Melissa Clarke:
Treasurer Jim Chalmers will deliver the Budget to parliament tonight. He joins me now. Jim Chalmers, thanks very much for speaking with AM this morning.
Jim Chalmers:
Thanks for having me back on your show, Mel.
Clarke:
So, can you explain for me the impact that the war in Iran and inflation and how that has affected this Budget?
Chalmers:
Well, the war in the Middle East has been a big influence on this Budget. It’s obviously the reason why an important part of the Budget tonight will be a fuel security package, building on the very hard work that we’ve been doing to secure enough fuel for Australian motorists and for Australian industry to keep the country moving. So, that’s really one of the important constituent parts of the Budget that we will release tonight because Australians are paying a very hefty price for this war in the Middle East. It is making our inflation challenge worse. It is putting downward pressure on growth. And so, the Budget will respond to those near‑term pressures at the same time as we reform our economy for the future.
Clarke:
You’ve said the Budget bottom line will be better off each year over the next 4 years and pointing to savings efforts around that, how much of a difference will there be? How much better off will the bottom line be?
Chalmers:
Well, there will be smaller deficits in every year of the forward estimates and that means less debt as well. The Budget will be about $45 billion stronger than it was in the mid‑year update in December, and that’s because we found more than the usual amount of savings, $64 billion in savings. We’ve made sure that our policy decisions are making a positive contribution to the Budget rather than detracting from the budget position, and we’re showing spending restraint as well. And so, what that means is the Budget tonight will be stronger than it was in December, and that’s because of the very substantial effort we’ve put into it. And this Budget will be our most responsible yet, but also our most ambitious at the same time. It will be focused on resilience and reform, and an important part of that is continuing to repair the Budget at a time of extreme global economic uncertainty.
Clarke:
You point to those improvements on the bottom line across the 4 years and point to savings the government has made. But what’s been the contribution of increasing inflation and the impact that has on increased revenue to that improved bottom line.
Chalmers:
Well, we’ll release all those numbers tonight, Mel, as you would expect. And what we’ve done with any increase in revenue is we’ve banked that to the bottom line. It’s a key reason why the Budget is stronger tonight than it was in December in the mid‑year update, because for the first time ever, we’ve got consecutive budget updates where we’ve returned every single dollar of those revenue upgrades to the bottom line. There’s not an upgrade in every year. In fact, there’s one year where revenue has been downgraded. But we’ve taken the most responsible approach to those revenue changes. We should also remember –
Clarke:
So, would those revenue changes be a larger contributor to that budget bottom line than the savings efforts by the government?
Chalmers:
No. We found $64 billion in savings. The revisions to revenue are smaller than that.
Clarke:
Ok, we’ll see more of the details tonight. We know broadly that inflation is fueling bracket creep, that is pushing people’s salaries higher and therefore into higher tax brackets. Will you be directly addressing that in this Budget?
Chalmers:
Well, this is a government which has been returning bracket creep and there’s more tax cuts to come. We cut taxes 2 years ago. We’re cutting taxes again in July and next July as well. We’ve got an instant deduction in the tax system, which will provide a bit of extra tax relief. And we’re cutting fuel taxes until the end of June as well because we recognise the very substantial pressure that this war in the Middle East is placing on Australians. And so there is cost‑of‑living relief. There are tax cuts on the way in July and the July after. And that’s because we understand that returning bracket creep, when governments can afford to do that, is a really important way that we provide that cost‑of‑living relief. The tax system –
Clarke:
Since those income tax changes, the ones you mentioned there that are already due to come, since they’ve been put in place, we have seen inflation rise up again, which accelerates bracket creep. So, are there further measures to address more recent inflation rises and its impact on bracket creep?
Chalmers:
Well, you’ll see the tax reform package in the Budget tonight. But what the tax package recognises, and all of the reforms that we will be embarking on, is that the status quo in the tax system and in the housing market isn’t working. The tax system is out of whack. There will be efforts to rebalance the tax system so that we can better align the treatment of income from people who work with the people who earn their income in other ways. And so that’s one of the objectives of the Budget tonight. You’ll see that at 7:30, because we recognise that the more that we can do to rebalance the tax system to better align our workers and people who earn their income from assets, the fairer the tax system is and the stronger the tax system is too.
Clarke:
Is improving the fairness in the tax system. Is that about trying to get a fairer outcome between younger and older Australians now, or is it giving younger generations the same chances older generations had? How do you approach the principle of making the tax system fairer?
Chalmers:
Well, the first principle is we recognise and respect the really big contribution that older Australians have made and continue to make to our country and to our economy. But we also need to recognise that there are a lot of Australians, and particularly younger Australians, who are finding it too hard to get into the housing market, and this problem will get worse if we leave it unattended.
Clarke:
We hear from some young Australians, though, they’re worried that as much as they’re facing some difficulties now, they’re also worried that if tax concessions are changed for future investors, that they’ll miss out on the tax breaks that older generations got to benefit from. They’re worried about the ladder being pulled up behind them. Have you considered that when designing the changes in this Budget?
Chalmers:
Of course, we have, and I don’t want to preempt the decisions and announcements that we’ll make at 7:30 tonight, but of course, in a Budget which is very focused on these intergenerational issues, we’ve been considering all of these sorts of matters. But overwhelmingly, the tax system and the housing market is not working, particularly for younger Australians. There is an urgency now to fixing this. Too many people are locked out of housing, and we don’t have enough homes. And so the Budget does have a very significant focus on housing and a very significant emphasis on young people in particular.
Clarke:
And with the focus on intergenerational inequity, there’s also the question of inequality within aged groups, the big gap between people who have parents who can help them financially and those that don’t. Will the reform package address that inequality too?
Chalmers:
Well, the package that we announced tonight is all about ensuring that more Australians can get a toehold in the housing market without having to necessarily rely on others, including parents, to buy their first home. You know, our primary focus in housing is housing supply. We’re maintaining that focus. The problem begins there, but it doesn’t end with supply. There are other issues too. There are issues of youth homelessness and we’re making investments there. There are issues in the composition of the housing market. Over a long period of time, since the capital gains tax arrangements were changed around the turn of the century, it’s become harder and harder for younger people to become owner‑occupiers in the housing market. And so obviously that’s of concern to us. Obviously, that’s one of the pressures that we’ll be responding to tonight.
Clarke:
We’ll all tune in. Treasurer Jim Chalmers, thank you very much for speaking to AM this morning.
Chalmers:
Thanks very much.