Sarah Ferguson:
Welcome, Treasurer, and congratulations on your highly unusual fourth Budget.
Jim Chalmers:
I appreciate it, Sarah, thanks.
Ferguson:
Now, budgets, as we know, are about choices. You’ve chosen to give every Australian worker a tax cut, spending $17 billion as we’ve heard. Why are you giving a tax cut to you and to me?
Chalmers:
This is about topping up a tax cut for every Australian taxpayer in addition to the tax cuts which are already rolling out from July last year. And so we know that they’re modest in isolation, but we think meaningful in combination with all of the tax cuts that we’ve provided and the other cost‑of‑living help that we are rolling out.
When it comes to the design of the tax cuts, in order to give a tax cut for every Australian taxpayer, the benefits are felt disproportionately to people we are encouraging into work. Younger workers, women, people on lower and middle incomes. They will proportionately be the biggest beneficiaries of these topped up tax cuts, in addition to the tax cuts already rolling out.
Ferguson:
Topped up tax cuts, but they’re still political. Have you stolen Peter Dutton’s thunder here?
Chalmers:
I see these tax cuts in economic terms, and it’s partly in recognition that even as we make this really quite remarkable progress together as Australians in the fight against inflation, we know that people are still under pressure and so we’re providing cost‑of‑living relief.
Really one of the defining features of this Budget is the cost‑of‑living relief that we’re providing. Often the best way to do that is through the tax system. So, we see it in terms of cost of living, we see it in terms of the economic benefits to participation. We found room in a pretty tight Budget to provide these tax cuts. The politics will take care of themselves.
Ferguson:
Are they fiscally responsible, though, in the environment we have?
Chalmers:
Yes, they are. And you know, there’s an appetite, obviously, and an enthusiasm often to provide bigger tax cuts. We have to provide the tax cuts we think the Budget can afford and we have to do that in the most responsible way. And that’s what’s guided us here to give as much cost‑of‑living help as we can in the most responsible way, conscious of the pressures on the Budget and also the pressures coming at us from around the world.
Ferguson:
So, put another way, the political advantage of the tax cuts, whether you want to engage with that or not, or not outweighs the, the impact on the budget.
Chalmers:
Well, I think that’s for others to determine. I genuinely believe –
Ferguson:
– but I’m here asking you.
Chalmers:
I genuinely believe that if you get the big economic decisions right, and we have overwhelmingly done that in the course of the last 3 years, I genuinely believe that politics will take care of themselves.
Obviously, I’m not oblivious to the fact that this Budget – this fourth Budget, a very rare and cherished opportunity – is being delivered on the eve of an election and it will set up a choice between Labor helping with the cost of living and Peter Dutton whose secret cuts will make Australians worse off.
Ferguson:
Just a question. Have you ruled out an inflationary impact of these tax cuts that the RBA would be looking at?
Chalmers:
A couple of things about that. First of all, obviously, I brief the Reserve Bank Governor on the Budget. I do that for every budget and every budget update. I’ve done that for the last 2 Reserve Bank Governors and I’ll do that for as long as I’m in this job. I think it’s important, so I’ve done that.
Secondly, one of the most encouraging things about this Budget is Treasury has actually brought forward its expectations for when inflation gets sustainably in the target band. And so we’ve provided this cost‑of‑living relief in a responsible way consistent with inflation lower and earlier, which is one of our key economic objectives.
Ferguson:
What about that specific question around whether or not there is an inflationary impact of these new tax cuts?
Chalmers:
We don’t believe there is for a couple of reasons. One, the timing. Secondly, there’s a participation effect here, we’re encouraging more people into the workforce, which is again one of our key objectives. But thirdly, we think we’ve got the magnitude right to provide some topped up tax relief to every Australian taxpayer, but in the most responsible way we can.
Ferguson:
Now, it is, as we are saying, of course, a pre‑election measure that sits alongside the, I think around $35 billion in pre‑election announcements that you’ve made since January. How are you going to pay for all of those promises with these tax cuts now sitting on top?
Chalmers:
First of all, a large number of those commitments that we’ve announced over the course of the last few months were already provisioned for in the mid‑year budget update –
Ferguson:
– some were, not all.
Chalmers:
Well most of them were, before tonight. The big mover obviously tonight has been the tax cuts. So, if you think about the net policy decisions in the Budget, about $35 billion. That is less than what our predecessors committed in their election Budget, point number one. Point number 2, half of that is the tax cuts, $17 billion in tax cuts. And point number 3 is $8 billion of that $35 billion was already in the MYEFO.
Ferguson:
Now you were fortunate in your previous Budgets with record windfalls, obviously – especially from the mining exports, enabling you to post surpluses. So, is what we are seeing now the true picture of your economic management with its unending long term deficits?
Chalmers:
First of all, it’s a popular misconception that the recovery in the Budget was driven entirely by commodity prices –
Ferguson:
Well, can I say largely also tax receipts, but largely by very, very large –
Chalmers:
Commodity prices played a welcome and, and significant role, as did the strength in the labour market. One of the things we should be proudest of as Australians is that we’ve got inflation down without seeing a spike in unemployment and that’s had benefits for the budget as well. We’ve been clear about that.
But what matters is when you get those revenue upgrades, what you do with them. And we unusually banked most of those revenue upgrades, without which there wouldn’t have been a surplus or a second surplus for the first time in almost 2 decades. Our predecessors spent most of those upgrades, we banked most of them and that’s why we had 2 surpluses.
Ferguson:
I think what we’re talking about now are the deficits into the future, not what your predecessors did. Let me put it to you in a different way. So, over the term of this government, you’ve overseen the largest spending as a share of the economy since the mid‑1980s, outside of crises, of course, who is going to pay for all of those commitments into the future?
Chalmers:
First of all, during COVID for understandable reasons, spending as a share of the economy was about a third of the economy. We got it all the way down below a quarter of the economy, and it’s settling a little bit higher than that, largely because of our responsibilities in the care economy and some of those unavoidable investments that we’re making as a government. Spending as a share of the economy, is settling around the kind of 26s, it was up in the 31s, it got down to the 24s, and now it’s settling slightly higher than that.
And in every Budget, whether it’s the $94 billion in savings that we found, the way we’ve banked upward revisions to revenue, the way we’ve shown spending restraint when it comes to real spending growth being half the pace of the 30‑year average. All of that comes together to make room for our commitments, whether it’s strengthening Medicare, providing cost‑of‑living help or investing in the future.
Ferguson:
Should we just give the audience the numbers again for what’s going to happen to the deficit? $42 billion next year, $35.7 the year after. It’s $179.5 billion, we’re not talking about banking surpluses, we’re talking about what you’re going to do to attack that structural position of the Budget.
Chalmers:
First of all, the budget position cumulatively is $207 billion stronger than when we came to office. And that shouldn’t be lightly dismissed. That’s actually the biggest positive turnaround in any budget in a single parliamentary term ever, in nominal terms. That’s the first point, very, very important point, often neglected.
Secondly, this year’s deficit is almost half as big as what it was when we came to office. Thirdly, if you look at the overall position, the bottom lines in this Budget, it is stronger than what it was only a few months ago in the mid year budget update. So, we’re chipping away and we’re also making sure we make a structural difference to the budget in the NDIS, aged care and interest costs.
Ferguson:
Yes. Actually, let me just ask you about NDIS, because on that particular measure, as you said, it’s been a huge pressure on the budget. Can you confirm that it’s going to hit its reduced target for growth of 8 per cent next year?
Chalmers:
We are on track for that for sure and we’re seeing some very encouraging progress. And the thing that we’re encouraged by is that we’ve been able to get the cost of the NDIS to a more sustainable growth rate, still growing quite quickly, but more sustainably, while we still meet our responsibilities to people who need and deserve the scheme.
Ferguson:
Now, there’s one other measure that people are talking about today I want to ask you about briefly, and that is the extraordinary increase in the – sorry, drop in the tobacco excise. This is a situation where the tax has caused enormous profit to bikies and criminals. A failed policy. How do you fix it?
Chalmers:
There’s 2 ways that we get tobacco excise down. One’s a good way and one’s a bad way. The good way is more people give up the darts, that’s a good thing. The bad way is more people avoid the excise, and there is a problem. I think we’ve spoken about this, maybe at this set on other occasions.
We’re investing more money in enforcement and compliance because we recognise there’s a problem here and we need to collect more of this excise because we’ve got a problem in people avoiding it.
Ferguson:
Let’s just talk about how the, how the politics of the big decisions in tonight’s Budget are going to play out politically. Obviously, we are in the teeth of an election. I think the Opposition has responded to your tax cuts. They’re calling them a cruel tax hoax.
Now, what does that tell you about how these tax cuts are going to be received? That’s strong language coming out from the Opposition straight away. Is that because you stole Peter Dutton’s thunder or are we looking at a tax hoax?
Chalmers:
That’s the first I’ve heard of it. Sounds like they’re not supporting our tax cuts. And that’s what happened last time we tried to give every Australian taxpayer a tax cut, they didn’t support that either. Peter Dutton was so angry about that, he said we should call an election to prevent those tax cuts flowing into the pockets of every Australian taxpayer –
Ferguson:
Isn’t he entitled to have a legitimate concern about you piling a tax cut on top of already a budget suffering from a structural deficit whose numbers are eye‑watering?
Chalmers:
No, we’ve done this in a very responsible way. We’re providing tax relief to every Australian taxpayer. If he doesn’t support that, he should say so.
Ferguson:
I think he’s said so.
Chalmers:
If he’s got alternatives, he should come clean. And they’ve had 3 years now and they still haven’t come up or come clean on any costed or credible or coherent economic policies. Angus Taylor’s colleagues don’t take him seriously. It is an absolute binfire of incompetence and inconsistency.
And what it means is, and as he told your colleague David Speers, Peter Dutton says there’ll be hundreds of billions of dollars of cuts, they’ve got to find $600 billion to pay for nuclear reactors, they can’t do that without coming after Medicare. That’s why they’re not coming clean on their cuts. And this week they need to come clean on their cuts because these secret cuts that Peter Dutton has in mind for Australians will make people worse off.
Ferguson:
That’s a slogan and I think what the audience wants to understand is how you intend to put policies in place that change the dynamics of the economy that we’ve heard people talking about all week. That is we are relying on tax revenue right now.
You’ve given people, you’ve given you and me $5 or $10 in our pockets. But going forward, who else is going to pay for all of these promises you’ve made if it’s not the taxpayer?
Chalmers:
The reason I think that’s an unusual question tonight, Sarah, is I’ve just laid out in lots of detail the government’s economic plan to help people with the cost of living, strengthen Medicare and make ourselves more resilient in the face of all of this global economic uncertainty.
And all we ask is that 3 years into a 3 year parliamentary term that the Opposition does the same thing to come clean on their cuts and how much worse people will be off as a consequence.
Ferguson:
Now I want to talk about the global uncertainty because during the next 3 year term if you get another term, if re‑elected, you could face an inflationary global trade war with the US, ongoing demands over Ukraine and a worsening security situation with China. With all of that uncertainty, would it have been more prudent to tighten the budget now to increase the capacity to respond to crisis?
Chalmers:
There is a dark shadow from all of this global economic uncertainty over the world’s economy and over our own economy and our budget. We’re very upfront about that in the Budget papers and in my Budget speech tonight. We do think that there is substantial risk that these escalating trade tensions mean more inflation and less growth around the world. And we wouldn’t be immune from that, but we wouldn’t be uniquely impacted.
Ferguson:
How concerned are you personally about that, about the situation, about the impact on Australia?
Chalmers:
Very concerned. And to go back to your original question, that’s why it’s so important that we have got the budget in much better condition. It’s why it’s so important that we’re rebuilding incomes and wages and household budgets and why it’s so important that we’re investing in a more resilient, more competitive economy. One of the things that’s unusual about this Budget being on the eve of an election is it still has economic reform, abolishing non‑compete clauses, a national regime for the electrical trades and it still has savings.
And that’s because we recognise the best insurance policy against all this global economic uncertainty is a more resilient economy, stronger incomes and wages for Australians and a budget in much better nick. We’ve made progress on all 3 fronts tonight, but there’s more work to do.
Ferguson:
Where is the room? Where would the money come from if you had, if you were compelled, let’s say, by circumstances to raise defence spending to 2.5 per cent of GDP?
Chalmers:
First of all, and I know you’re asking a different thing. But first of all, we are dramatically increasing spending on defence. Not as far as you just nominated, but it is a quite dramatic increase by historical standards and we’ve made the room to do that. A combination of budget repair and I mentioned the $200 billion improvement and making room for our priorities.
And in a tight Budget, the fact that we have made room to help with the cost of living and strengthen Medicare and fund this increase in defence spending, all at the same time as we’ve got this year’s deficit down, I think that augurs well for our ability to continue to make the right economic decisions for the right economic reasons. Managing this global economic uncertainty, recognising that people are still under pressure, but more than recognising that, helping people who are doing it tough.
Ferguson:
When you delivered your first Budget, you said they were hard decisions for hard times, possibly harder times now. Are you going to be able to lay out to the Australian people in this election a plan that encompasses the future, not the situation, not the cost‑of‑living crisis you’re dealing with now, but a genuine crisis in the Australian budget going forward? We’ve talked about tax, but the growing deficit up to $42 billion next year.
Chalmers:
Yeah, I mean, it hits 42 and then it starts to trail away again. It gets back near balance towards the end of the medium term. But I accept the general proposition of your question. There are structural challenges in the budget. We’ve begun to address those, NDIS, aged care, interest costs, all of those are important ways that we’re improving the structural position of the budget.
But what I laid out tonight in the government’s economic plan and in our fourth Budget was a plan to help people in the here and now with the cost of living, but also a plan for the future. Investing in green metals, for example, investing in innovation, making sure that we are an indispensable part of the global net zero transformation. These are our aspirations for the future. We have taken an intergenerational approach to our economic plan and I’ve laid that out tonight.
Ferguson:
Jim Chalmers, thank you very much indeed. And congratulations, as I said at the beginning, on that very rare fourth Budget.
Chalmers:
Thank you, Sarah.