Sally Sara:
Now, yesterday, the Reserve Bank Governor, Michele Bullock, had this to say about government spending. Let’s take a listen.
[Excerpt]
Michelle Bullock:
The extent to which governments make up the shortfalls for households by giving them more money, it makes it harder to dampen demand.
[End of excerpt]
Sara:
Do you accept the basic point that anything you do to support households can make the job of the RBA more difficult?
Chalmers:
Well, a couple of things about that. I mean, first of all and most importantly, this is going to be a really responsible budget that takes the inflation challenge seriously because we know that people are under pressure.
Now, government spending wasn’t the reason why rates went up yesterday. It wasn’t a factor in the decision; it wasn’t a feature of the statement that the Reserve Bank released afterwards.
The Governor was asked a hypothetical question about, how would the Bank view a world where the budget added heaps more fiscal stimulus into the economy, and that was the answer that Governor Bullock provided.
The point that we have been making throughout the course of this week, before yesterday’s decision and this morning after it, is that there’s not a heap of extra stimulus spending in the budget.
In fact we’re winding back spending overall in the budget, and that’s an important point I think that has been lost because, you know, even though budgets aren’t the main driver of prices in our economy at the moment, it’s a war in the Middle East, the quicker than expected recovery in the private sector, we know that we can play a helpful role in the fight against inflation, and that’s what the Budget is going to be all about.
Sara:
You said the Budget will include some tax reform with a focus on housing. You haven’t confirmed the details, but it’s widely expected that you’ll revisit some of Labor’s 2019 policies, such as a capital gains tax and negative gearing. Your colleague Annika Wells said on this program this week that the issue was crisper in the minds of voters now compared to what it was 7 years ago. Has the political context changed?
Chalmers:
Well, I’ll leave the political commentary to others. I mean certainly, when it comes to the economics of the current situation, we recognise that there are substantial intergenerational pressures that people are feeling –
Sara:
Are they new?
Chalmers:
– and that’s not about – well, I think that they have intensified, you know, particularly when you think about the housing market. You know, primarily our issues in housing are about not having enough homes, and so the primary focus of the government’s policy for some years now has been building more homes.
But we’ve acknowledged, I think in an upfront way, that there are issues, intergenerational issues in housing, in the tax system, and so we have been working through those issues, I think in the usual considered and methodical way, which is a hallmark of this government. But overwhelmingly, our housing policy’s about building more homes.
Beyond that, we are concerned about how hard it is for people, particularly young people, to get a toehold in the market. We’ve all seen the way that home ownership rates over a long period of time, particularly amongst young people, have dropped away.
So we take these challenges seriously. I’m not pre‑empting any elements of the Budget next Tuesday night, but we’ve been upfront about the pressures that we are trying to respond to.
Sara:
As you were just saying there a moment ago about home ownership for young people, it’s been an issue for a long time. Why didn’t the government take some of these proposed changes to the election last year?
Chalmers:
Well, we made it clear in the first 4 years or so of the government that the emphasis is on building more homes, and the policy we took to the election was focused almost exclusively on supply. There was also the 5 per cent deposits –
Sara:
But to bring you back to this question about things like capital gains tax discount changes, et cetera, why not put that into the election so people knew what they might be getting?
Chalmers:
Because the emphasis in our election policy was on building more homes and providing a 5 per cent deposit. And in the year or so since the election, we have been focused on delivering those commitments that we took to the people around housing supply, as well as, you know, building Urgent Care Clinics and all of the rest of it.
The first year was very focused on being a year of delivery, and what the Budget will signal is a year of – or begin a year of more ambitious reform.
And I don’t think any responsible government can ignore the very real intergenerational pressures that are in our budget, in our tax system, in our housing market, in our economy and our society more broadly. And that’s not about setting some Australians against others.
It’s not the fault of older Australians that younger people are finding it hard to get a toe hold in the market. It’s the fault of successive governments, especially Coalition governments, who haven’t taken this challenge seriously. We do take these challenges seriously.
Part of the Budget is about responding to that at the same time as we deal with a whole bunch of other things. There’ll be a fuel security package in the Budget. Obviously, fighting inflation is a big part of the focus of the Budget. But there will be tax reform as well, and there will be additional steps in the housing market and that’s because we take these issues very seriously.
Sara:
Treasurer, just finally, is the Budget sealed? Has it gone to the printers as yet?
Chalmers:
Haven’t hit print on the Budget just yet; we wouldn’t have ordinarily done that.
Sara:
How late can you do that?
Chalmers:
Oh, usually over the weekend. There’s a lot of different documents; they get printed at different times. But towards the end of the week, obviously, we start hitting print on these documents.
But you’ll actually hear a bit more later today about an important part of the Budget, which will be in there on Tuesday night, which is our fuel security plan. The Prime Minister and Minister Bowen, after National Cabinet today, will be talking about a really important part of the Budget, which is the fuel security part of the Budget.
That’s been one of the things which has been finalised towards the end of proceedings.
It’s all about making sure there’s more fuel for motorists and for industry and more fuel security for our economy more broadly. A big emphasis on securing more fuel, making our supply chains more resilient and funding this fuel tax cut, which is in the Budget as well. And so people should expect to hear a bit more about that later on today. That’s been one of the big pieces which we’ve finished quite recently.
Sara:
Some busy printers over the weekend. Jim Chalmers, thank you.
Chalmers:
Thanks, Sally.