Peter Stefanovic:
The RBA Governor, Michele Bullock, has issued a warning to the federal Treasurer, Jim Chalmers, over any handouts that might be coming in next week’s Budget. It follows reports that haven’t been denied that working Australians would receive a one‑off $200 to $300 tax offset.
[Excerpt]
Michele Bullock:
The extent to which government make up the shortfalls for households by giving them more money, it makes it harder to dampen demand.
[End of excerpt]
Stefanovic:
Joining us live now is the Treasurer, Jim Chalmers. Treasurer, good to see you, thanks for your time today. That’s a fairly clear and direct response on spending. Did you get the message?
Jim Chalmers:
This will be a responsible Budget which takes seriously the inflation challenge in our economy because we know that people are under pressure. Governor Bullock was asked yesterday a hypothetical question based on some budget speculation that had been in the paper that morning. That budget speculation always happens in the lead‑up to budgets, often some of that speculation is right and some of it is wrong. People will get a sense of it on Tuesday night when we hand the Budget down.
But overwhelmingly what people will see in that Budget when we hand it down is a big effort to be as responsible as we can be. Overall, pulling back on spending. So, when Governor Bullock was asked if there is a heap of new stimulus spending in the Budget, what would you think about that, that’s obviously a hypothetical which doesn’t reflect the reality of the budget which continues to be managed in a very, very responsible way, including when it comes to levels of spending.
Stefanovic:
So you can’t confirm handouts for workers are coming in the Budget next week? Is that happening or not?
Chalmers:
I’m not going to add to that kind of speculation. As I said Pete, sometimes that speculation’s right, sometimes it’s wrong. This always happens in the lead up to the Budget. What we’ve already made clear is that this is a tax cutting government. We’ve already cut taxes once for workers, we’re going to cut them again in July, again after that in July next year, we’ve got the fuel tax cut that we will fund in the Budget, taking some of the sting out of these higher petrol prices, we’ve got an instant tax deduction which provides a little bit of extra tax relief as well.
We’ve shown a willingness to cut taxes, our political opponents opposed those tax cuts and said that they would repeal them, but we will be pressing ahead with those tax cuts that we’ve already announced.
Stefanovic:
I mean, you’re going to increase taxes as well, and I’ll get to that in a moment. That’s the speculation, anyway. But just let me ask a different way on this other suggestion that there will be a handout next week. Would such an offer feed inflation, and therefore, make the RBA’s job harder if you were to do it? Do you concede that?
Chalmers:
What matters is the overall composition of the Budget and the nature of your spending in addition to, or alongside the magnitude of that spending.
We’ve made it really clear already that we’ve got very substantial savings in this Budget. In fact this will be one of the most responsible budgets that people have seen, certainly in the last quarter century or so. That’s because we recognise that even though budgets are not what’s driving this inflationary pressure that we’re seeing from the war in the Middle East and the faster than expected recovery in the private economy, these inflationary pressures are not because of government spending. The decision that the Reserve Bank took yesterday was not about government spending, it wasn’t mentioned in the statement that the board released.
But we do understand and take responsibility for making sure that we are playing a helpful role in the fight against inflation, not a harmful role, and you’ll see that in the Budget. You’ll see in the Budget that there is more than the usual amount of savings, you’ll see that the net budget position actually improves over the 4 years rather than goes backwards, and this is because we acknowledge that we can play a helpful role here, and that’s what we intend to do, because responsible economic management has been a hallmark of this government and it will be a feature of the Budget on Tuesday night as well.
Stefanovic:
But do you concede though spending increases demand, when the RBA is trying to limit it, aren’t you doing the exact opposite?
Chalmers:
Well, this is the point that Governor Bullock was making yesterday, that I have made on other occasions as well. Budgets are not the primary driver of the inflation that we are seeing right now. But of course aggregate demand includes both private and public demand, and that’s why it’s important that we manage the budget in a responsible way and play a helpful role in this fight against inflation, and that’s what we intend to do.
Let’s be really clear here, Pete, the Governor was asked what would happen if there was a heap of extra stimulus added into the budget, and how would the Reserve Bank think about that. That’s not what we’re intending to do. In fact we’re winding back spending overall, we’ve already made it clear in areas like the NDIS, like making the EV tax breaks more sustainable. We’re taking these budget pressures seriously, we’re taking this inflation challenge seriously, because we know that people are under pressure.
As the Governor acknowledged yesterday, we both want to get inflation down in our economy, but we’ve got different responsibilities. I’m confident that we are striking the right balance in this Budget on Tuesday night, recognising the inflationary pressures in our economy and the pressures that that puts on people who are paying a hefty price for this war in the Middle East.
Stefanovic:
Okay. Tell me, are you rethinking any plans for next week following yesterday’s rate rise and those comments from Bullock?
Chalmers:
You have to understand that the decision taken yesterday by the independent Reserve Bank was widely anticipated, and in our budget forecasts what we do, or what the Treasury does, is they take the market’s expectation of future movements in interest rates into account already. Obviously, reading the tea leaves and looking at the market expectations, like most Australians we were anticipating the decision that was taken yesterday. We haven’t hit print on the Budget yet, but the decision taken yesterday was broadly anticipated, widely expected amongst economists. So, it’s something that we were already able to take into consideration as we put the finishing touches on the Budget.
Stefanovic:
So, her comments aren’t going to give you pause for thought?
Chalmers:
Well, the Governor’s comments were based on speculation and a hypothetical outcome which isn’t the reality of the Budget. The Budget is not about injecting heaps more stimulus into the economy, as I explained a couple of different ways already Pete.
Stefanovic:
I’m just trying to work out if it’s happening or not. It sounds like that’s not happening now. Is that what you’re saying?
Chalmers:
I’m saying people will see details of the Budget on Tuesday night. I’d encourage people not to assume that every bit of budget speculation is necessarily right in every respect.
What happens in the lead up to budgets is people make assumptions about what’s in and what’s not in the Budget. Sometimes those assumptions are right, sometimes they’re wrong. People don’t have long to wait now to see what’s in the Budget on Tuesday night.
Stefanovic:
Does Victoria’s spendathon make your job harder?
Chalmers:
First of all, I wouldn’t necessarily characterise it the way that you have, Pete. Every state government of both political persuasions is doing what it can to manage its budget pressures and to help people through a difficult period.
Obviously, when it comes to the combined budgets of governments around Australia, then the state governments are part of that aggregate when it comes to how much government spending there is in our economy.
But I’m not going to take shots at the Victorians. This is a good Victorian government, and the budget is all about trying to get Victorians through a difficult period through these circumstances which no Australian chose, this war in the Middle East which is pushing up prices and making life harder for people. The Victorian Government, like every government of both political persuasions in this country, is doing the best it can to navigate through some choppy waters in the economy.
Stefanovic:
Just back to your Budget then, fuel security is expected to be a big part of the Budget. Can you reveal what might be in it on the fuel front?
Chalmers:
Fuel security will be an important part of the Budget, and later today after National Cabinet Prime Minister Albanese and Minister Bowen will be giving a sense of what’s in the Budget when it comes to fuel security, and the fuel security part of the Budget is all about securing more fuel, it’s about more resilient supply chains, it’s about funding this fuel tax cut which is taking some of the edge off these higher petrol prices from the war in the Middle East.
Overwhelmingly what this fuel package in the Budget will be is about securing more fuel for motorists and for industry and more fuel security for our economy. It’s a really important part of the Budget that we will hand down on Tuesday night, and you’ll hear more about it from the PM and Chris later today.
Stefanovic:
That sounds to me like you might be then hinting at matching what the Opposition recently came up with to extend fuel storage from 30 to 60 days onshore, is that what it’s going to be about?
Chalmers:
Well, the Opposition don’t come to this with a lot of credibility. They saw our refineries go from 6 refineries to 2 refineries, and so we make our own decisions based on the work that we do. We work around the clock on fuel security. The PM, Chris, other ministers are doing a terrific job securing more fuel for Australia on international markets and making sure it gets where it need to go. But we know there’s more to do, and the Budget will have additional steps when it comes to fuel security for motorists and industry and fuel security for our economy more broadly.
We’ll work very closely with our international counterparts, with industry, with our departments to make sure that we’ve come up with the best and most comprehensive plan that we can. It will be a central feature of the Budget, and you’ll hear more about it today from Anthony and Chris.
Stefanovic:
Can you at least humour me though, is it going to relate to the Opposition’s recent policy about storage?
Chalmers:
Well, it’s determined without input from the Opposition because they don’t come to this with any credibility. To be honest with you, Pete, I don’t pay a lot of attention to what the Coalition is proposing. They’re trying to pretend on the one hand there’s no war in the Middle East pushing up prices, and then on the other hand calling for us to do things.
They don’t come to this with a heap of credibility. We’ve worked up our own plan. We’ve done that in the usual considered and methodical but decisive way. It will be an important part of the Budget on Tuesday night and it will take into consideration all of the great work that the PM and other ministers have been doing to make sure that our country has the fuel that it needs to keep moving.
Stefanovic:
All right. I know you’ve got to get to another interview, I just want squeeze this in, because we were going to talk about capital gains tax changes and there might be a broken election promise around the corner, but I want to ask you about young investors who use the stock market to get ahead, maybe to get a house deposit together, I don’t know. But now there’s the expectation that you’ll clip that ticket as well. So isn’t that an attack on aspiration?
Chalmers:
Well, once again, I’m not going to add to the speculation about the Budget. I think there are genuine intergenerational issues in our budget, in our economy and in our society that we take seriously and that we will respond to in the Budget. On the specifics of any policy change, I’m obviously happy to talk about that on another occasion.
Stefanovic:
Well, you might get that question next week, Jim Chalmers the federal Treasurer, appreciate your time. Thank you so much as always.