SARAH FERGUSON:
Treasurer, welcome to the program.
JIM CHALMERS:
Thanks very much, Sarah.
FERGUSON:
When is a broken promise, not a broken promise?
CHALMERS:
What we're proposing tonight, Sarah, is a modest but important change to the superannuation tax concessions -
FERGUSON:
I think I'm just going to jump in there because I think I asked you a straight question, and we will get to all of that, but I'd like you to answer that question first, if you would.
CHALMERS:
The point that I'm trying to make, Sarah, is that we said we weren't contemplating major changes to super and these aren't major changes. This is a modest change, but it's an important change. It's not something we were contemplating before the election, it's not something that we were contemplating in the October Budget, but it's the right thing to do to make our world‑class superannuation system, affordable and sustainable into the future.
FERGUSON:
Would you have made the change to superannuation during this term if you weren't boxed in by that election promise?
CHALMERS:
The reason that we're making this change and putting this forward is because we've got a trillion dollars of debt, we've got deficits as far as the eye can see, and the medium‑term pressures on the budget are intensifying rather than easing. So that's the necessity. But you're right that we have deliberately said that we will take this to the people. This policy doesn't start until after the election, it leaves 99 and a half per cent of people completely unaffected. And it means there are still generous tax concessions for everybody in the system, but slightly less generous for half of 1 per cent of people who have more than $3 million in their super account.
FERGUSON:
So delaying the change until after the next election gives people the chance to vote you out if they want to do that, if they don't like it. Is that the rationale?
CHALMERS:
We thought it was important that we have a lead time into the policy, and we thought it was important that we put an election between now and this change. That's something that the Cabinet agreed earlier today, it's an important design feature of what we're proposing. There are a range of reasons why this is a modest change - a $2 billion a year change when it's up and running out of $50 billion in tax concessions for super, doesn't come in for a couple of years until the other side of an election, leaves 99 and a half per cent of people aren't affected. So again, what we're proposing is pretty modest, but we think it's important in the context of all of these budget pressures that we inherited from our predecessors, it makes the superannuation tax concessions a little bit more affordable and a bit more sustainable, and in the process makes the budget a bit more responsible.
FERGUSON:
You said this wasn't in your mind during the last budget, what is it that changed because it had already been made public the size of these very large super holdings? What is it that changed after October to this decision today?
CHALMERS:
I think a recognition that the cost of servicing the trillion dollars in debt that we inherited is going up and up. The fastest growing expense in the budget right now is the interest cost, with rising interest rates, on government debt. We've also got big pressures coming from the NDIS and aged care and health care and defence as well. And so those pressures are intensifying, we're getting a near term bump in some of our revenue because we're getting good prices for our exports and unemployment has got a three in front of it, and we're seeing the beginnings of some wages growth - that's helpful to the budget this year and next year but after that the pressures on the budget are intensifying rather than easing. There are a whole bunch of programs, which haven't been funded on an ongoing basis that we have to find room for. And so what we've decided here is to make a difficult decision, but the right decision in the interests of making the budget more responsible.
FERGUSON:
Let me just understand that because a lot of people have obviously been scratching their heads about why you would bring this forward, risking the broken promise campaign ahead of the Aston byelection. Do you think that you've now largely neutralised that question, and you can focus on the inequities in the tax system?
CHALMERS:
I think certainly we're focused on the inequities in the superannuation tax system, and I've laid out all the reasons why that's the case. The timing has been chosen deliberately, so that there's a long run up, and that people can get used to the idea. I think we've made that clear through the course of today as well. But I think more broadly too - you want to talk about the politics of this decision - we will typically err on the side of frankness when it comes to these kinds of decisions. Sometimes making the right decision does come with an element of political risk, and sometimes it comes with a political cost. People will want to talk about rebuilding faith and rebuilding trust in politics, one of the ways that we do that is when we make the right call, and we're confident that we make the right call, even if the politics are contested. And we will always look for a way to strengthen our economy, to strengthen our budget, to strengthen the superannuation system. And if our opponents want to jump up and down and go to war on behalf of people with more than $3 million in their super accounts then that's a matter for them.
FERGUSON:
To be fair they're also going to war on the notion of the broken promise - your side of politics excoriated Tony Abbott for broken promises. But let's move on to what you're actually going to do with this money. Super fund chief and former Labor minister Greg Combet has suggested that part of the revenue could go to boost the superannuation balances for women and vulnerable Australians. Is that how you're thinking that some of this money could be used?
CHALMERS:
The primary reason why we're making this change is because we want to improve the structural position of the budget. That is our primary concern here - the debt and deficits that we've talked about in a couple of your questions today, but we've made it clear more broadly, including last Monday in the same speech that I gave about superannuation's objective, I said that we would like to pay the superannuation guarantee on paid parental leave. There is a problem with gender inequality in a superannuation system. And when we can afford to do that, we would like to do that. We've flagged that for some time now, including last Monday. I think that is an important aspiration when we can afford to do that we should.
FERGUSON:
Are you setting us up though for a bigger debate on equity within the tax system that includes other aspects of the taxation system, where wealthy people are able to minimise tax? Is that what you're setting us up for - further discussion on other tax minimisation methods?
CHALMERS:
Our focus is on superannuation. One of the reasons why we made this announcement today on the same day as the Tax Expenditures and Insights Statement came out is because one of the stunning features of that new data that we released today is if you line up the 10 most expensive tax concessions, they are worth about $150 billion a year, about a third of that is in the superannuation system. So we've made it pretty clear that superannuation is our priority. Again, a modest change, but a meaningful change and an important change in an area which is costing the budget a lot of money.
FERGUSON:
But within those figures that were released today, there are much bigger concessions for capital gains tax, do you think that they are sustainable?
CHALMERS:
We said today in the course of making this announcement that all of the figures we put out, we put out because we think there should be more transparency about them. Governments of both political persuasions released those kinds of statements - we've made it a bit clearer and a bit more accessible in doing so. But it's not a statement of policy, what the Treasury put out today, it's not a statement of intent. The statement of intent came with our plans for superannuation. That's our focus.
FERGUSON:
I'll put a fairly simple question to you then, though, are those concessions on capital gains tax sustainable or not?
CHALMERS:
It depends - you've got to look right across the budget. We're not saying today that we want to change those tax concessions. I think it's enough that -
FERGUSON:
You're not saying it today, but is it becoming part of the debate?
CHALMERS:
Inevitably people will put suggestions to us based on the various pressures on the budget. But what we've said today is our focus isn't there. Our focus is on the superannuation tax concessions - $50 billion a year, a third of the big 10 most expensive tax concessions. I think people understand after what we've said today, and what we've done today that that's our priority.
FERGUSON:
Notwithstanding those figures released today, as you say they contain more detail than was previously the case - more details of the foregone tax revenue and who they hit the hardest. What's the purpose of releasing that detail if it's not to provide the rationale for bigger changes to the tax system?
CHALMERS:
We want people to understand all the pressures on the budget, not just in the taxation system. I've said many times - probably you and I have spoken on your program many times - about the pressures from the NDIS and aged care and health care and defence spending and the increasing borrowing costs of servicing that trillion dollars of debt that we inherited. These are all important considerations. And what I've tried to do since I've become the Treasurer is to err on the side of frankness when it comes to the pressures on the budget. And I think we've identified today in superannuation, an area that we do want to act on. You're right to question me about the element of political risk and political consequences attached to that. But we would rather err on the side of frankness, we'd rather come up with the right decision, even when it's difficult, because we take our responsibility seriously. And that's to try to clean up the mess that we were left. That means making the budget a bit more responsible where we can.
FERGUSON:
Just to go back to precisely that list of tax concessions that are part of the paper that was released today. The biggest tax concessions in that list are for capital gains tax. So is that part of your thinking? Is that your next step?
CHALMERS:
We're not proposing to act on that. We're proposing to act on superannuation for all of the reasons that I've outlined tonight.
FERGUSON:
Let's move on to the Reserve Bank. You're opening up the Reserve Bank to applications. Why would you do that before the outcome of the review of the Reserve Bank?
CHALMERS:
Well, because we're pretty sure that's where the review is going to head. One of the good things about the review panel is they've been engaging, not just with the Government, but the Opposition and the crossbench as well. And because these appointments will be made immediately after we received the Reserve Bank Review, but we need to get the ball rolling before we receive the review, then we're anticipating the direction that they will head. We put out expressions of interest. We are serious about getting the best possible two replacements for Mark Barnaba and Wendy Craik, two terrific people, who are stepping off the board in the coming months. The expressions of interest are not an especially controversial thing, but we're pretty sure the review panel is keen on it. And that's why we did it.
FERGUSON:
But it is a change to normal practice. Is your concern that the board, the Reserve Bank Board, is too detached from the lives of ordinary Australians?
CHALMERS:
I just see no downside in casting a wide net. I do want to refresh the Reserve Bank Board and that's not a shot at Mark or Wendy or any of the board members. I think there is an opportunity to refresh the Reserve Bank Board.
FERGUSON:
What does refresh mean?
CHALMERS:
Well, put two new people on there. And in doing so making sure that we're making the best use of the available talent. There are a heap of great people who could serve with distinction on the Reserve Bank Board, we think being more open than usual is a good thing. We're pretty sure that's going to be recommended to us. But it's not an especially controversial thing. We'll find two great Reserve Bank board members. I'll confer with the Prime Minister and my Cabinet colleagues in the coming months. We'll announce them before long, there'll be great appointments, I'm sure, because we've got a good bunch of people to choose from. In issuing an EOI means that we're casting a wider net.
FERGUSON:
The Reserve Bank has one blunt instrument - the ability to manage interest rates. Should it have more subtle tools at its disposal now?
CHALMERS:
They have other tools. They have some of the regulatory tools, but their primary job is to try and get on top of inflation without crunching the economy and the monetary policy tool is the main one that they are able to use. They take those decisions independently. I focus on my job. There are some issues on the supply side of the economy, which are pushing up inflation. We've got to make sure we're providing cost‑of‑living relief where we can without adding to that inflation, showing some restraint in the budget, and making really smart investments in areas like early childhood education, which provide that cost‑of‑living relief, but also create a bigger, better trained workforce at the same time. These are the ways that governments try not to add to the pressure that people are feeling at a time when inflation is higher than we'd like for longer than we'd like.
FERGUSON:
But just on the reality of the current situation, we saw in a very powerful piece on this program last night by Alan Kohler, people struggling to pay their mortgages, struggling with rents, a fear of being evicted, people flooding into food banks, and the emergence in Australia of something like a class of working poor. My question is, is dealing with wealth inequity going to be the primary mission of your government, the government in which you serve?
CHALMERS:
Absolutely. I watched Alan Kohler's segment last night. I think it was a symbol of the pressure that people right around the country are under with these interest rate rises combined with cost‑of‑living pressures. These pressures are coming at us from around the world, but they are being felt around the kitchen tables of Australia. And I think Alan got right to the nub of it. We will see tomorrow morning when the National Accounts come out for our economy, what the impact of these rising interest rates are on the economy, but we already know that they're making life harder for more people. It's one of the reasons why people are finding it hard to make ends meet.
FERGUSON:
Treasurer. Thank you very much for coming on this evening.
CHALMERS:
Appreciate it, Sarah. Thank you.