Patricia Karvelas:
Treasurer, welcome back to Afternoon Briefing. The latest ABS data shows underlying inflation, that’s the RBA’s preferred measure, has risen to 3.4 per cent over the year. What does that mean? Should Australians prepare for another rate rise?
Jim Chalmers:
Well, I think most Australians knew before this data that certainly the government acknowledges that people are under pressure. Inflation was steady in annual terms in January, but still higher than we’d like, and you’re right to point out that the underlying measure of inflation went from 3.3 to 3.4. We acknowledge that. We know that people are under cost‑of‑living pressure, but more than acknowledge that we’re doing something about it. We’re rolling out this cost‑of‑living relief, whether it’s more bulk billing, cheaper medicines, student debt relief, or the 2 more tax cuts which are on the way, which is all about recognising the pressures that people are under.
Karvelas:
Newspapers have been reporting today that you’ve encouraged Treasury staff to strive for fiscal restraint ahead of your fifth budget you’ll be delivering in a couple of months. Should Australians prepare for a period of budget cuts, Treasurer?
Chalmers:
Well, first of all, I’m very happy to repeat publicly what I said to the Treasury officials privately. That’s an accurate of the summary of the sorts of things that we talked about on Monday night in the Treasury building as I was expressing my gratitude to them for the work that they do to help us with our discussions and our deliberations and our decisions.
There will be more savings in the government’s fifth budget, but there were also savings in the first 4. $114 billion in savings so far, all up. There’ll be more in the May Budget as well and a big part of the work that we are doing right now, with the Expenditure Review Committee and with the Cabinet more broadly, is to see where we can find more of those savings to continue to get the budget in better nick.
Karvelas:
Is any portfolio immune from cuts, because the Finance Minister was on the program yesterday. She mentioned Defence spending is obviously growing, we know that. So, is Defence the only portfolio that’s immune? Have you told all departments and all ministers that they have to find cuts?
Chalmers:
Oh, look, we don’t go about it exactly as you’ve described it. We don’t have a list of ins and a list of outs. But clearly, as Katy pointed out accurately, there are some areas where spending is increasing. We just did a hospital deals, for example. You obviously know that we’re funding improvements in bulk billing. Defence is a good example and some of the issues around the aging of the population. And you know this government’s Labor values. You know that as we found those $114 billion in savings and delivered a couple of surpluses and engineered a more than $200 billion improvement in the budget overall, you know that that is a reflection of the government’s priorities.
We have said to ministers we’re looking for more savings in the fifth budget, just like there were savings in all of the first 4. We’ll go about that in the considered, methodical, responsible way which I think is a defining feature of this government, recognising that we do have some big challenges. Inflation, first and foremost, but also productivity, against the backdrop of all of this global economic uncertainty. That’s what’s guiding us as we do the hard but necessary work to continue to repair the budget over time.
Karvelas:
And can you rule out any cuts to frontline services?
Chalmers:
I think people understand that all of our effort when it comes to services is about making sure that we can deliver those services well. One of the big increases in spending in our budget has actually been trying to get through the backlog of veterans’ claims, for example. And so people should take their cues from that.
I’m reluctant in February to sort of announce what may or may not be wound back or trimmed in May. Obviously, there’s a lot of work still to happen, a lot of decisions and discussions still to take place. I’m not able to be more definitive than that, but people can take their cues from what we’ve been able to achieve so far to find those very substantial savings, to make very substantial progress on the budget, but also to acknowledge and recognise that there’s much more work to do.
Karvelas:
But in terms of what Australians should expect – I try and make the show as much as I can for viewers to look at it, right – are you telling Australians, not just journalists but Australians, that they should get ready for some belt tightening, that they’ll notice that the government is spending less?
Chalmers:
Oh, there’ll be belt‑tightening in the Budget. We’ve made that really clear and there has been belt‑tightening in the first 4 Budgets as well. Our message‑
Karvelas:
But will it be more significant than the other budgets because of the more acute inflation pressure?
Chalmers:
Well, a couple of things about that. First of all, again, we haven’t finalised the Budget, so it’s not possible to be definitive comparing the savings effort in our fifth Budget compared to the first 4, given a lot of those discussions or decisions are still to be had and still to be taken.
But more broadly on the question of savings, even in the mid‑year Budget update in December, we found another $20 billion in savings. So we try and go about that in a very responsible way, very considered way, recognising that every budget is delivered in the context of the economic conditions and the economic conditions right now are defined by inflation, which is higher than we’d like for longer than we would like, but also this long‑standing productivity challenge in our economy. Those 2 things are related. And we’re coming at these challenges against the backdrop of all of this volatility we’re seeing around the world on equity markets and debt markets, and when it comes to the geopolitics of the day.
All of that is a way of saying, Patricia, that responsible economic management’s been a defining feature of the government to here, it will be a defining feature of the government from here. But like every Budget, it will take into consideration the very specific economic conditions that we confront together.
Karvelas:
Former Treasury Secretary Ken Henry has said, well, essentially has raised his really big concerns about the nation’s tax system. I know it’s a system you’re looking at in this Budget. He says it’s full of holes, it suffers from deliberate negligence and has encouraged, and this is really key, higher income earners to find creative ways to reduce their tax. Do you agree that people are finding creative ways to reduce their tax because of the system?
Chalmers:
Well, obviously, you know that I’ve got a heap of respect for Ken Henry. I listen to him on these matters and on other issues more broadly. I invited him to the Reform Roundtable in September to be able to contribute his very substantial experience.
I agree that there are issues in the tax system, and I think the way that they play out is with a sense of intergenerational unfairness, which is how Ken comes at this as well. A lot of the discussions at the Reform Roundtable were about what possible steps could we take in tax reform to make the system fairer, particularly in an intergenerational sense. His contributions, his thinking, are always welcome.
Karvelas:
Okay. So on a specific proposal that we know you’re looking at, which is the capital gains tax discount, on that specific measure, I just would love some clarity on whether you’re just looking at that on its own or whether you’re looking at capital gains tax as a way of actually delivering bigger tax cuts perhaps to people? So you bring in more revenue but that you give it back in bigger tax cuts?
Chalmers:
Well, first of all, we haven’t changed our tax policies and the big focus is on income tax cuts. We’ve got another income tax cut coming this year and another one next year as well. It means as Treasurer and as a government, we would have cut income taxes 3 times for all 14 million Australian taxpayers. That’s the focus. But there is also a big agenda when it comes to intergenerational fairness in the tax system, boosting the low‑income super tax offset in addition to the income tax cuts in the housing system, more supply, helping people save for a deposit.
The reason why I start there, Patricia, is because we’ve got an agenda on tax, it’s about cutting income taxes already, we’ve got an agenda on housing‑
Karvelas:
I get that, but what I’m trying to get clarity on is if it’s – because right now, and you know this, your political opponents, because this goes to this absolute sort of detail, are suggesting that this is just a revenue measure, that it’s just a tax measure. I’m trying to work out whether it is or whether you’re trying to change the tax system more broadly and deliver it back to people to give them an advantage. People who have been missing out through bracket creep, through being basically in a system that’s given an advantage, to be frank, to boomers.
Chalmers:
I understand your question, Patricia. It starts from the fact that we are returning bracket creep and delivering 2 more tax cuts. Your question was about are we seeking to fund tax cuts, the point I’m making is that we are already delivering 2 more tax cuts. So that’s the starting point.
As you know, as Katy said this morning and I said this morning, and we’ve said on other occasions, at this stage of the budget process we consider a range of options and we seek a range of views. There’s no decisions taken on that. We don’t write the Budget for May in the second half of February. But obviously, we are considering ways to make the tax system fairer. We’ve made that clear for some time. Now, related to that is when we haven’t taken any decisions, we haven’t come to any concluded views on any of these matters, it’s hard to then go into subsequent levels of detail.
The final point, you asked me about our political opponents. I’m not especially focused on them, I mean, the Shadow Treasurer wrote a book not that long ago calling for more intergenerational fairness when it comes to things like the capital gains discount‑
Karvelas:
Yeah, but with tax cuts too‑
Chalmers:
You’re probably more focused on what they say than what I am. I’m focused on working through the options, making the Budget more sustainable, considering next steps on tax reform, making our economy more productive, and, as always, if we take more steps in any of these areas, that will be a matter for the Cabinet to decide in the usual collective and appropriate way.
Karvelas:
There are the headlines in the papers that you also want to focus on economics, not politics, in the Budget. Does that mean you’ve been focused on politics in your other spending?
Chalmers:
No, it reflects a view that I’ve long held which I shared with the Treasury colleagues on Monday evening. My view is if you get the economic calls right, the politics will take care of themselves. Probably you and I have spoken about that over the number of years that you and I have been talking about these sorts of matters. These are views that I’ve held for a long time.
If we continue to get the big calls right in the economy, make the Budget more sustainable, make our economy more productive with the big agenda that we’ve got there, consider next steps on tax reform. I believe if we make good, considered, methodical decisions in each of those areas, the politics will take care of itself.
Karvelas:
And that means there’ll be losers, there are always losers, does it mean fronting up and saying ‘yes, there’ll be losers’ and making the case, the difficult case?
Chalmers:
Well, we made clear on other occasions when we’ve made difficult savings or difficult calls including, for example, ending the electricity rebates which are a big reason why we’ve seen that inflation number come in higher than we would like it to today, is because we ended the electricity rebates, a big part of the reason for that. So, there are hard decisions, but our commitment to people is to manage the Budget and the economy in the most responsible way that we can, to try and make it more productive over time to lift living standards for everyone, so that we can grow our economy faster with lower inflation. These are the objectives of the government. They’ll be the objectives of the Budget too.
Karvelas:
Now, finally, Treasurer, the Prime Minister was evacuated because of that bomb threat at The Lodge. Can you give me a sense of just how much your lives as senior politicians have been impacted by rising violence and threats?
Chalmers:
Well, I think unfortunately and increasingly, this goes with the territory. I agree 100 per cent with the Prime Minister who said that collectively we all need to turn the temperature down. This is becoming a more and more frequent part, I think, of doing these sorts of jobs. They are big opportunities, but they come as well with, unfortunately and increasingly, these sorts of events.
I’m pleased that everyone was okay last night. I’m very grateful to the AFP and the other agencies that help us through these sorts of episodes. But certainly these sorts of things have been happening with increasingly regularity. It means that the AFP and others consider more attention to us would be a bit more warranted, and so that obviously changes the way that we go about things.
But whether it’s Anthony or myself or other Cabinet ministers, the thing that we don’t want to see is we don’t want people to be more reluctant to go out and talk with real people in real communities, like the communities that we represent. We would like to be accessible‑
Karvelas:
And is that what’s happening as a consequence of this?
Chalmers:
Not in my case, but I can imagine that people are weighing up those kinds of decisions. One of the great things about this country is how accessible our leaders are, being out and about, talking with real people in real communities about real issues. We don’t want to wind that back. It’s not something I’m intending to do, but obviously, when this sort of stuff happens with increasing regularity, it’s the sort of things that Ministers might consider. That’s why it’s so important, I think, collectively that we do what the PM has suggested, and the director of ASIO and others have suggested, which is to try and turn the temperature down in our politics.
Karvelas:
Yeah, I think one of the best attributes of Australia is our accessibility to people in power, so I really agree with you there. Treasurer, thank you so much for joining us.
Chalmers:
Thanks, Patricia.