PATRICIA KARVELAS:
Electricity subsidies worth $300 to every household over the year from July 1, and an increase to rent assistance are the government’s 2 main tickets to what they predict will be an effort to drive down inflation to get within the Reserve Bank’s target range by the end of the year.
But there’s a debate over whether the government has gone far enough when it comes to cost‑of‑living relief, and then on the other side whether perhaps it’s gone too far. It’s getting criticism from different parts of the world; from the Greens who think they should have gone further, and others who say that they’re spending too much. Treasurer, Jim Chalmers, joins me in the studio. Welcome.
JIM CHALMERS:
Thanks very much, Patricia.
KARVELAS:
Are you trying to subsidise your way to lower inflation?
CHALMERS:
No, we’ve got a broad plan to engage in this fight against inflation. The Budget is very responsible, second surplus in a row as part of that, showing restraint when it comes to real spending growth, limiting a lot of our spending to unavoidable decisions and the cost‑of‑living package. And all together, our Budget will put downward pressure on inflation, not upward pressure on inflation, and that’s important because we’ve made good progress.
Inflation had a 6 in front of it when we came to office, it’s now got a 3 in front of it, but it’s not mission accomplished because people are still hurting.
KARVELAS:
Okay. But isn’t the risk that the Budget spending is going through to demand and put pressure on the Reserve Bank to keep interest rates higher for longer?
CHALMERS:
That’s not advice that we received in putting the Budget together. The advice is that our cost‑of‑living package will take some of the edge off inflation, particularly this year and next year, and it won’t add to broader inflationary pressures in the economy.
KARVELAS:
Okay. But if a higher income earner gets a $300 reduction in their bill, if you’re a higher income earner, that’s more money to spend in the economy, isn’t it?
CHALMERS:
This is overwhelmingly about people doing it tough, and there are broad elements of our cost‑of‑living plan. Every taxpayer gets a tax cut, every household gets energy bill relief, and then there are some targeted elements too, second consecutive increase to rent assistance, cheaper medicines, what we’re doing with student debt, all of these things.
KARVELAS:
Yes, I know, but you’re not answering my question about, you’re not paying that extra $300 on your bill, you’re earning $200,000 a year; you’ve got more money to spend.
CHALMERS:
I’m saying overwhelmingly that is about people doing it tough. They don’t have a lot of spare cash lying around. And there is a difference between sending people cheques and helping to get their electricity bills down.
I’m surprised, frankly, that more people don’t think it’s a good idea to try and take some of the sting out of these electricity bills, because people are under pressure, they need the government to play a role here, that’s why our cost‑of‑living help is substantial but responsible.
KARVELAS:
Okay. It’s interesting you say you’re surprised. I mean do you think you need a $300 reduction in your bill? You’re a high‑income earner. But Jacqui Lambie says she doesn’t need it, as an example?
CHALMERS:
It’s not about me, it’s about millions of people who do, and you know, some of the same people – not Jacqui, who I like and respect – but some of the same people that wanted high income earners to get twice as big a tax cut as they’re currently getting are now arguing against this, and you have to ask them about their inconsistency there.
This is overwhelmingly about millions of Australians who are doing it tough. More help is on the way in the Budget. Tax cuts for every taxpayer, energy bill relief for every household and other cost‑of‑living help as well.
KARVELAS:
Well, given now you don’t have to work with the states in your delivery of this, will the bill actually say, ‘the federal government has reduced your bill’, will there be something on the bill that makes that clear?
CHALMERS:
We’ll work with the retailers, we like to make it clear in the event that we are stepping in to help people with their electricity bills. Last time we were able to do that in conjunction, as you say, with the states and with the retailers. We’re implementing it in a similar way. Ideally, we could make a similar point.
KARVELAS:
Okay. So it will say something that will make it clear, because you say it’s not a cheque, but you want people to know.
CHALMERS:
Yes, but that’s not our primary objective here; our primary objective here is to help people with the cost of living. People are still under the pump even as inflation has come off substantially, that’s why our big focus of the Budget was providing more help to more people with the cost of living at the same time as inflation moderates and we get the Budget in much better nick.
KARVELAS:
Okay, let’s go to the Future Made in Australia Act, $22 billion over 10 years. A lot of it subsidises technologies that we don’t even know work yet, like hydrogen, great idea, but it hasn’t been commercialised at that scale. Is it a big gamble?
CHALMERS:
No, of course not. A lot of the $22.7 billion over 10 years that you’re referring to is in the form of tax incentives, including in hydrogen, but also processing and refining critical minerals, and using the tax system means that we can reward scale and success, commercialising these enormous opportunities for Australia.
And in the event that people can’t stack it up, there will fewer tax incentives paid out; in the event that more people can stack it up, that would be a good thing, the cost incentives would go up. But it’s very deliberate to lean very heavily on the tax system. There are grants, there are subsidies, there are loans, but overwhelmingly the Future Made in Australia package I released last night is about tax incentives to try and encourage the jobs and industries which will power our future and deliver us a new generation of prosperity.
KARVELAS:
Okay. And 2027 is the earliest I think it starts, is that right?
CHALMERS:
The hydrogen one?
KARVELAS:
Yes.
CHALMERS:
Yes, it starts in 2027, and that’s because it incentivises production, and so we need to see the production rolling before people get the tax credit.
KARVELAS:
Okay, I get it. And you talk about a front door to deal with all of this. So where’s that going to happen; is it going to be an agency, or is Treasury the place that everything happens, because this is quite a confusing architecture. How are you going to build it?
CHALMERS:
That’s the point. So I knock around in investor circles, global and domestic, I speak with a lot of businesses and investors, as you’d expect me in my job, and some of the main feedback we get is that when people want to invest in other countries, it’s quite easy, there’s a single front door to help with different levels of government, different approvals processes, co‑investment opportunities and the like.
And we want to provide that here. We’ll do the work to do that. We flagged an intention for there to be a single front door. There are some institutions performing that role at the moment. Treasury will have a role to play, absolutely, so will Ed Husic’s department and Chris Bowen’s department, PM&C and others.
KARVELAS:
Okay, so everyone? It just sounds like a little confusing, so Treasury’s ultimately –
CHALMERS:
No, we want to take the confusion out of it.
KARVELAS:
So you’re still working with the Industry Department, but ultimately do they have to –
CHALMERS:
Do you think we shouldn’t work with those other departments?
KARVELAS:
No, don’t get cranky with me, I’m not saying you shouldn’t, but how are you going to make it work in a cohesive way?
CHALMERS:
That’s the whole point of the single front door for investors, is to be able to come to the government and to say, ‘We want to make a substantial investment in a substantial project.’ We know there’s federal, state and local implications, we know there’s co‑investment opportunities, we know there’s approvals processes, we want to help people do that by simplifying it, not making it more confusing.
KARVELAS:
Okay, fair enough. Let’s go to housing. Budget figures clearly show housing is not getting built fast enough, dwelling investment will have contracted 3 per cent the financial year to June and will remain flat in the next financial year. How can that be when you’ve put forward $35 billion in housing measures?
CHALMERS:
Because we’re rolling out this $32 billion in investment as quickly as we can, but we start a long way back, you know, we are dealing with a decade of neglect when it comes to investment in housing. The pipeline is not as we want it to be, and that’s why there’s another $6 billion in the Budget for housing, more homes for Australians, as part of this $32 billion investment.
We have to turn this around, and we all have to do our bit, and we’re kicking in substantial investment and showing leadership at the Commonwealth level, the states and territories will do their bit, the industry, we will train more workers. All of this is about making it easier to build and rent and buy.
KARVELAS:
Okay. You’re also putting a lot of pressure on universities to build student housing if they want more students above the government’s cap, and you talk about a new formula to be developed. How will that formula work?
CHALMERS:
First of all, I see international education as a huge asset for the country, a huge asset; I said that in the Budget speech. But we need to make sure that we can manage these numbers of foreign students in our universities, and so we’ve indicated that we will manage the growth in foreign students, and as part of that negotiation with universities, we want to see them build more student accommodation.
And so we will work with them, whether it’s a formula or a ratio or some other way, to make sure, if they want to bring in more foreign students, they need to build more student accommodation, because that will take pressure off the housing market, particularly in our cities and suburbs.
KARVELAS:
Okay. So beyond the cap, if you can’t house these people, you can’t bring extra students in.
CHALMERS:
Yes, we will negotiate with them how much extra student accommodation they will build in return for the approval to bring in more foreign students.
KARVELAS:
Okay. And how would you determine it? Do the dwellings have to be already up and running?
CHALMERS:
Yes, we’ll consult with them, and we’ll negotiate with them. But we need more student accommodation, I think that’s broadly agreed; we need more housing, that’s broadly agreed, and we’ve got an opportunity to work with the university sector to build more of it.
KARVELAS:
Treasurer, the forward estimates of the NDIS spending show a cap of an 8 per cent increase per year. You’re saving $14 billion over the 4 years through the new NDIS legislation. Can you tell me exactly how that money will be saved?
CHALMERS:
Yes. First of all, the spending on the NDIS in the Budget goes up and there’s extra spending and not less spending in the Budget, and the $14 billion that you referred to just refers to the impacts, the consequences of the legislation that’s before the Parliament, and we’ve made no secret of the fact that we want to make sure we’re getting value for money for the participants in the scheme.
We want it to deliver the services it was designed to, the services that people need and deserve, and part of that means – still growing in costs, quite quickly – making sure that we are managing that growth, and it just reflects the legislation in the announcements that we have already made.
KARVELAS:
Okay. This Budget is getting a mixed reception. Some say that you have shown a lot of discipline in the budgets, the last 2, but Phil Coorey, for instance, says it’s like someone being on – I thought it was an interesting way of describing it – someone being on a diet, and then you get a bucket of KFC and you’ve overindulged. Is that something that you kind of can wear, the criticism that you were very disciplined and that somehow you’ve stopped that now?
CHALMERS:
No, this Budget’s very disciplined as well. Real spending growth under us has been a fraction of what we inherited, even if you think about next year’s deficit when we came to office, next year’s deficit was going to be $47 billion, it’s now $28 billion.
This year we turned a $56 billion deficit into a $9 billion surplus. We are delivering 2 consecutive surpluses for the first time in almost 2 decades.
KARVELAS:
I know, we’ve got deficits after. I mean you’ll be going into the election –
CHALMERS:
Well, that was the situation that we inherited. There were deficits as far as the eye can see, there was much more debt.
KARVELAS:
You’ve delivered 2 surpluses, and that’s now over.
CHALMERS:
The work of repairing the Budget is ongoing. I find it surprising that when we have saved $152 billion in debt just this year and $80 billion of debt interest, when we’ve improved the budget bottom line by $215 billion in cumulative terms, the Budget is in much better nick than what we inherited from our predecessors. We have been cleaning up the mess that we inherited. Two surpluses is part of that. All of these improvements across the board in the Budget is part of that, and I think any objective observer would acknowledge that.
KARVELAS:
Treasurer, I’m getting feedback from listeners saying that the interest rates are really smashing them and ultimately they just want to see interest rate cuts. Do you think interest rate cuts could be delivered by the end of the year?
CHALMERS:
As you know, and we do this dance from time to time, Patricia, I don’t make predictions about future movements in interest rates.
KARVELAS:
Okay, but if I can frame it as your response to the listeners who say, ‘Yeah, whatever, 300 bucks, whatever, these interest rates are smashing me.’
CHALMERS:
I understand that. And I thank your listeners for listening. The pressure on people from these rate rises is substantial, and it’s also slowing our economy and slowing consumption and retail trade and the like.
I take responsibility for my part of the fight against inflation, and that’s the Budget. The Governor will take these decisions independently about the future movements of rates, and when she does that, and when her board does that, she will take into consideration a far broader range of factors than just the Commonwealth Budget.
KARVELAS:
Treasurer, thanks for joining us.
CHALMERS:
Thanks Patricia.