SARAH FERGUSON:
Let’s go straight to that question about inflation. You said, framing the Budget, that it was the primary focus. Do you accept that if the RBA does raise rates post‑Budget, you’ll be held to blame?
JIM CHALMERS:
The Reserve Bank will take its decisions independently. I take responsibility for my part of the inflation fight, and the Budget is making a big effort in that regard. This Budget is about easing cost‑of‑living pressures. It’s about putting downward pressure on inflation at the same time as we invest in the future.
FERGUSON:
I mean, the question was, if there is a change in the interest rates, and I know you’re not making that decision, but will you accept then that this Budget has failed to convince them?
CHALMERS:
I don’t think that’s the only measure of a decent Budget. You know, we are trying to put downward pressure on inflation—
FERGUSON:
It would be a shattering verdict on this Budget, though, wouldn’t it?
CHALMERS:
The Reserve Bank will take its decisions independently. I don’t tell the Reserve Bank how to do its job and then it doesn’t tell me how to do my job. I’m very confident in this Budget that we’re putting downward pressure on inflation, that we are being part of the solution to inflation rather than the problem. And that’s because of the spending restraint, the responsible economic management and the way we’ve designed our cost of living help.
FERGUSON:
All right, I’ll come to the downward pressure in a moment. But just on one of those cost‑of‑living measures, which is the $300 that’s going to every household in Australia. Why do high‑earning Australians need a subsidy?
CHALMERS:
Well, there are multiple parts of our cost‑of‑living package. There’s a tax cut for every taxpayer and there’s energy bill relief for every household. Those are the broad parts of our cost‑of‑living package, and then there are some targeted parts. Up to a million renters will get some help, some help with medicine costs, and in other ways as well. And that’s because we recognise that a lot of people are under a lot of pressure. And because of this Budget, more help is on the way. We’ve found a responsible and affordable but meaningful way to help people with the cost of living. Not just people on low and fixed incomes, but people in middle Australia too.
FERGUSON:
You talked about middle Australia, but there’s a whole bunch of people who aren’t in middle Australia, like yourself, who don’t need help paying their bills. Why do you need to give energy relief to those people?
CHALMERS:
Well, first of all, I think these cost‑of‑living pressures go up and down the income scale. Yes, they fall disproportionately on the people on the lowest incomes and fixed incomes, and they are obviously our priority. But I think people are under the pump right around Australia. Even people—
FERGUSON:
Yes, but you will acknowledge there are people who are not under the pump. We hear about it a lot, the baby boomers, those people who’ve won the housing lottery and so on. Why are those people going to get $300 in their pocket?
CHALMERS:
Because I think these cost‑of‑living pressures are applying pretty broadly in our community. It doesn’t make sense what happened to—
FERGUSON:
—the wealthy or the very wealthy?
CHALMERS:
Well, the simplest way to deliver this cost‑of‑living relief is via energy bills. And once you go beyond providing it to people who are on pensions and payments, who are our priority in the last Budget, once you go beyond that, it makes sense to go broadly. Some of the cost‑of‑living package is broad. Every household gets energy bill relief, every taxpayer gets a tax cut and there’s targeted cost of living help as well.
FERGUSON:
Yes, but you’d already done the tax cut and here you are deciding to give extra money to wealthy people. I don’t think you’ve yet explained why you’re doing that unless it’s simply a matter of mechanism. But you’re not arguing that.
CHALMERS:
Well, I think there are 2 things. The first point that I’ve made is that people are under cost‑of‑living pressure up and down the income scale.
FERGUSON:
Not at the top, though.
CHALMERS:
Well, and secondly, that it makes a lot of sense if you’re providing this cost of living help the way that we are, to take the edge off energy bills and put downward pressure on inflation. Once you go beyond people on pensions and payments, the simplest, most efficient, most effective way is to provide it more broadly. That’s part of the broad cost‑of‑living relief in the Budget. There’s targeted relief too.
FERGUSON:
So, it’s not just election, pre‑election language that says relief for everybody? It’s not just a slogan?
CHALMERS:
No, of course not. This is about putting people front and centre—
FERGUSON:
Even people who don’t need it.
CHALMERS:
Well, it’s about pressures on people right now and it’s about the priorities of the future. These are things that we care about whether it’s the third year of a term or the first year of a term. This Budget is about the economic cycle, not the political cycle.
FERGUSON:
I think we haven’t got an answer on why those people are getting that money. But let me move on to the question about—
CHALMERS:
I think you have.
FERGUSON:
Well, I’m going to disagree with you because I’m asking why it is you’re choosing to give wealthy people $300.
CHALMERS:
Because cost‑of‑living pressures go up the income scale. And because it’s the easiest, simplest, most efficient, most effective way to provide this help.
FERGUSON:
Let’s talk about putting downward pressure on inflation. Now, conventional economic wisdom is that when governments put money in people’s pockets, that money that we’re just discussing, they will spend it, and that puts upward pressure on inflation. Why won’t that happen this time?
CHALMERS:
Well, first of all, it’s not a unanimous view of economists. It’s very rare, in fact, to get a unanimous view amongst economists.
FERGUSON:
No, but it’s conventional wisdom.
CHALMERS:
I’m not sure that it is. And the very clear advice that we got from Treasury was that by designing our cost‑of‑living package the way we have, we’ll take the edge off inflation and we won’t add to inflationary pressures elsewhere in the economy. We took that advice very seriously and we proceeded on that basis.
FERGUSON:
Well, have you found a magic formula that turns payments into households into an instrument to fight inflation? Because that would be a magic formula.
CHALMERS:
I don’t think that people watching the program tonight would think it is anything other than common sense, that if we take some of the edge off electricity bills and we take some of the edge off rents, that will put downward pressure on inflation. That’s a very different thing to spraying around cheques or cash in the economy. It’s taking the edge off bills. That’s what we want to see. That’s one of the reasons why we expect inflation to now moderate a bit faster than what we anticipated at Christmas.
FERGUSON:
Let’s be clear about that, because what it does is it changes the number in the CPI, that is the basket of goods. So, it changes that number in that sense it affects inflation, but it doesn’t do anything to address supply and demand, the key thing that you must address when attacking inflation. Which brings me back to my question. How does giving people money address demand?
CHALMERS:
Well, let’s not overcomplicate it, Sarah. We’re making—
FERGUSON:
I think that’s a pretty straightforward thing inflation is about.
CHALMERS:
Well, let me give you, let me give you a more straightforward answer to that. If you take some of the edge off electricity bills and you take some of the edge off rents, of course inflation is going to go down. And what we’ve seen last Budget, for example, because of our energy relief in the last Budget, instead of energy prices going up 15 per cent to March, they went up 2 per cent. Rents are still too high, but they would have been even higher were it not for our rent assistance in the last Budget. I think it’s common sense and that your viewers would understand if we’re helping get the bills down for electricity and rent, then that will have a good impact on inflation.
FERGUSON:
It’ll change those bills. It’ll change the CPI, as I just said, but it won’t change the demand in the economy, which is the number one thing that you’re trying to stifle when fighting inflation. Am I right about that? Or has inflation changed?
CHALMERS:
You have to look right across the Budget. We’re showing spending restraint, which would be unrecognisable to our predecessors. We’re budgeting for a second surplus, which if that happened would be the first back‑to‑back surpluses in almost 2 decades.
FERGUSON:
And net $9 billion of spending next year.
CHALMERS:
Real spending growth is a fraction of what we inherited and a fraction of the 30‑year average—
FERGUSON:
Still $9 billion net into the economy in the next year.
CHALMERS:
You need to look at the composition of that spending. That spending is a combination of our cost‑of‑living relief that we’ve just talked about at some length, combined with things that any reasonable person would consider to be unavoidable spending. Things like extending health programs, palliative care, cancer care, services like MyGov wasn’t funded in an ongoing way by our predecessors. And so that spending next year is made up entirely, that extra spending is made up entirely of unavoidable spending pressures and the cost‑of‑living package.
FERGUSON:
Let me just come back to the question I asked you before. Why is giving people money not putting demand into the economy? That is the conventional economic wisdom.
CHALMERS:
Well, I don’t think that that is consistent, the view that you’re putting, is consistent with the advice that we received from Treasury.
FERGUSON:
So, how do they explain that more cash in people’s pockets doesn’t cause demand? If they gave you that advice, they must have explained it, explain it to me.
CHALMERS:
Well, first of all, people don’t have a lot of spare cash lying around.
FERGUSON:
You’re about to give them some.
CHALMERS:
People are under extreme cost‑of‑living pressure, that’s the first point. Secondly, there is a behavioural difference to sending someone a cheque and encouraging them to spend it or taking a bit of the edge off some of their bills. There is a world of difference between those things. The professional economists and forecasters in the Treasury have given us very clear advice. They don’t expect there to be upward pressure on inflation in our economy more broadly. Remember as well, we’re talking about a $2.6 trillion economy and we’re talking about a handful of billions of dollars in cost of living help. And so, I think we need that perspective too.
FERGUSON:
Do you still recognise that it’s a gamble?
CHALMERS:
I don’t think so. I think we’ve taken a pretty cautious, pretty conservative, responsible and restrained approach to this Budget. We have spoken many times about budgets, and I don’t see budgets as anything other than an opportunity to get the Budget in better nick, to help people where we can, but also to set out a vision for the future, which is another important part of the Budget.
FERGUSON:
And we’ll come to that in just a moment. But I just want to look more broadly at the other inflationary pressures that are around. So, you’ve got the tax cuts, you’ve got $10 billion that were added from the state governments on top of your household payments. So, just for the last time, how does all of this combined not fire up inflation?
CHALMERS:
Because what we’re talking about here is taking the edge off people’s bills. People are under extreme pressure, they don’t have lots of spare money lying around. And what we’ve also shown more broadly is that inflation – when we came to office, inflation had a 6 in front of it, it’s now got a 3 in front of it. We’ve been able to do that without smashing the economy, without slashing and burning in the Budget, and that’s the approach that we will continue.
FERGUSON:
Let’s go on to the ‘Future Made in Australia’. There’s a big political dimension to this, as well as being a very ambitious policy, and we’re just beginning to get the details explained to us. I just want to go to how the Prime Minister described it recently. He said: it’s a means of restoring faith with blue‑collar workers. So, I guess my question is, how big an investment are you planning to make to win back those blue‑collar workers?
CHALMERS:
Well, this is about making sure that people are front and centre and communities in a Future Made in Australia. It’s about recognising that if we are going to attract and incentivise all of this investment in making Australia an indispensable part of the net zero global economy, then we need to make sure that there are benefits for workers and communities in that. And that’s been our approach right across the Budget, putting people front and centre, whether it’s cost of living help or setting out a vision for the future of our economy.
And that’s why there is a substantial but responsible investment in a Future Made in Australia, making ourselves a renewable energy superpower and capturing the full benefits for our people from the way that the global economy is changing and how that pace is accelerating with an emphasis on net zero.
FERGUSON:
So, frankly, there is a political and an electoral dividend to making this investment.
CHALMERS:
No, it’s not political to say that you want people to be beneficiaries of change in our economy.
FERGUSON:
It is political to say that you’re using this particular policy to win back blue‑collar voters who deserted the party in 2019. Which is what the Prime Minister said.
CHALMERS:
I don’t see it in political terms.
FERGUSON:
Have you talked about it with the Prime Minister? Because those are the terms that he used.
CHALMERS:
He wouldn’t see it in political terms either.
FERGUSON:
That’s how he put it.
CHALMERS:
I knock around with the Prime Minister a bit and I know how he approaches this, and he approaches it—
FERGUSON:
I’m just using the language that he used about it.
CHALMERS:
I understand. He’s approaching this the same way I am.
In a world of churn and change, we need to get our workers and our communities a bigger slice of the action. That means teaching and training them to take full benefit of the way the global economy is changing. It means investing in communities, attracting private investment so that we can make the most of this opportunity.
FERGUSON:
So, when he said it was also about bringing back blue‑collar workers to the party, to the ALP, did he misspeak?
CHALMERS:
I don’t see it that way, and I don’t think that’s the only interpretation of what he said. We are the party of the workers, blue‑collar workers, of course, but also care economy workers. A big emphasis in the Budget, on the care economy as well. My reason for being, you know, in every single Budget, my reason for being is to make our people the primary beneficiaries of the way that the global economy is changing, not victims of that change. That’s why I’m here talking to you on Budget night once again. It’s because I deeply believe that Australia’s got this unbelievable opportunity and that if we don’t play the cards that we’ve been dealt, it will be an egregious breach of our generational responsibilities. And the way that we best serve and service those responsibilities is to put real people and real communities at the centre of our economic policymaking.
FERGUSON:
Let me just talk to you very briefly about some other real people, and those are people on JobSeeker. You know that we’ve got unemployment forecast to rise, food bank salvos, they all wrote to you before the Budget asking for you to raise JobSeeker. You haven’t. Do your Budget priorities suggest that you care more about people who have jobs than those who don’t.
CHALMERS:
No, I don’t think that’s a fair interpretation. And also, we increased JobSeeker in the last Budget by $40 a fortnight. I think JobSeeker is about $100 or $120 higher a fortnight since we’ve come to office. And I respect—
FERGUSON:
Not enough for a proper living according to all those people on the front line, including economists.
CHALMERS:
There is more than one way to help people who are especially vulnerable, including the jobless, energy rebates, rent assistance and in other ways too.
FERGUSON:
Just moving on to the bigger question. So, you’re taking a bow today because you’ve produced this second surplus. But I want to ask you about the much bigger question, which is to do, well, the other very big question, which is to do with the shape of the Budget to come, the structural deficit in the Budget. Your own head of Treasury, who you were walking around Parliament House today, Steven Kennedy, said that tax increases will be needed along with spending cuts to fix the long‑term Budget problem in Australia. When will you take his advice?
CHALMERS:
We’ve taken it in this Budget. There are tax changes in this Budget which help repair the Budget position.
FERGUSON:
Not to the extent that they’re going to start working away at that long term structural Budget problem.
CHALMERS:
I’m not sure I agree with that.
FERGUSON:
So, where is it?
CHALMERS:
Well, there are changes in this Budget around tax compliance, multinationals, the way foreigners are treated in the capital gains system. We’ve made way more tax changes and tax reforms than people usually acknowledge. And that is part of the reason why we’re making such stunning progress cleaning up the mess that we inherited in—
FERGUSON:
Is that the kind of, is that the kind of tax change that the head of Treasury would regard as the sort of reform you need to address that structural Budget problem?
CHALMERS:
Well, I work closely with the head of Treasury, as you’d expect. I’ve worked with a few of them over the years, and they know my approach is to take seriously the opportunities for tax reform, to work through it in a sequenced and methodical way, and that’s what you see again in this Budget.
FERGUSON:
Treasurer, again, congratulations on the Budget and thank you very much indeed for talking to us.
CHALMERS:
Thank you, Sarah.