Stephanie Dalzell:
Treasurer, thanks for joining us. You’ve confirmed the government will be handing down a deficit in the upcoming Budget. How bad is the Budget bottom line? What’s the number we’re talking about?
Jim Chalmers:
Oh, good afternoon, Stephanie. Well, first of all, I’ve been saying that for some months that the Budget this year is in deficit, but that deficit will be much smaller than what we inherited from Peter Dutton and Angus Taylor. It will show that we’ve made some very substantial progress cleaning up the mess that we inherited in the budget but as I’ve said on a number of occasions for some time now, those first 2 surpluses that we delivered, the first 2 surpluses back to back in almost 2 decades, they will be followed by a deficit, but the deficit will be smaller than what we were left.
Dalzell:
Treasury have put the cost of Ex‑Tropical Cyclone Alfred at $1.2 billion. What pressure will that, and disaster support more broadly, place on the Budget?
Chalmers:
Well, this will be a key influence on the Budget that we hand down in 8 days’ time. Not the only influence. The global economic uncertainty will be a big part of the story, cost‑of‑living pressures, but also the progress that we’re making getting inflation down in our own economy. These will be the main influences. But when it comes to natural disasters, we will be provisioning another $1.2 billion to respond to Ex‑Tropical Cyclone Alfred. That will take the total of assistance and rebuilding and recovery costs in the Budget from natural disasters to something like $13.5 billion.
Now, you played a grab a moment ago, grabs before from Peter Dutton and Angus Taylor. Remember when they talk about our Budget, they consider things like natural disaster funding as wasteful spending. This is the reason why they won’t come clean on the cuts that they intend to make to the budget because they pose a big risk to people including in these natural disaster affected communities.
Dalzell:
I’ll come to the Coalition’s figures in a minute. But just staying on the Budget for now, we’re expecting the second round of Trump’s tariffs next month. The impact for Australia could be huge. Not just the tariffs themselves, but the global consequences of them. How are you accounting for that in this Budget?
Chalmers:
I think you’re quite right the way you’ve summarised that in the question. There are really 2 sets of impacts on Australia when it comes to these escalating trade tensions coming out of DC, but also retaliatory tariffs from around the world. There are the direct impacts on Australia from things like a tariff on steel and aluminium, but there are also the broader economic consequences in a world where we’re seeing these escalating tensions. I’ll have a bit more to say about this tomorrow when I’m at the Queensland Media Club.
But what we’ve said before is that we have modelled these impacts on the Australian economy. We expect the immediate direct impacts to be relatively manageable. We’ve got wonderful exporters, they will diversify, they will find other markets, but the broader consequences will be much more significant. Particularly when you consider the impact of these tariffs on the big economies, the US, China, Canada, Mexico, Europe, we expect the impacts of those to be much more substantial.
Dalzell:
Just for people not as intimately involved in the Budget as you, which is probably everyone, how do you model those impacts? Is it an initial scenario of tariffs? Can you just walk us through how you’re possibly managing to model something that is just so unclear at the moment?
Chalmers:
Well, what the economists do at the Treasury, and they’re professionals, they model all kinds of scenarios and they try and forecast in the budget the best sense that they can get of the likely impacts of these sorts of policy changes out of DC, but also out of Beijing and elsewhere. And what they do is they have a look at the size of the industry that’s impacted, they look at the likely impacts on that industry, and they come up with an informed and a concluded view. So again, I’ll say a bit more about this tomorrow, but really, you’ve touched on 2 of the big influences on this Budget. We’re 8 days out now. There’ll be extra money for cyclone recovery. there will also be an attempt to quantify the economic impacts of these escalating trade tensions and between them, those 2 influences will be quite significant when it comes to the Budget.
Dalzell:
Now, we heard the Coalition before. They say the average Australian worker paid $3,500 more tax last financial year than before your government was elected. How do you plan to address bracket creep here?
Chalmers:
Well, those guys have got a lot of nerve talking about tax cuts when they tried to prevent almost 3 million people getting the tax cut that Labor is delivering and they tried to prevent 84 per cent of taxpayers getting a bigger tax cut, or 90 per cent of women taxpayers getting a bigger tax cut because of the steps that we took and implemented in the middle of last year. So if they want to talk about tax, they should explain to those millions of Australians why they didn’t want them to get a tax cut in the first place, that’s the first point I would make about that.
What we saw with our tax cuts is every single Australian taxpayer gets a tax cut because of this Albanese Labor government. It means people are earning more and keeping more of what they earn. That is one of the central objectives of our economic policy, making sure that wages are growing which is one reason why the tax take is up, but also making sure more people keep more of what they earn because of the tax cuts that our political opponents opposed.
Dalzell:
It seems like the Budget is still relying on upside revenue, on iron ore and coal. Is this economic management or is it economic luck?
Chalmers:
A couple of things about that. First of all, we’re not expecting big, significant revenue upgrades in the Budget. We’re expecting any revenue upgrades in this Budget to be smaller than in the other Budgets we delivered. But what really matters when you do get those upward revisions to revenue is this Labor government in a very responsible way has banked most of those upward revisions to revenue, our predecessors used to spend most of those upward revisions to revenue and that’s the big difference.
That’s one of the reasons why we’ve engineered the biggest improvement in the Budget in nominal terms in the history of this country, around a $200 billion improvement to the Budget. Two surpluses for the first time in almost 2 decades, we’re paying down Liberal debt, we’re saving on the interest costs on that debt as a consequence and that’s really the overarching message I would leave your viewers today, Stephanie.
People are looking for hints in the fourth Albanese government’s Budget, the hints for the fourth one are in the first 3, a Budget defined by economic responsibility, responsible economic management, making our economy more resilient in the face of all of this global economic uncertainty. Those will be the major focuses of the Budget tomorrow week.
Dalzell:
Well, if the hints are in the first 3, does that mean that in this Budget, we can expect an extension of that federal energy subsidy, giving households $300 for electricity bills this financial year? Will that continue?
Chalmers:
Look, as you’d understand, I don’t intend to announce any cost‑of‑living help that will be in the Budget next week. What we have said consistently really for some time now is where we can find an affordable and responsible way to provide some cost‑of‑living help, recognising that people are still under pressure, of course we will try and do that where we can. Again, we have done that in the first 3 Budgets, and we will try to do that again in the fourth.
The Budget is really about managing the nation’s books in the most responsible way that we can so that we can provide that cost‑of‑living relief when we can do that in an affordable way so that we can invest in building Australia’s future and so that we can continue to clean up the mess that we inherited from the Liberal and National parties.
Dalzell:
I also wanted to ask you about breaking news that we’ve had this hour that US President Donald Trump is set to call the Russian President Vladimir Putin about the war in Ukraine on Tuesday, discussing land, power plants and dividing up certain assets. Are you concerned about those words, dividing certain assets?
Chalmers:
Look, I haven’t seen those comments, I haven’t seen those stories that you say have broken in the last little while. I’ve been on video hook ups about the Budget and about other things. So I’ll go through the language that has been used here. We’ve made it very clear we support the people and the leaders of Ukraine. They have been incredibly brave and courageous in the most difficult circumstances. Vladimir Putin and Russia have been the aggressors here and we’ve made clear our position. Beyond that, I’m happy to go through the language that’s been used by President Trump and no doubt we’ll have more to say about it in due course.
Dalzell:
A Labor Party rank‑and‑file campaign to scrap the AUKUS submarine project is intensifying. Concerns are growing about the future of the US alliance under President Donald Trump. Is it time to jump ship? Pardon the pun.
Chalmers:
Oh no, I don’t believe so. And again, I’ve got the most respectful view of people who have other opinions about this, all the way from former Prime Minister Turnbull to some of the branch members that you mentioned there. Obviously, we listen respectfully when people have different views, but we don’t share those views.
AUKUS is in Australia’s national interest. It also has, in my view, big industrial and economic benefits, and we support it for those reasons, understanding that something as big and often controversial as this will attract a whole range of views right across the political spectrum.
Dalzell:
When we talk about the next round of tariffs, how concerned are you that the Pharmaceutical Benefits Scheme will become a focus for the Trump administration in this next round?
Chalmers:
That remains to be seen and I’m reluctant to speculate about that. I will say this about the PBS – this is one of the most important features of our health system. We’ve got universal Medicare, we’ve got the PBS, which means massive savings for people accessing often life‑saving drugs. And so it’s something that we’re very proud of. It’s something that we will defend, of course. That’s the position we’ve had for a very long time. Beyond that, I don’t really want to speculate about what may or may not be part of the next pronouncements that President Trump or others make out of Washington DC.
Dalzell:
Well, in terms of the current tariffs then on the table, steel and aluminium, Trade Minister Don Farrell has said he’s not sure what America wants in terms of negotiating. How do we make an offer? In that context, what can we offer?
Chalmers:
Well, there have been discussions for some time, as you would expect. We’ve all been engaged at different levels with different counterparts with the US administration. We’ve made it very clear, I think the Prime Minister was very strong in making it clear that these tariffs are not the actions of a friend. They are disappointing, they make no sense, and they are a recipe for slower growth and higher inflation wherever these tariffs apply, including in the US, so we’ve made our view very clear. But we’ve been engaging in the ways that people would expect here in Australia with our American counterparts pointing out that this is an economic relationship of mutual benefit. We have a lot to offer the United States and vice versa.
Dalzell:
Thank you. Treasurer, thank you so much for your time today. Sorry to cut you off. We really appreciate you taking the time but we’re running out of time. That’s Afternoon Briefing.