SARAH FERGUSON:
Today unemployment is at a 50 year low. But the strong employment figure may lead to more interest rate hikes adding to the cost‑of‑living crisis. Meanwhile, the IMF has released a mixed assessment of the global economy. The Treasurer, Jim Chalmers, is in Washington DC for meetings with his G20 counterparts and the International Monetary Fund. Jim Chalmers, welcome to 7.30.
JIM CHALMERS:
Thanks very much, Sarah.
FERGUSON:
Now, as I just said, we've learned that unemployment is at a near record low level. But at the same time, we're in the midst of a cost‑of‑living crisis, why is having a job not enough to secure a reasonable living in Australia?
CHALMERS:
Unemployment at three and a half per cent is a really remarkable outcome, given the global pressures that confront our own domestic economy. And what it shows is that while we have a lot coming at us from around the world, we've got a lot going for us as well. And low unemployment is one of those things that we've got going for us. But that invites its own challenges as well, we need to make sure that our employers can find the workers that they need, we want to make sure that we get that decent wages growth in the economy, which has been missing for the best part of a decade. So there's no shortage of challenges in our economy, particularly in the global economy, but having unemployment at three and a half per cent means that we enter this new period of uncertainty from a position of relative strength.
FERGUSON:
But experts are warning that the job figures might mean the Reserve Bank may raise interest rates again at its next meeting. Now that will frighten people who are under financial pressure. Is there anything you can do or say to reassure them?
CHALMERS:
There are obviously important reasons why I don't pre‑empt decisions taken independently by the Reserve Bank. And clearly when they next meet, they will factor in everything that's happening in our economy and in the global economy as well, whether it's the unemployment rate, some of the softening we've seen in consumption and retail, the softening that we're seeing in the global economy as well, they will weigh all of that up and they will take their own decision. But we certainly understand that these interest rate rises, which began before the election and continued afterwards, they do put extra pressure on people who are already under the pump. And that's why a key task of the Budget that I'll hand down in May is to provide some responsible cost‑of‑living relief, which is provided in a way that doesn't add to this inflation challenge that we've got in our economy.
FERGUSON:
Now, the IMF released a report yesterday that shows growing public debt and a structural deficit in Australia that's putting Australia into a vulnerable position. Is this the Budget where you must start seriously reining in public spending?
CHALMERS:
Two important releases from the International Monetary Fund - one which showed that the global economy is a precarious place characterised by uncertainty and volatility. And that's why these meetings in DC are so important and so well timed coming less than four weeks before our Budget because we want to align our Budget with those conditions. But when it comes to the pressures on the Budget itself, I think they are well recognised and well understood. The Budget will get a little bit better in the near term because we're getting good prices for our exports, and we've got low unemployment but the pressures on our Budget are actually intensifying rather than easing in the years ahead. That combination of the increasing borrowing costs on servicing that trillion dollars in Liberal debt combined with the cost of aged care, health care, the NDIS and national security.
FERGUSON:
I'm sorry to interrupt, but I'm going to stop you on a trillion dollars of debt because we hear that line a lot but to be clear, you inherited debt, but you also bequeathed debt to the Liberal government. I just want to say that but do carry on.
CHALMERS:
A tiny fraction of what we what we inherited almost a year ago, and the fact is - it's not a partisan point to say - that the fact is the cost of servicing that debt that we inherited is going up as interest rates go up. That's a factual point. That's actually the fastest growing area of spending in our Budget. Your question is about how we deal with this substantial structural challenge that we have in the Budget and it needs to be a combination of three things: the sort of restraint that we showed in October - banking most of the upward revisions to revenue from high commodity prices and low unemployment; also some modest but meaningful changes in the tax system - whether it's superannuation tax breaks or multinational taxes; and thirdly, trimming spending where we need to direct it to areas that require more public investment. Because what we're trying to do here, Sarah, is to carefully calibrate and align our Budget with what's going on in the world. The pressures that are coming at us from around the world that are being felt around the kitchen table, and that means striking a series of fine balances. Cost of living relief, obviously, but also budget restraint and that means trimming spending where we can.
FERGUSON:
Alright, so on that topic, have you confronted your Cabinet colleagues about the need for serious spending cuts?
CHALMERS:
Confrontation isn't necessary, Sarah, I think it's well understood right across our Cabinet, right across the parliamentary party and I think in the broader community as well. People understand that for too long, we had too much wasteful spending in the Budget, and it meant that we couldn't invest in the things that we truly value as a society, whether it's aged care, Medicare, all of these important areas of government investment. So I think that's well understood. I've been really encouraged, frankly, in the community and in the government, the level of understanding about the pressure we're under in the global economy, in our own economy, but also in the Budget. I think there is an appetite in Australia for us to try and clean up some of this mess so that we are as resilient as we can be to the sorts of international shocks we're seeing in the globe at the moment.
FERGUSON:
Let me ask you a specific question about reining in the ambitions of your colleagues’ portfolios. In particular, it puts Bill Shorten right front and centre. Is he committed to reining in the runaway costs of the NDIS estimated to be as much as $74.2 billion? It's such a large figure, it's almost hard to take it in. Is Bill Shorten prepared to rein in that spending?
CHALMERS:
I think all of my colleagues are prepared to try and do the right and responsible thing in the Budget –
FERGUSON:
What about Bill Shorten and the NDIS?
CHALMERS:
I think it's broadly understood that Bill has a very difficult job to do. We want to make sure that the substantial and important investment that we make in Australians with a disability, that we're getting value for money and that money is going to the people that need it in the system. It's no secret that the cost of that has increased substantially over recent years. It is one of the fastest growing pressures on the Budget and Bill understands that I think better than anyone.
FERGUSON:
Let me quote some of the things you've been saying and this is really a question about ambition. You said you've got plans for modest but meaningful tax reform, you need to chip away at the structural problem in the Budget. Don't you need a much more ambitious plan and program than that suggests?
CHALMERS:
We are ambitious about it but the point that I'm making is the challenges in the Budget and the economy are so substantial that you can't just fix them in one Budget or even, I believe, necessarily in one parliamentary term. You need to work away at this over a period of time, that's the approach that Katy Gallagher – the Finance Minister – and I have taken in the first Budget in October. It will be the approach that we take in May. Some of these issues that we're dealing with, including some that we've spoken about tonight are big, substantial, generational issues. There is a generation of debt in the Budget, it will take some time to deal with these sorts of pressures that we've been talking about. I'm just being upfront with people about that – you can't click your fingers in one Budget and make all of the challenges in our economy and our Budget disappear. You need to work away at it over time and that's what we're doing.
FERGUSON:
So the IMF is clearly aware of the seriousness of these issues. They called on you to expand consumption taxes, particularly the GST. Have you absolutely ruled that out in this term of government?
CHALMERS:
We have Sarah, for all of the reasons you'd be familiar with. I've been asked about this for the best part of a decade that I've been a member of the national parliament. I don't think that's the best way to go. I think there are other opportunities when it comes to multinational taxes, for example, or the changes that we're proposing in superannuation. This is the best way, I think, to make a modest but meaningful change in the tax system at the same time as we show restraint elsewhere and we trim spending elsewhere. You need to come at these challenges from a range of viewpoints, tax is only one of them.
FERGUSON:
Yes, but if you're not going to touch the GST, if you're not going to consider a deal with the states that shifts spending responsibilities towards the states, the question is – where is the revenue going to come from with all of the ambitions you have, with all of the promises you're making, where is the revenue coming from?
CHALMERS:
First of all, there is I think a really productive conversation with the states about – we've got all of these funding agreements coming up over the next 12 to 18 months, we've got an opportunity at National Cabinet and with the state and territory treasurers, there's no state or territory elections for a while now so there is a window of opportunity to have some conversations about how we fund the services that the people we represent need and deserve, so that is happening. When it comes to the GST, obviously any change to the GST, the benefits of that would flow 100 per cent to the states who get all of the GST revenue, so it wouldn't of itself repair the Commonwealth Budget. It's not a path that we are prepared to go down but we think that there are opportunities in tax, I've mentioned multinationals and superannuation - they are important places, I think, to advance an agenda that makes the Budget a bit more sustainable over time.
FERGUSON:
You say that you can't snap your fingers and no one's expecting you to do that but do you accept that if you don't start making real inroads into public spending now, you as Treasurer could run out of time to show the world that you're actually serious about dealing with these substantial structural issues?
CHALMERS:
Well, first of all, obviously I'm conscious that these jobs don't go on forever and you've got to make a difference while you're here. I think that is an important reminder and an important prompt. But let me give you one example, Sarah, I don't accept that we haven't made big progress already. In the October Budget, Katy Gallagher and I found $22 billion in savings in the Budget – the March Budget before the election found precisely $0 in savings on the expenditure side of the Budget. So we found $22 billion more in October than my predecessor found in March, that is good progress and it meant that we can have deficits a little bit smaller, debt a little bit lower and we can fund the things that our society values in some of those areas we've been talking about tonight.
FERGUSON:
Jim Chalmers, good luck on your whistle‑stop tour. I hope that audio is okay. Thank you very much for joining us.
CHALMERS:
Appreciate it, Sarah. All the best.