SARAH FERGUSON:
Treasurer, welcome to 7.30. Is this your pre‑election Budget?
JIM CHALMERS:
We’re working towards a budget in March. That’s the schedule that we’ve been working to.
What Katy Gallagher and I have been doing is working on this mid‑year Budget update and the March Budget more or less simultaneously. It will be here before we know it.
But today’s mid‑year Budget update is a really responsible set of books. It reflects the progress that we’ve made. It gets the deficit down for this year a little bit, and even where there’s slippage in some of the subsequent years because of more spending on Medicare or medicines or pensions, we’ve still engineered this $200 billion positive turnaround in the Budget since we’re elected, and that means less debt for Australians to repay.
FERGUSON:
Let me just state this question of the Budget. I want to put it this way. Are you saying that if there is no Budget, if there is no Budget before the election, there’s enough information contained in this document for the voters to judge you and your economic management?
CHALMERS:
First of all, I’m not going to pre‑empt decisions that the Prime Minister takes about the timing of the election. Our expectation is that we’re going full term. The election will be in the first half of next year. We’re working towards delivering our fourth Budget towards the end of March. That’s what Katy and I have been working towards. If that’s not the case, there will be other announcements, obviously, between now and then if an election campaign is on.
But what this is is the fullest, most recent accounting of the pressures and priorities of the government. Particularly that really quite substantial progress that we’ve made cleaning up the Budget, that $200 billion turnaround means $177 billion less debt and $70 billion less interest on that there, and that means that we’ve been able to make room for these pressures and priorities which are in the Budget.
Now, you said today, if we can afford to do more, and there is a case to do more to help people with cost of living, of course, then we will consider that.
FERGUSON:
How will you know whether or not you can afford to do more. What further data do you need?
CHALMERS:
What we do in every budget, Sarah, and what we’ll do in the next budget, like in the first 3, is we’ll weigh up the economic conditions and we’ll weigh up the budget pressures and the budget constraints, and we’ll make the best decision that we can and help people as much as we can, consistent with our responsible approach to managing the budget.
That’s how we got to the cost‑of‑living relief that’s rolling out right now. We worked out what we could afford. We worked out where we could do the most good in the most responsible way. That’s the approach we’ll take in the fourth Budget, which will be the same approach as we took in the first 3.
FERGUSON:
You have a relatively modest about $5.5 billion set aside under the heading decisions taken not announced, that would suggest that only a moderate amount of additional relief is possible. Is that correct?
CHALMERS:
I caution you against drawing those kinds of conclusions.
As you know, the decisions taken but not announced line item in the budget is a permanent feature under governments of both persuasions.
As you rightly point out in your question this year, it’s a bit smaller than what it has been in other years, particularly in other pre‑election budgets.
Often it’s made up of things like decisions which have been taken but which require some kind of negotiation with the states or with others, or decisions that have been taken where there’s an element of commercial-in-confidence. It’s not all election commitments, it’s not all necessarily cost of living. It’s a range of things. What we’ve tried to be there when it comes to that particular line item in the budget is very responsible, as you rightly point out.
FERGUSON:
We’ll return to that when the election comes. But today’s figures show a large increase in government spending this financial year. Doesn’t that fly in the face of claims that the government is working with the Reserve Bank in the inflation fight?
CHALMERS:
I don’t believe so. I mean, what the Reserve Bank Governor has said publicly before is that public demand is not the main game when it comes to inflation and interest rates, and if anything, the fact that we handed down 2 surpluses in our first 2 years was helpful to the fight against inflation
Today we’ve also shown that we’ve got that deficit for this year even smaller, and it’s now almost half what we inherited when we came to office.
We’re running as tight a ship as we can. We’re obviously conscious of and focused on the fight against inflation, and in that regard, we work closely with the Governor of the Reserve Bank.
FERGUSON:
The Governor of the Reserve Bank has never said that government spending has no impact on the job that she is trying to do. Have you had discussions with her about the figures in MYEFO, particularly the very large growth in public spending under the Albanese government, under your treasurership.
CHALMERS:
I have. In fact, I asked the Treasury Secretary to run the whole Reserve Bank board through the mid‑year Budget update at the beginning of last week, and he was able to do that. Then I personally briefed the Reserve Bank Governor earlier this week. That’s not unusual in my time as treasurer. I’ve gone out of my way to make sure when we’ve got Budgets and Budget updates, that I personally brief the Reserve Bank Governor so she knows what’s coming, she knows what we’re grappling with, and knows what the various bottom lines and different aggregates are.
I took the opportunity earlier this week to do that, and that’s because I acknowledge that we’ve got the same interests and objectives here to get on top of inflation without ignoring the risks to growth. That requires us to work together where we can and briefing her on these numbers and where they’ve landed is an important part of that effort.
FERGUSON:
I wonder what she said about the level of federal spending. I’m not asking you to answer that because you’ll say you won’t disclose it, but the question goes to you. Federal spending as a share of the economy will be more than 27.2 per cent next year. How do you justify public spending at a runaway rate like that?
CHALMERS:
A couple of important points to make there.
First of all, a lot of the spending, which is in today’s mid‑year Budget update is things like the indexation of the pension, strengthening Medicare, more kids in early childhood education, and so a lot of the differences in spending are parameter variations. They are automatic, or they are genuinely unavoidable. Things like funding for natural disasters, funding to support veterans, because we’re getting more claims processed.
These are a big part of the story when it comes to the spending, when it comes to spending as a proportion of the economy we’re actually in the year that we’re in now, it’s lower than what it was anticipated to be in the Pre‑election Fiscal Outlook.
We’ve made a bit of progress there, but let’s make this broader point, Sarah, so that we don’t get into a back and forth about very specific words.
People have asked me in the course of today, should we have and could we have cut harder in the Budget?
The answer to that is we could have, but we shouldn’t have, and that’s because the economy is quite soft and people are under very substantial pressure.
We’ve made a huge effort, and we’ve made substantial progress turning the Budget around. It is hundreds of billions of dollars stronger than what we inherited, but we have to strike a series of fine balances here, which recognise that inflation is the primary target of our economic policy but we can’t ignore the risks to growth. We can’t ignore the fact that people are under pressure, and now would be the worst time to slash and burn when it comes to things like Medicare or pensions and payments, all of these sorts of things which are so important, but especially when people are doing it tough and the economy soft.
FERGUSON:
The way that you present this, it’s as if it’s a choice between what you have presented here and a slash and burn or austerity government, which you say the opposition wants to bring in, but spending growth is forecast to rise from 2.9 per cent last year to 5.7 per cent. You say, stay away from the figures, but those figures tell a very clear story about the decisions of your government. So again, I come back to the question, how do you justify an increase of $58.3 billion dollars.
CHALMERS:
Partly it goes back to the unavoidable and automatic changes in spending. That’s part of the story.
It’s also partly about the fact that we were able to restrain spending so substantially last year. You’re making a comparison between one year and another year. But if we want to talk about numbers. Think about it this way, Sarah. the net policy decisions in this Budget, the net spending in this Budget update I handed down today with Katy Gallagher, was 17 and a half billion dollars. In the last coalition Budget, it was about $39 billion in the mid‑year Budget update. Before that, it was about $45 billion and they had no savings in their last Budget, and we found almost $15 billion of savings in this Budget.
We have shown restraint. We have found savings. We have banked in our time in office, upward revisions to revenue, and that’s why we had those 2 surpluses in the first 2 years. It’s why we’ve got the smaller deficit in this year, and that’s how we’ve got the Budget in much better condition at the same time as we’ve rolled out cost‑of‑living help and investing in the future, not instead of rolling out cost‑of‑living help and investing in the future.
FERGUSON:
Let me put the question in a different in a different way, because as you know, as you announced today, we are, as you presented, the document today contains deficits, as far as the eye can see to use common the common parlance. This is my question, do you have difficulty saying no to your ambitious colleagues?
CHALMERS:
No, unfortunately, it comes with the territory. Katy and I frequently explain to our colleagues that they have more good ideas than we can afford to fund.
We’ve been very serious about responsible economic management and budget discipline. We fund a fraction of the good ideas that are put to us in the Expenditure Review Committee, and there we have a very effective and willing partner in the Prime Minister, Anthony Albanese.
We work together very closely to get the Budget in as good a shape as we can at the same time as we fund the pressures and priorities which are most important to us. Inevitably, that means saying no from time to time. Our colleagues, I think, understand that as well.
FERGUSON:
What is your message then to the Australian people that you will face in an election next year about your efforts to deal with these structural problems in the Budget that has very large deficits into the future?
CHALMERS:
Firstly, we’ve made a lot of progress when it comes to repairing the Budget that we inherited, but we need more than a term to finish the job, because to our $200 billion turnaround is the biggest ever on record in nominal terms, but we know that there’s still debt in the Budget. There are still pressures on the Budget that we need to manage, and so we’ve been very, very upfront about that.
If you read the commentary, Sarah, you’ll see that the same people who wanted to give us no credit at all for the surpluses now want to give us all of the blame for the deficits. I say to all of your viewers, and I say to the Australian people, I take responsibility for all of it.
I take responsibility for the balances that we’ve struck.
I take responsibility for the pressures and priorities that we have accommodated.
And I take responsibility for making sure that as we go about fighting inflation, we don’t forget our responsibilities to people, and we don’t forget the significant risks that exist in our economy.
You asked me before about slash and burn, the free advice that we get about cutting much harder in the Budget is given to us for political reasons, not economic reasons. Because the growth in the economy is so soft and people are under such substantial pressure that the balance that we have struck is the right one, and not because we’ve chosen between cost‑of‑living relief and investing in the future or getting the Budget in better nick. We’ve managed to do all 3, 3 things at once, but we’ve done it in a considered and a methodical and a sequenced way, because we recognise those responsibilities to people who are doing it tough right now.
FERGUSON:
How does responsibility fit with a vista future deficits? How do those 2 things go together?
CHALMERS:
First of all, the medium term projections in the mid‑year Budget update. They actually do have the Budget coming back to surplus at the end of the medium term period. I do acknowledge that there are substantial deficits in the meantime. The deficit peaks next year and then starts to get back to more manageable levels. That’s important, but I acknowledge that there is still debt in the Budget.
Our debt position is better than other countries around the world. It’s much better than what we inherited, but we’ve got more work to do. We’re up front about that.
But as we go about managing that debt down and avoiding that debt interest, I say the same thing I said a moment ago. You have to do that in a responsible way. Responsible economic management is not just cutting as hard as you can, as frequently as you can. It’s about striking those well informed, well intentioned balances in the Budget, recognising that inflation is the primary challenge in our Budget, in our economy right now, but not the only one.
We’ve got risks to growth as well. We want to maintain the gains that we’ve made in the labour market, and so managing those balances and striking those right balances, that’s really what responsible economic management is all about, and that’s been a hallmark of this Albanese Labor government.
FERGUSON:
And just finally, what did the Reserve Bank say about the risks of the numbers of the Budget that you presented today?
CHALMERS:
As you rightly anticipated a moment ago, I’m not going to put words in the Governor’s mouth. We had these good private conversations. Actually, quite frequently we compare notes about the budget and the economy, but I refer your viewers to what Governor Bullock has said publicly.
First of all, public demand’s not the main game.
Secondly, the surpluses have helped her in the fight against inflation.
And also, we’ve both recognised in different ways and explained this and described it in different ways, we’ve got the same objective and interests here, getting on top of inflation without ignoring the risks to growth.
We’ve got different responsibilities, and one of my responsibilities is to make sure that we can fund pressures in areas like Medicare, medicines and pensions.
So we’ve got a different set of responsibilities. I’m discharging mine in the most responsible way that I can. I take responsibility for the decisions that we are taking in the Budget. And what we saw in the mid‑year update is we’re making really quite substantial progress striking all of those effective balances.
Treasurer Jim Chalmers, thank you very much indeed for joining us.
CHALMERS:
Thanks very much, Sarah. Merry Christmas.