Sarah Ferguson:
The Australian economy barely grew in the first 3 months of this year. That’s according to new data out today from the Australian Bureau of Statistics. Australia’s sluggish growth presents a challenge to Treasurer Jim Chalmers. European‑based Organisation for Economic Co‑operation and Development or OECD also produced figures overnight that pointed to a lack of business investment in Australia. The Treasurer joined me earlier.
Jim Chalmers, welcome to 7.30.
Jim Chalmers:
Thanks very much, Sarah.
Ferguson:
This is the first time we’ve seen you since the election, so beginning your second term as Treasurer.
Unemployment is down. Inflation is back in target, but government spending is the highest it’s been in 4 decades, productivity is low, business investment is low. How does that reflect on your economic management?
Chalmers:
The Australian economy has got a lot going for it, low unemployment, as you pointed out, inflation is much lower than it was in recent years, real wages and incomes, including in today’s National Accounts, are growing again, interest rates coming down, debt’s down, and we’ve seen growth in the economy as well, including in today’s figures.
The Australian economy is growing slowly, but we’ve achieved something that major advanced economies have been unable to achieve, which is that combination across unemployment in the low fours, inflation lower than 2.5 per cent, and 3 years of continuous economic growth.
Ferguson:
Now, you just mentioned that there is some growth in today’s figures, but it’s a tiny amount of growth in the economy. You said yourself earlier today our economy is not productive enough. What responsibility do you take for that?
Chalmers:
I take responsibility for doing what we can to turn that around over time.
First of all, when it comes to economic growth, I think even modest growth in these global economic circumstances is welcome, but we do have a number of related challenges. We’ve got global economic uncertainty, our economy is not productive enough, and we need to make the budget more sustainable over time as well. So I take responsibility for my part of addressing those major challenges that we have in the economy in this second term.
Ferguson:
Now, the OECD is forecasting an upgrade in growth next year in their figures that came out overnight. But it also says that business investment is 30 per cent weaker than it should be. Is it time to consider bigger tax incentives and fewer regulations to encourage investment in Australia?
Chalmers:
We’re certainly up for a conversation about how we attract more investment and how we make our economy more productive over time. We’ve made that really clear that those are central priorities in this second term of the Albanese government. I was speaking to major American investors just this morning about some of those goals.
Now we’ve already put in place some changes, some economic reforms, which are about attracting more investment, the Single Front door for major investments, the foreign investment reforms that I’ve put in place, but we’ve got an open door and an open mind when it comes to other suggestions around cutting red tape, making our economy, our businesses, our industries more competitive.
There’s this big global scramble going on for capital in the context of all of this global economic uncertainty, all these escalating trade tensions and Australia has a really compelling story to tell when it comes to competing for that investment, and we want to work with anyone who shares our objectives, which is to attract more of it so we can get deeper pools of capital working in the interests of Australian workers and industries.
Ferguson:
I want you to be a bit more specific because we’ve heard you talk around the generalities of productivity before. Today you said you were prepared to contemplate additional steps to attract investment. Apart from red tape, what are those additional steps?
Chalmers:
First of all, let’s not dismiss the deregulation agenda. It’s part of making our economy more competitive, more productive. I’ve got a whole National Competition Policy agenda that I’m rolling out with the states, and unilaterally I’ve abolished 500 nuisance tariffs, I’ve got a National Productivity Fund with the states and territories.
We’re strengthening and streamlining regulation, but I made it clear today, and I meant it, and I’m happy to say again on your show tonight, Sarah, that we do genuinely have an open mind to making our economy more efficient, more competitive, more productive, more dynamic. Competition policy and deregulation is an important part of that, but there are other specifics too.
Clearly, artificial intelligence, the technological transformation, will be a big part of making our economy more productive. Clearly, we need to pay attention to the care economy. Clearly, there’s a role for human capital which is better at adapting and adopting technology as it evolves.
Clearly, the energy transformation will be absolutely central to getting our costs down and making our economy more productive. So we’ve got a big, ambitious agenda. We’ve already started rolling it out, but we’ve also already started consulting with our industries and with others, including international investors.
We think that there’s a big chance for Australia here, even in a world which is increasingly defined by churn and change. The global economy is in some ways a dangerous place. Australia has got a very, very compelling offer that we make to the world. There is a global scramble for capital that requires us to be as competitive and as productive as we can be, and that’s really central to my ambitions, my aspirations, my objectives for this second term of the government.
Ferguson:
Now, the OECD also wants to see urgent budget repair. You referred to the sustainability of the budget. One small element of that – not so small but nonetheless given the size of the challenges – are your proposed changes to the taxation of very large superannuation balances. Have you spoken at all to the Opposition about what it would take to secure their support to pass these changes?
Chalmers:
Obviously I’ve seen the comments that they’ve been making publicly, including, I think my opposite number said today that they weren’t interested in negotiating. He’s disagreed with himself. He had a different view yesterday or the day before.
Look, we’ve said, obviously, in a Senate where we don’t have the numbers, our job is to engage, whether it’s the cross bench or the Opposition, to try to pass our legislation. I’m not convinced that they’re fair dinkum when it comes to making superannuation tax concessions a little bit fairer, and I think my opposite number has made that clear that they’re not interested in that.
We’ll obviously have discussions with other parties in the Senate to do what we can to pass that legislation. It’s a change that we announced almost 2 and a half years ago. It’s modest, it’s methodical, but it makes a meaningful difference to the budget.
In a world where the budget is not sustainable enough when it comes to the pressures that come from the aging of our population, pressures on the health system, the NDIS and all the rest of it, it’s an important budget repair measure, and we intend to proceed with it.
Ferguson:
One of the problems with this debate is a phoney war we’re in at the moment, because we’re not in the middle of negotiations but there’s a lot of media coverage of this at the moment, is for people to understand exactly what’s at stake here. The key criticism from the Opposition is that you intend to tax what are called unrealised gains in the superannuation system. Could you explain briefly what that is?
Chalmers:
First of all, this change is about making sure that people with very large superannuation balances higher than $3 million, which is only about half a per cent of people in the superannuation system, that they still get concessional tax arrangements for their large superannuation balances, but a little bit less concessional.
The best way to think about that is, if you’ve got $3 million in super before this change your tax concession is about $14,000, after this change it’s about $13,000 worth of tax advantages. So a modest change, but a meaningful change when it comes to the budget.
The part that some of the commentary and our political opponents have latched onto is the calculation of those earnings, just the earnings above the $3 million. Unrealised capital gains, the calculation that we are proposing is the method proposed by the Treasury when we announced this change years ago.
We’ve done multiple rounds of consultation seeking views if people have got better ways to go about calculating this liability, and nobody has come forward with a better idea than what the Treasury has proposed to us. This calculation of unrealised gains exists elsewhere in the tax system. It actually exists elsewhere in the superannuation system as well.
I know that some people don’t like it. I’m obviously aware of the campaign that some of our political opponents and others have been running, but nobody’s come forward with a better way to do it, and so we’re proposing to go with what the Treasury has recommended to us.
Ferguson:
Jim Chalmers, thank you very much indeed for joining us.
Chalmers:
Thanks Sarah.