Mark Riley:
Treasurer, thanks for joining us.
Jim Chalmers:
Thanks, Mark.
Riley:
A budget redressing the balance between those who earn and those who own. Fair?
Chalmers:
A big motivation for the Budget is to try and better align the tax treatment of people who work for a living with people who earn their income in other legitimate ways. And so really, it’s about that. It’s also about helping people get a toehold in the housing market, but also tax reform to encourage investment and innovation in our economy more broadly.
Riley:
So, these changes in the property market don’t begin for a year. What effect will it have on prices firstly, and secondly, you’re expecting a rush in investment into the property market before these things take effect?
Chalmers:
We’ve tried to have these transitional arrangements to smooth out, minimise the market disruptions. There’s really no reason for big jerky movements in markets from what we are announcing tonight because of what’s called ‘grandparenting’, which is essentially recognising and respecting decisions that people have already made. We’ve made some effort to try and minimise those market disruptions.
Riley:
Why all asset classes and also trusts?
Chalmers:
When it comes to the capital gains treatment, what we’re trying to recognise is that the current system, where a discount is calculated one way versus what we’re proposing to do, the old way, distorts investment decisions. If you look at on average, over a 20‑year period, what we saw was it overcompensated people investing in existing houses, and it undercompensated people investing in shares or units or some of these other kinds of investments. We’re trying to rebalance that. It has created a distortion in the way that Australians invest. It’s one of the major challenges that we’ve had when it comes to housing.
You asked me a moment ago about house prices. We’re not targeting a particular price. What we expect to see is that house prices will continue to grow at about 2 per cent more slowly than what they have been, on a median house price that’s about $19,000. But we’re not trying to target a price. We’re trying to make it easier for more people to get a toehold in the market. The intersection of the market and the tax system currently locks too many people out of housing, particularly young people. Fixing that is a really important motivation for the Budget.
Riley:
Why do workers have to wait 2 years for a tax offset?
Chalmers:
Well, we’re providing the tax relief that we can afford. If you look at the tax reform package overall, it’s neutral. What that means is the money that we raise with capital gains or negative gearing changes, we’re returning that to workers and businesses. We provide as much tax relief as we can afford to. It’s not the only way that we’re providing that tax relief, really 5 different ways. Three income tax cuts, an instant tax deduction, plus this new Working Australians Tax Offset which is directed only to people who work for a living. It’s an effective increase in the tax‑free threshold for people who work. And it’s part of what we were talking about a moment ago, trying to rebalance the system a little bit to recognise that people who work for a living are under pressure and the tax system treats people very differently. We’re trying to treat them in more similar ways.
Riley:
Okay, the other thing cut tonight is trust in politics. What’s the value of an election policy? Not much.
Chalmers:
Well, I know that there’s a lot of interest in that, and I take responsibility for the fact that the government’s come to a different view about some of these key policies. Now, the comments and commitments we made at the election reflected the fact that we had an almost singular focus on housing supply. That is still the main game when it comes to the housing market. But there are other challenges as well, including the inability for a lot of people, including young people, to buy their first home. And so, the government has changed its view. We’re very upfront about that and tonight we’ve explained why.
Riley:
The impact of the Iran war. Should families expect petrol prices, prices at the supermarket to be higher for a long time?
Chalmers:
Well, we’re taking some of the edge off petrol prices because of our fuel tax cut, which is costing the budget about $3 billion and taking 32 cents a litre off the price of fuel because that’s primarily where the pressures will be playing out. But yes, we expect these price pressures to be felt a bit more broadly in the economy. We expect inflation to get a little bit worse before it starts to trail away again. And that’s another one of the reasons why it’s very clear Australians are paying a hefty price for this war in the Middle East. The Budget is about helping people through a difficult period, at the same time as we undertake some of these bigger, longer‑term, more difficult reforms.
Riley:
Your best prediction, when will things get better for families?
Chalmers:
Well, when it comes to inflation, we think inflation will peak around the middle of the year and then trail away. But we are hostage to the global oil price, we are hostage to developments taken in Washington, D.C. and Tehran and other places. We’ve tried to be upfront about that as well. Australians didn’t choose the circumstances of this war. They don’t have any say in when it will end and what happens after it ends. But we are helping people through a difficult period at the same time as we take on some of these bigger, longer‑term challenges in our economy.
Riley:
Treasurer, thanks for your time.
Chalmers:
Thanks, Mark.