Tom Connell:
I spoke to him a short time ago, started by asking him about the impact Cyclone Alfred has on the budget.
Jim Chalmers:
First of all, our focus, as you’d expect, is on the human cost of ex‑Tropical Cyclone Alfred and all of the other natural disasters we’ve seen in recent years. But there will be a substantial economic cost and also a cost to the budget. The $1.2 billion you refer to will be provisioned for in the Budget. It will be one of the key influences on the Budget we hand down in 8 days. But economic consequences as well, about a quarter point of growth, we think in this quarter. One of the consequences of the 12 million work hours that were lost in our economy when businesses shut down.
When it comes to inflation, the 2 things we’re monitoring very closely are the impact on fruit and veg, once we have a better handle on how the various farms and producers fared over a big geographic area during this natural disaster, and then building costs, as you rightly identify.
We’ve made a lot of progress on building and construction costs. It’s actually one of the more heartening reasons why inflation has come off substantially since we came to office. But we do expect some upward pressure here. I’ve been speaking with the insurers about their workforces, for example. They expect a little bit of upward pressure on building costs as well, but hopefully we can keep them contained because we’ve made a lot of progress together on that part of inflation and on inflation more broadly over the last couple of years.
Connell:
You saw a lot of this upfront. One of the big concerns of people ongoing in these areas is insurance. We spoke to people in southeast Queensland who said it’s just beyond them, that cost. Has seeing this upfront and talking to people made you think about whether or not there are elements or parts in Australia where insurance just isn’t going to be affordable, and is there a government role for that?
Chalmers:
Obviously it’s a key concern. We were talking a moment ago about the drivers of inflation and insurance costs is one of those drivers. And unfortunately, it does mean that some people will opt out of the insurance that they need, particularly in areas which are frequently hit and hardest hit. I’ve been in pretty regular contact with the insurers, particularly Suncorp, RACQ and some of the others, to make sure that for people who do have a policy, that they are being dealt with quickly, expeditiously, but I also know that it’s important more broadly, the system.
One of the things which hasn’t got a lot of commentary about this natural disaster is that the Cyclone Reinsurance Pool that’s managed by the federal government is an important part of dealing with what we’ve seen. It is an important backstop. It has had a little bit of an impact on premiums. We’d like it to have more of an impact on premiums, but it’s one of the things that the federal government is doing.
My colleague Stephen Jones is also doing a heap of other work, as have people like Daniel Mulino, who runs the committee process for us, to see what else could responsibly be done. But I don’t want to pretend that we have this insurance market perfectly fixed. We’ve done some meaningful things. We’re working closely with all of the stakeholders, but it is still a big driver of inflation. It still is a big concern for us.
Connell:
Yeah. The other part, inflation, of course, a big driver of that. Alright, so we’re a week and a bit from you delivering another Budget. I know expectation management is important. Do you want to just say, once and for all, is there any chance at all of another surplus?
Chalmers:
There won’t be a surplus this year, I think that’s pretty clear from the Budget we’ll hand down next week. There have been 2 surpluses for the first time in almost 2 decades. As you know, we’ve engineered the biggest ever nominal improvement in the Budget, around $200 billion. We’re paying down liberal debt. We’re saving on interest costs. We’ve made a lot of progress in the budget. And even if you think about the deficit for this year, it will still be a deficit, but it will be much, much lower than what we inherited from our predecessors. And so, we’re making progress, even where we’ve been able to.
In 2 years, we’ve been able to turn big Liberal deficits into Labor surpluses. This year we’ve been able to turn a big Liberal deficit into a smaller deficit and that will be demonstration, really, of our responsible economic management and the progress we’re making together as Australians in the Budget, but also in the economy more broadly.
Connell:
And for Australians as well, we’ve got, of course, the default market offer released on energy prices up to the highest increase, 9 per cent. Does that mean not continuing with the energy rebate, $300 energy rebate would be untenable given how much prices would go up by overall?
Chalmers:
I think when it comes to the energy bill rebate, it’s important to remember in the last year that we have data for, electricity prices went down about 25 per cent. They would have still gone down about 1.5 per cent were it not for our rebates. It shows the important role that those energy rebates have played in taking some of the edge off these power prices. The Default Market Offer that you’re asking me about is a forward‑looking thing. It reflects unreliability in the existing coal fired generator market, part of the market.
And that’s why it’s important we get more cleaner and cheaper energy into the system, and to do that in the most reliable way that we can. There are 2 things which are absolutely mad when it comes to electricity prices. One, our political opponents didn’t support energy bill rebates, so Australians would have been much worse off. Energy prices would have been higher if they had their way.
And the second bit of madness is nuclear reactors, which would leave the unreliable parts in the system for much longer while they built these reactors. And then when they were built, they would push up energy prices because they’re such an expensive form of new energy.
Connell:
But if you think of those customers in NSW, for example, facing a 9 per cent increase, could they also face the removal of that subsidy on July 1?
Chalmers:
I’m not going to pre‑empt the Budget. I think you’d understand why I wouldn’t do that. Our focus is on rolling out the cost‑of‑living relief that we’ve already budgeted for, including those energy rebates which are helping people take some of the edge off these cost‑of‑living pressures. That’s what they’re designed to do and that’s what they’ve been doing. It beggars belief that the Coalition didn’t want people to receive that bit of help.
Connell:
I know you’re short on time. Just briefly, the Coalition hinting it’s fair to say, income tax cuts in the next term. Is that something you’re looking at as well?
Chalmers:
I see Angus Taylor’s on a little tour of marginal electorates. While he’s doing that, Tom, he should tell millions of Australians that he didn’t want them to get a tax cut in the first place. As I understand it, this whole brouhaha about tax today, he’s using numbers which are calculated before our tax cuts came into place, before they came into being.
And so, he should visit every marginal seat and he should tell millions of Australians he didn’t want them to get a tax cut. He didn’t want them to get help with their electricity bills. He wants them to have lower wages. These are the reasons why Angus Taylor and Peter Dutton pose such a risk to household budgets, it’s because people would have been worse off to here, and they’ll be worse off still if they win.
When it comes to income taxes, we’ve shown that we are cutting income taxes right now from the first of July last year, a very important decision that we’re very proud of. It means average tax rates come down. It means people get a bit of tax relief that they need and deserve to deal with these cost‑of‑living pressures that they’re still confronting.
Connell:
So, given how recent that last tax cut was, is the indication they’re not coming anytime soon, the next tranche or the next move on that?
Chalmers:
I’ll say the same thing I’ve said on every other occasion, Tom, that I’m asked about this. Our focus is on the tax cuts which are rolling out right now. They’re rolling out in the economy right now. They’re helping every Australian taxpayer with a tax cut that the Liberals and Nationals didn’t want them to get, millions of Australians would have missed out. So, that’s really an important thing I think, the important role that the existing tax cuts are playing in the system.
The fact that we are nowhere near the tax to GDP cap that Angus Taylor is talking about today, the fact that they opposed these tax cuts, which would have meant people would have been worse off, that’s our focus. There are already tax cuts rolling out in the system. They’re an important part, but not the only part, of the cost‑of‑living help that we’re providing in a substantial but also responsible way.
Connell:
Treasurer Jim Chalmers, thanks for your time.
Chalmers:
Appreciate it, Tom. All the best.