Melissa Clarke:
The federal government has handed down its first comprehensive update to the nation’s finances since the federal election earlier this year. The mid‑year budget update indicates the budget’s bottom line has been improved slightly by more than $8 billion over the next 4 years when compared to earlier forecasts. Jim Chalmers is the Treasurer and joins us now. Jim Chalmers, welcome back to Radio National Breakfast.
Jim Chalmers:
Thanks very much, Mel.
Clarke:
Before we drill into the budget update, I do want to ask you some questions about the response to the terrorist attacks. You acknowledged yesterday that that has been the focus of the government and of the country right now, and you and other cabinet ministers have said more needs to be done. When it comes to what you as Treasurer can do, is there any need to reassess resourcing for the federal police and ASIO in light of this attack?
Chalmers:
Well, first of all, as you suggest in your question, Mel, we understand that this week’s not about the mid‑year budget update. The country and the government is singularly focused on the aftermath of this horrifying act of evil antisemitism, and so that’s where our focus has been throughout the week.
In terms of support for our agencies, we have been increasing funding for our anti‑terrorism efforts over the life of this government. From memory, an extra half a billion dollars or so for counterterrorism, another couple of hundred million dollars for countering violent extremism and dealing with foreign interference. So, we have made it clear that even with these extra resources that we have contributed to the effort, we are obviously acting with some urgency now in considering what other steps might be necessary, and as Treasurer, I’m obviously part of those discussions.
Clarke:
When it comes to the broader government response to this, we’ve heard suggestions from former Treasurer, Josh Frydenberg, that a Royal Commission is warranted to assess what has happened and what should be done now. Do you think a Royal Commission would be helpful?
Chalmers:
I thought my colleague, Tony Burke, made a good point about this when he was talking with your colleague, Sarah Ferguson, last night on the 7.30 program. I mean we want our agencies 100 per cent focused on the investigations, and we don’t want them delayed or deterred by a Royal Commission.
Everyone’s focus – including the agencies involved here – needs to be on the investigation, needs to be on getting to the bottom of what happened here, primarily because that will help inform us as we take additional necessary steps.
Clarke:
Would a Royal Commission delay or deter action in the meantime? We’ve seen other Royal Commissions in recent years, perhaps the one into aged care is an example, of where reform efforts were begun whilst a commission was underway. Are they necessarily mutually exclusive?
Chalmers:
Well, the point I’m trying to convey to your listeners, and I think the point that Tony was making last night is, we want our agencies 100 per cent focused on the investigation. That’s the best use of their time, and that’s our focus as well.
Clarke:
Let’s turn to the budget. This update shows that the budget deficits will be better off by $8 billion over the next 4 years. But the outlook’s much the same, deficits sitting at around $36–37 billion at the end of the 4 years, and we’re still in deficit in 10 years’ time. The challenge is still there for you to turn around the budget, isn’t it?
Chalmers:
There are still pressures on the budget, we’ve been upfront about that. Some of those pressures are intensifying rather than easing. But we’ve come a long way in the budget. We’ve made a heap of progress. Two budget surpluses, a much smaller deficit last year. And what we saw in the mid‑year budget update yesterday is actually an improvement in the budget every year of the forward estimates, a stronger bottom line every year, less debt every year, and the government making a positive contribution to that with its savings and making sure that our policies are improving the budget rather than detracting from the budget.
And that combination of factors is actually the first time that that’s happened in a mid‑year budget update in about the 30 years that governments have been handing them down.
So, by that combination of measures – better bottom line every year, less debt every year, government making net positive policy decisions – by those 3 issues being simultaneously present in yesterday’s mid‑year budget update it actually makes it the most responsible mid‑year budget update in the 30 years that governments have been handing them down.
Clarke:
I guess the question is, is it enough to deal with the challenge of the structural deficit that we face? Given, yes, you’ve got net positive policy decisions here, but the increases we’re seeing in revenue may not stick around in the years to come given that they are in some part due to inflation, boosting incomes and company tax, the booming share market, things we can’t rely on being there, but a lot of the pressures that you’re talking about are permanent ones that have been built into the structural budget. So, are the efforts that you’ve made so far, are they going to be enough to deal with the longer‑term structural deficit?
Chalmers:
Oh, there’s always more work to do, and we’ve now handed down 7 Budgets or budget updates, and in every single one of those there have been savings. In every single one of those we have taken responsible decisions to deal with these pressures on the budget.
We don’t pretend that that work is ever finished, obviously it’s not. It’s an ongoing task for all of us to make the budget more sustainable, but because of our efforts, you know, over the 3.5 years we’ve been in office, $114 billion worth of savings, the budget is more than $200 billion stronger than what we inherited, debt is around $175 billion lower this year than it was forecast to be when we came to office.
So, we have made a lot of progress in the budget. I think a lot of the commentary, either accidentally or deliberately, ignores that progress that has been made. The budget is much stronger than since we came to office, but we don’t pretend for a moment that there’s not more work to do.
Clarke:
You’re listening to Radio National Breakfast, and my guest is the Treasurer, Jim Chalmers. The forecasts show that inflation isn’t going to be back in the target range until the end of next year, as the Reserve Bank is also forecasting. We also see a dip in real wages, they’re declining for a little while. Do households need to be prepared to be cautious and careful with their spending over the next couple of years?
Chalmers:
Look, I’m not going to give free advice to families making decisions about their own finances. But we need to remember that the real wages story in this country in the last couple of years has been a very positive one. In fact we’ve seen now for 2 years continuous annual real wages growth. When we came to office real wages were falling sharply, we’ve been able to turn that around, that’s a good thing.
The inflation forecast has changed for the next little while, that just reflects the data that we’ve been getting in the last couple of months. As the Reserve Bank said, it remains to be seen how much of that tick‑up in inflation is permanent and how much of it is temporary.
But as you rightly point out in your question, even with pressures on inflation, even with that recent data, the Treasury expects in the forecasts we released yesterday that both their measure of underlying inflation and the headline inflation rate, they expect both of those things to be back in the band by next financial year.
We want to inflation to be lower. It is higher than we’d like, even though it’s much lower than what we inherited when we came to office, and it’s obviously a key focus of ours. The 3 big challenges that we confront as we head into 2026 are obviously persistent inflation, this long‑standing productivity challenge that we’ve had in our economy and also all of this global economic volatility. All 3 things are related, and all 3 things will be the major determinants on our thinking as we head into the Budget next year.
Clarke:
And just briefly, about before we let you go, Treasurer, there is an additional $233 million in the Budget for the CSIRO. The agency’s still going ahead with up to 350 job cuts though, a lot of that will happen with capital works instead. Is the research and development sector still under‑funded in this Budget? Because the science sector certainly feels it as a proportion of GDP, their share of federal government support is still diminishing.
Chalmers:
I think whether it’s that sector or any other sector in our economy, they would always like more resources, they would always like more funding. But in yesterday’s mid‑year update we provided an extra $233 million for the CSIRO on top of the billion dollars a year that they get from the government and on top of the extra $45 million we provided in the last Budget.
How they manage that is a matter for the CSIRO and their board. They’ve made it clear that they’re rethinking some of their resourcing and some of the ways that they manage their budget.
But from a government point of view, we’ve been very substantial and very enthusiastic supporters and funders of the CSIRO because we see it as a crucial role in the way that we set ourselves up to succeed in the future economy.
Clarke:
Jim Chalmers, thank you very much for joining me on Radio National Breakfast.
Chalmers:
Thanks very much, Mel.