MELISSA CLARKE:
Jim, you’ve said that this Budget will put downward pressure on inflation. How is it going to do that?
JIM CHALMERS:
Well, it’s a really responsible budget. There’s spending restraint in the Budget at the same time as we’ve designed our cost‑of‑living help to be part of the solution to these inflationary pressures rather than part of the problem.
CLARKE:
So, it’s what you’re not spending that’s helping put downward pressure on inflation?
CHALMERS:
Well partly, it’s about getting the Budget in much better nick, particularly at the front end when these inflationary pressures are the most acute. It’s also about easing cost‑of‑living pressures in a way that puts downward pressure on inflation rather than upward pressure on inflation. And it’s also about making our economy more productive and more competitive and more dynamic by investing in the future.
CLARKE:
So, when do you think inflation will be back in the target range? The last mid‑year Budget update we had suggested that would be 24–25. Is that still the case?
CHALMERS:
We will have more to say about that between now and the Budget. But we do expect the Budget, as I said, to put downward pressure on inflation rather than upward pressure on inflation. In every budget, we update all of our forecasts. These are uncertain times to be making forecasts about the economy, but people should expect to see that one of the consequences of our Budget is lower inflation rather than higher inflation.
CLARKE:
Should we still expect that it is roughly around the same time period, give or take 6 months, 12 months, that we’ll have inflation back in that 2 to 3 per cent range?
CHALMERS:
People will see it’s updated. And as a consequence of the things that we’re doing in this Budget, as you would expect. And that’ll be the difference, frankly, between the Reserve Bank’s forecasts and our forecasts, just an issue of timing – ours has the Budget in it, and theirs weren’t able to. But speaking about inflation is a good opportunity to remind people that we know people are still under pressure, but we have made pretty substantial progress in this inflation fight. It’s less than half what its peak was in 2022, but we know we’ve got more to do. And you’ll see that in the Budget.
CLARKE:
You’ve talked about preparing for that post‑inflation period of trying to drive growth once we get past that. But we know from experience, from, you know, the Hawke‑Keating years that inflation often is very persistent. It’s the weed that keeps growing back. Are you being overly optimistic and thinking that the challenge will be done and you can focus on driving economic growth at the end of the forward estimates period?
CHALMERS:
Look, I’m optimistic about the future of our economy and our country. But there’s a really sharp near term focus on the inflation fight in this Budget. It’s the most important thing that we can focus on in the near term, but we need to remember that we’ve got a growth challenge as well, and so we’ll invest in the future. The Budget will be a responsible budget, it will ease cost‑of‑living pressures and it will invest in a Future Made in Australia. And we won’t be slashing and burning in the Budget because we know people are under pressure and the economy is weak. So, a focus on inflation – a primary focus on inflation, but not a sole focus.
CLARKE:
You talked about that sharp, immediate relief when it comes to cost‑of‑living. Obviously, the updated stage 3 tax cuts will be a pretty key part of that. You’ve only got so much room to move in providing cost‑of‑living relief unless you risk accelerating inflation. So, at this point, where inflation isn’t quite as good as we had thought it might be at this time, would it have been better to have a more targeted income tax cut regime rather than going ahead with one that does cover all income taxpayers, 13 million people? Have you missed an opportunity to give better targeted to relief? To those who really need it, rather than everyone who pays income tax?
CHALMERS:
Well, no is the short answer to that. We think that the way that we’ve redesigned the tax cuts are bang on for the circumstances that we confront. A tax cut for every taxpayer is the foundation stone of the cost‑of‑living help in this Budget. But with –
CLARKE:
Not every taxpayer is doing really tough right now.
CHALMERS:
We found other ways as well to provide cost‑of‑living help to people who might not be in the tax system, for example, or people who are under particular pressure. And so what people can expect to see on Tuesday night, tax cuts for every taxpayer. Other help available as well, because we recognise people are under cost‑of‑living pressure and we’re able to provide that help because we are showing such spending restraint and such responsible economic management elsewhere in the Budget.
CLARKE:
Healthcare costs are always something that causes a lot of extra spending in the Budget. Inflation of healthcare costs is significant. How much is that going to be an imposition on the Budget this year?
CHALMERS:
Well, we’ll be investing another $8.5 billion dollars in health and Medicare in this Budget. Almost $3 billion of that is strengthening Medicare, which is a very high priority of this Labor government. And within that, an extra $227 million for 29 more urgent care clinics, which have been spectacularly successful, providing access to more bulk billing doctors for more Australians.
CLARKE:
Are we going to have the workforce to support extra urgent care clinics? That means we need a workforce that is already short staffed, in many cases to be working longer hours, more days. Is there something to support the workforce to help those extra –
CHALMERS:
We need to train more health workers, we need to train more people in the care economy and we need to pay them appropriately. There is a provision in the Budget, in aged care and early childhood education to make sure that we are paying people in the care economy what they need and deserve. This is also another important reminder that a budget which is primarily about cost of living and a Future Made in Australia also has really substantial investments in health and the care economy and Medicare, in housing, in universities reform and in skills. We do need to train the workers that we’ll need in the care economy and in a Future Made in Australia and that’s a focus.
CLARKE:
I’m glad you mentioned Future Made in Australia. Can you give us any more understanding at this point of exactly how it is going to work to target the industries you’re looking at and what sort of mechanisms that you will do that by?
CHALMERS:
So a Future Made in Australia is really about grabbing these vast industrial and economic opportunities from the global shift to net zero. And what you’ll see in the Budget is a whole combination of levers to turn this opportunity into prosperity. Whether it is using the tax system, whether it’s using targeted grants, robustly governed, whether it’s attracting and absorbing and deploying more private investment, which is a massive focus of the Budget on Tuesday night. There will be a range of different levers and different measures and policies to make sure that we can make our economy an indispensable part of the global push to net zero.
CLARKE:
We know that China and the US are making significant moves in this realm as well, seeing what they can do to leverage their economic strength to be the forerunners in this. How can we possibly compete with the economic scale of those countries?
CHALMERS:
Well, because we’ve been dealt the most extraordinary cards. Whether it’s industry or energy or resources, or our skills and human capital base or our attractiveness as an investment destination. We have some remarkable opportunities here, not to compete dollar for dollar with those big economies, not to try and pretend that we can make everything that we need here, but to work out where we fit in these big global supply chains, not just at the very beginning of them or the very end of them, but in the middle of them where the value lies.
CLARKE:
So, we have to really narrowly target where we fit so that we’re not trying to compete with other nations.
CHALMERS:
We have to be smart about it. There’s an element of targeting, there’s an element of incentivising private investment. There’ll be public investment in Tuesday’s Budget to become a renewable energy superpower, to make a future in Australia. But the big emphasis of all of that is not to replace private investment, but to attract more of it so that we can get the money flowing into these industries which will create good, secure, well‑paid jobs.
CLARKE:
Is that riskier if we’re narrowing that target, if there’s a smaller, smaller pool or smaller design of areas, and we’re targeting in that, that increases the risk of any investment the Australian Government makes with taxpayers money.
CHALMERS:
I’m confident we’ve struck a really effective balance here and we know we need value for money. And what you’ll see are very robust frameworks and guidelines and tests for where public investment will be provided. Everyone has an interest in making sure that we squeeze maximum benefit out of a Future Made in Australia and out of the public investment that flows into that. But overwhelmingly, it’s about getting that private investment flowing, creating those good, secure, well paid jobs, becoming a renewable energy superpower, because that’s where our future lies.
CLARKE:
If we’re flush with these benefits of resources and opportunities that Australia inherently has, why do we need to have extra encouragement to attract that investment? If the golden opportunity is there, why doesn’t the market see that? Where’s the disconnect? Why do we need to come in if the opportunity is so great?
CHALMERS:
There is a lot of appetite in the market, but what we’ve seen around the world, the world is changing, the pace of that change is accelerating. Other countries are changing their orthodoxies in order to take full advantage, and we need to do that as well. But we start this task with a whole bunch of advantages, geographical, geological, meteorological, geopolitical, all of these advantages that we have –
CLARKE:
So even with the advantages because other countries are investing, we need to as well. Is that the message?
CHALMERS:
Absolutely. But not as an end in itself. Public investment, not as an end in itself, but as a way of leveraging and attracting and turbocharging the appetite for private investment, which is there.
CLARKE:
We’ll see the details on Tuesday. Jim Chalmers, thanks very much.