TOM CONNELL:
Let's return to the Budget that's been handed down of course last night by the Treasurer Jim Chalmers. He's been good enough to join me now.
Treasurer, thank you very much for your time, a very busy morning, I know. You're set to deliver a surplus. Does doing that give you a taste for wanting to make that permanent, by that I mean getting to a structural surplus in the Budget sooner than forecast, which is, what, beyond 10 years at the moment?
JIM CHALMERS:
Good morning, Tom, thanks for the opportunity to have a chat. Obviously, it's really important that we're forecasting that surplus for this year. It's a demonstration I think of our responsible economic management that we've banked so much of that upward revision to revenue, but there are still structural challenges in the Budget.
We're not getting ahead of ourselves in terms of what the future Budgets might look like, but we made really substantial progress on that structural challenge last night. We have avoided hundreds of billions of dollars in debt and therefore a lot of interest repayments on that debt.
We're proud of the progress that we made but there will always be more to do.
CONNELL:
So, the final forecast is $28 billion, that's in forward estimates, in terms of a deficit. Is that the best indicator of where the structural deficit is at right now, about $28 billion and that's the amount of hard work you've got to do?
CHALMERS:
Oh, there's a number of different ways that you can measure the structural deficit in the Budget. The structural challenges I think are pretty clear, but they have been partly addressed but not completely addressed in the Budget that we handed down last night.
If you look at the trajectory of the debt, for example, the trajectory of the deficits which are getting better compared to what they looked like in October and certainly before that, that is really substantial and welcome and important progress on the Budget position.
I think one of the defining elements of last night's Budget was how responsible and restrained we were, particularly with that upward revision to revenue, and that will pay dividends in the Budget into the medium term as well.
CONNELL:
Okay. So spending restraint you just mentioned there. Spending from this year to next year goes from 24.8 per cent of GDP up to 26.5 per cent, $51 billion more in total. That's a pretty big increase, isn't it?
CHALMERS:
Oh, the reason why it looks like that in the Budget papers, Tom, is because this year, 22/23 when the inflation challenge is at its most acute, is actually really contractionary and so you see the Budget return to a more normal structural position after this year. If you compare to the year before that, the year before that, the additional spending does not look as significant.
The other thing about next year and the spending in next year is a big proportion of that is unfunded but ongoing programs that we've had to clean up in the Budget. There's also the impact of the small business tax breaks and some of the carefully calibrated and carefully targeted cost‑of‑living package.
CONNELL:
Right. But you're still talking about significant more in spending overall whichever way you slice it when you're looking at childcare, for example, which I know was already announced but it's still new spending, the cost‑of‑living package you're spruiking as well. The only mention of inflation in the Budget and by yourself has been that CPI reduces by 0.75 per cent because of what happens on energy bills.
CHALMERS:
Yes.
CONNELL:
What about the rest of the spending? There must be a figure on what that does to inflation as well in terms of upward pressure.
CHALMERS:
Well, the Treasury advice and the commentary in the Budget papers make it really clear that the Budget that we designed, carefully calibrated and released last night will address cost‑of‑living pressures rather than add to inflation. That advice is really clear.
You're right that the combination of the measures in our energy plan are actually putting downward pressure on the inflation forecast in the Budget. That's really important. And the other measures are not expected to add to these inflationary challenges. And the reason for that is because not all of this cost‑of‑living package hits the economy at once.
The $14.6 billion cost‑of‑living package that I'm really proud of that we released last night is a four-year number. It's very carefully targeted, very carefully calibrated to help people deal with cost‑of‑living pressures without making them worse.
CONNELL:
Sure, but at the same time the people it goes to, lower income Australians, as we know, they tend to spend money when it's available. So whilst not all that $14 billion is in this financial year, billions of it is. Childcare spending is as well. I know you mentioned Treasury advice but is there a number somewhere, there must be some sort of element of upward inflationary pressure from that spending that you balance out and come out with a net effect, if you like?
CHALMERS:
That's not the Treasury's expectation that it will add to the inflation challenge in our economy. The Treasury numbers in the Budget are really clear: inflation moderates over the next couple of years, our energy plan puts additional downward pressure on that. That's clear in the Budget papers as well.
The Treasury does not expect our cost‑of‑living package to add to the inflation problem in our economy. It expects us to help people deal with some of those pressures. Yes, we're prioritising the most vulnerable people. There's help for middle Australia as well, including early childhood education as you mentioned.
But the money doesn't hit the economy at once. It's carefully designed and calibrated and targeted and that's why we feel very confident that we will help deal with this inflation challenge, not put extra pressure on it.
CONNELL:
If it does, if despite that advice inflation goes up and we have to see rate rises, would that Budget be a failure?
CHALMERS:
Oh no, of course I wouldn't see it that way, Tom. I wouldn't pre‑empt future decisions of the independent Reserve Bank, and it's not our expectation that this will put additional pressure on inflation. Inflation is moderating, it's welcome. We'd like it to moderate quicker and that's why elements of our cost‑of‑living plan like the energy relief that we are providing is such an important part of our efforts to put downward pressure on inflation. So are our investments in the supply side in the economy, so is the substantial discipline and restraint that we've shown in the Budget in banking almost all of the upward revision to revenue.
These are all important ways that we are cognisant and addressing the inflation challenge in our economy. That's why we are confident that we are helping to put downward pressure on inflation, not upward pressure on it.
CONNELL:
You've also mentioned, just finally on stage three of income tax cuts, you haven't deliberated on them at this Budget. I'm just interested in your mind‑set. In a year's time, just before these take effect, is it your position that the default is they're in there and they'll stay there as is, or will you regardless of any economic situation reassess these tax cuts and every element of them?
CHALMERS:
No, I think as you describe it, it's our default position because we haven't changed our view on that, legislated some time, as you rightly identify, it hasn't been a big part of our deliberations, it hasn't really been any part of our deliberations for this Budget. What we've tried to do instead is provide that cost‑of‑living relief, lay the foundations for future growth and do it in the most responsible way. The tax cuts don't come in for more than a year. We've got other priorities in the interim. We haven't changed our view. And in the context of this Budget we haven't discussed changing our view.
CONNELL:
Got to leave it there, I know you've got a bit on this morning. Treasurer, thanks for your time.
CHALMERS:
Appreciate it, Tom, thanks.
CONNELL:
All right, so that's the latest in terms of the Budget coverage this morning.