooner, but I get that people would like us to go further than that. But I think there are genuinely good reasons to prioritise those other 2 policy goals.
Kenny:
It arises in my mind as you say that, as you say, acknowledging that the campaign for a gas tax – 25 per cent gas taxes was being promoted – and indeed the 47 cents in the dollar argument that’s being mounted against the changes to capital gains tax, it reminds me of something we all know, I guess, which is that simple ideas are often much more successful in the kind of public debate than complicated ones. There’s a good example in gas policy, you know, talking about gas reservation as being a superior policy in your estimation to a gas tax.
How difficult is it when you’re governing to deal with those sorts of things, particularly when sometimes they proceed – as in the case with capital gains tax – proceed from basically an acknowledged untruth?
Chalmers:
There’s always an element of complexity. The difference between making a suggestion and making change is that governments have a responsibility to bed down all the fine details. Here again I acknowledge – having spent the best part of a couple of weeks now explaining the difficult contentious changes in the Budget – that governing is different to posting on social media, or issuing a press release, or writing an opinion piece in one of our papers.
There is often complexity and there’s nothing easy or simple about trying to rectify some of the intergenerational injustice which is baked into our housing market and our tax system. You simplify where you can in explaining why the changes are necessary, but there’s nothing simple about trying to unpick something which has been a problem in our economy for a long time.
Taflaga:
Well, on another intergenerational injustice, and a bit self‑interested as this is a university podcast and it would be remiss of me not to ask, you know, the government went to the 2022 election saying it would revoke or repeal the Job Ready Graduates scheme which sees students pay $50,000 degrees. Students that I’m teaching right now in Introduction to Aus Policy. This is a friendless policy, this is a bad policy, why is it still the government’s policy?
Chalmers:
To give credit to Jason Clare, the Education Minister, we’ve been doing a heap of work in other areas to make the university system fairer and cutting student debt is a big part of that. The whole agenda around the Universities Accord, and particularly making it easier for people from, frankly, communities like mine to see themselves succeeding at university and finishing degrees.
We’ve done a heap of good things in higher education. I acknowledge that people would have liked us to have taken on that challenge by now, but it’s not like we haven’t been working very hard to make the system fairer for people. I think it doesn’t get all the attention it deserves, and Jason doesn’t get all of the kudos that he deserves, but one of the elements of policy that I’m proudest of is what we’ve been able to do about access to higher education for more people, recognising that we have to make it easier for people from suburbs like mine to see themselves doing well at places like the ANU.
Kenny:
Yeah, well, $50,000 for an arts degree is not exactly an incentive to going there, that’s one of the problems. That has been Labor policy to get rid of it, right? So you know, to amend that, to fix it up. So is that going to happen this term?
Chalmers:
I’m not anticipating that or pre‑empting that. That has come up from time to time in our discussions, and I understand why both of you would raise it with us, but we’ve had some other priorities. We shouldn’t lightly dismiss or diminish all of the good stuff that we’ve been doing in universities policy with student debt cuts, for example, and all the other stuff we’re doing around access and aspiration.
Kenny:
We’re getting close to time and I just thought I’d be interested in your views on just the sort of broader political landscape, if I can. We sort of touched upon this a minute ago, but if we could just go back to it, in terms of, you know, the Liberal party really facing a big structural crisis.
I think it’s been obvious for a while, you know, with the Teals basically taking those Liberal jewels in the metropolitan area. The fact that the Liberal Party holds now something like – what is it – 9 of 88 metropolitan seats around the country. And of course we’ve seen this spectacular rise of One Nation, much like we’ve seen the rise of Reform in the UK and the threat that places to the Tory party.
I wonder, as a long‑time practitioner but also as a theorist and student of this throughout your life, what’s going on here? And what do you expect to see in terms of what appears to be a pretty major, pretty historic re‑alignment of the political landscape in democracies like ours?
Chalmers:
I certainly think the way that politics is reorganising itself around the world is very significant. We don’t know how enduring it is, but it’s not hard to find a number of examples in other parts of the world where politics has been turned on its head. For us in Australia, it’s primarily this issue of the way that One Nation is cannibalising the Liberal Party and National Party. There’s obviously implications for us in the Labor Party as well, but primarily, this is about the 3‑ring circus on the right wing of Australian politics.
What I’ve tried to say is even if you put aside for a moment the kind of psephology of it, the partisan politics of it, there’s an issue underlying all of our societies. It’s worse in other countries but we are at risk here too. I tried to say in that National Press Club speech the day after the Budget – from Farage to Farrer – which goes to my obsession with alliteration partly, but also recognising –
Kenny:
Mine too.
Chalmers:
My colleagues give me a lot of grief about my obsession with alliteration. But really what I’m trying to say there is there’s an underlying discontent here, and governing parties like ours have a choice whether to pretend it doesn’t exist or to try and genuinely address the legitimate parts of that. I think there is a legitimate concern that people have about being disconnected and being disregarded.
Our Budget wasn’t a political strategy, on the contrary it was full of very difficult decisions. It was an economic strategy rather than a political strategy, but it’s an economic strategy to try and deal with these legitimate concerns that people have. It’s a test of whether a sensible middle‑of‑the‑ground major party with a long history can respond effectively to these anxieties that people have.
I think it was Galbraith who said the essence of leadership is about dealing with the defining anxieties of the people at any one time, and there is something real here. I think the defining part of this challenge, in Australia, is the housing market. It’s the main game in the intergenerational injustice, and I think it’s the main game when it comes to this idea that the economy’s at risk of being set up for other people to succeed.
We take it really seriously. Even though this is primarily – in a partisan sense – a problem for Angus Taylor who looks like he’s increasingly running a minor party rather than a major party, we take this responsibility very seriously. We’ve said in the course of the aftermath of the Budget we’re the last ones standing in the sensible centre of Australian politics, but we’re not standing still. That’s because we recognise that some of these concerns that are driving people to consider all political alternatives are real anxieties. Our choice is to try and explain them away and dismiss them and disregard them, or to try and address them. We’ve chosen the latter path and I’m proud that we have.
Taflaga:
Does that mean a different language though? I mean, earlier we were talking about what were Labor words. Do you need to draw on a different, wider, richer language, perhaps from Labor’s past, about a more social democratic set of language, particularly if you’re talking about housing? I mean across the world we see this housing problem, and it’s pretty much clearly linked to a decline in public housing in the role of the state in housing. Is there a bigger role for the state in the coming years?
Chalmers:
That’s not really the way that I come at this challenge. I think there are legitimate reasons to have a size of government which is sustainable, efficient, delivers the right level of services in an appropriate and an affordable way. I’m not really, despite what you might read from time to time from the opinion pages, I’m not really trying to seek to make government bigger.
The reason why it sounds like you and I might have a different view about the role of mobility and aspiration and ambition and opportunity is because, if we come back to those fault lines in our politics that we began with, the difference between how we see those ideals and our opponents is our opponents see aspiration and opportunity as this exclusive preserve of people who are already doing well. Whereas our government – from the Prime Minister down – sees aspiration and opportunity as the birthright of every Australian, whether they’re born in Logan City or they’re born in a wealthier part of Australia.
That’s not about judging people who are doing well, it’s about trying to make sure that more people can do well in this country. I don’t think any objective observer of the way that our housing market interacts with our tax system would conclude that we’re set up to deliver on that kind of aspirational promise.
We’re engaged in a very, very substantial battle here and it’s about the future of the place, it’s about whether or not aspiration is something that everyone is entitled to or an ever‑diminishing pool is entitled to. That’s why the political battle is so contentious and so contested, because some people would prefer things stay exactly as they are, and they’ve got partisan or commercial interest in the status quo.
Our job as a government which cares deeply about the future of the place is to try and make sure that our policies aren’t combining to lock people out of that aspiration that people have got a legitimate right to expect in a country like ours. Again, we talk a lot about the ‘fair go’ in this country, and from time to time it requires a government to make changes to ensure that’s part of our future and not part of our past, and we’re prepared to make some of those changes in this Budget.
A country doesn’t change itself. Sometimes it requires leadership, and we’re demonstrating that leadership because we don’t just want to defend those things – aspiration, ambition, opportunity – we want to make sure that more people can access it into the future, and that’s what the Budget is about.
Kenny:
Just as a final question, it seems to me, just going off that, that one of the words that’s missing from there is ‘equality’ and I think that’s where Marija was going to some extent as well. And the trouble with words like ‘aspiration’ and ‘ambition’ is that they are used by the other side with equal conviction to sell their proposition.
They say that the Budget – for example, in respect of the tax changes that we’ve talked about for small businesses, or for start‑ups, and so forth – they say that this is Labor’s war on aspiration, Labor’s war on growth, Labor’s war on –
Chalmers:
That doesn’t make it right though, does it, Mark?
Kenny:
No, it doesn’t make it right, but what I’m saying is that people are listening to this kind of rhetorical blizzard where effectively the same terms are being used as weapons against each other, and I think it does devalue those terms to a degree. I’m not blaming either side in particular for this, but I mean they can’t both be right at the same time in respect of the criticisms that that are being made. I think a lot of this is feeding the level of kind of ennui and dislocation that people feel about politics, along with – let’s be frank – along with breaking promises which is also a cost to levels of trust and conviction in the system.
Chalmers:
I accept that different people will describe our goals here differently. And I think intergenerational equity gets very close to the way that you’re thinking about, both of you are thinking through, some of these challenges. Whatever language you choose, people will have their own way to describe what we’re trying to do here.
But what I’m trying to do here in my part of the shop is to make things fairer for people in intergenerational terms. It’s about recognising that there’s nothing aspirational about locking people out of the housing market or out of the economy more broadly. I’m trying to deal with these genuine undercurrents of discontent and trying to do that in a way that recognises that if you care about those things, you have a responsibility to act on them. It would have been the easiest thing in the world in this Budget – politically much easier – to leave everything as it is. But leaving everything as it is is a recipe for this problem that we’re seeing around the world to accelerate here in Australia as well.
Taflaga:
So you’re trying to push open a closing door?
Chalmers:
Yes, we’re trying to recognise what’s happening around the world and try and avoid it, rather than ape it. Our critics and opponents want to ape what’s happening around the world though. It’s quite bizarre to me that when you see the economic, political, and social dislocation around the world that our opponents and critics want to go down that path. We want to avoid that path and part of doing that – from time to time – means that there are difficult decisions to be made with political costs, but so be it.
Kenny:
I know I said last question before, but this is the last question. Do you at a sort of a broad sense see this time as propitious for reform parties as well, because there is a real kind of hunger in electorates around the world now for change? That is, and as we discussed, a sort of a disaffection with the status quo. It almost feels like people aren’t looking for incrementalism, they’re looking for big, imaginative things to be done, for politicians to do what politics is for which is sort of problem‑solving. And if you’re in a reform party, a party that has at its core the notion of change and reform and making adjustments to benefit the people, is that not a good moment, an invitation, a greater moment than has been the case in the past for the kind of politics that you’re advocating?
Chalmers:
Yes, I think there is more appetite now to deal with some of these big, long‑standing challenges in our society and in our economy, I think that’s true. I think there is more of an appetite for change – not that that change is always universally supported – but that sense that the status quo isn’t working.
Kenny:
Yeah, people want change until they see it, then they start quibbling with the details.
Chalmers:
And equally, often the same people who write about how important reform is are the same people who make it impossible once you have a crack.
Kenny:
Yes, I’ve noticed that. I’ve been guilty of it myself.
Chalmers:
Leaving that to one side, I think genuinely there is an appetite for people to take more seriously the big challenges in our economy and our society, and again, that’s what we’re trying to do.
Kenny:
Jim Chalmers, thanks so much for joining us on Democracy Sausage and for doing so in the past as well. It’s very much appreciated that you make time for us and glad to have you back here, if only virtually in this case on ANU soil.
Taflaga:
Thank you.
Chalmers:
I really valued my time at the ANU, and I really enjoy talking with you both, Marija and Mark. Thank you.