Tom McIlroy:
Jim Chalmers, welcome back to the podcast.
Jim Chalmers:
Thanks for having me back, Tom.
McIlroy:
It’s great to have you, especially in Budget week.
Patrick Commins:
Yeah, it’s really good to have you here to talk through what has been really one of the most consequential and important budgets that we’ve seen for a long time. I know you would agree with that. One of the things about the Budget is it’s been framed around into generational fairness. That was really at the core of it. I was looking at some analysis today from the ANU which modelled the impact for all the changes, tax changes, brought them forward to one year to see how the distributional impact goes. Sorry to ambush you with this, but the idea –
Chalmers:
That’s okay, is it the Ben Phillips stuff?
Commins:
Yeah. That’s exactly it.
Chalmers:
Yes, he’s done that every budget.
Commins:
Yeah, that’s right. He finds, as you would expect, you know, it’s clear that younger people, lower income households are getting, you know, the lion’s share of the benefits and the opposite at the other end. So, you know, it’s what’s on the tin, essentially.
One of the things that does show is that it’s not a major impact, I suppose. It’s going in the right direction, but it’s not transformative in and of itself. And I’m just wondering how you think about that in terms of the Budget, and maybe around your longer‑term policy goals?
Chalmers:
I’ve had a look at that research for the other budgets, but I haven’t seen that one yet from Ben for this Budget, so I’ll check that out. But really, one of the big principles in this Budget is to try and better align the way that we tax people who work with people who earn their income in other legitimate ways. That’s really one of the organising principles that sits underneath the tax reform package in the Budget and it’s got intergenerational motivations to it as well.
We’ve spoken in different engagements, all of us, Tom and Patrick and I, about these intergenerational concerns that people have, which we share, I share. In this Budget we’re trying to not just observe them, but act on them. That’s because it’s increasingly clear to us that we can’t have this idea of intergenerational fairness or aspiration or ambition or opportunity, we can’t admire that in the rear‑view mirror. We have to make the necessary changes so that those things that we love about being Australian are part of our future and not just part of our past.
Commins:
Yeah, I mean, you talked about the hard road of reform in your Budget night speech. Is it fair to say that we’re just at the beginning of that road?
Chalmers:
No, I think there’s been substantial reform through the 4 years of the government. The sense I was trying to give in, not just the Budget night speech but the speech the next day at the National Press Club, which is often more useful to give you a sense of the sorts of things we’re grappling with, is that the pace of change has accelerated, the pace of reform has accelerated in this Budget. I think that’s self‑evident.
But we weren’t going from a standing start. The tax cuts, we had a bunch of tax cuts in the system already, a lot of energy market reform. It’s a reforming government, it’s an ambitious government. But this Budget was an especially reforming, especially ambitious budget. I think if you compare it even to budgets going back decades, I think most people, whether they concluding that now or at some future point, I think people will look at this as an especially ambitious budget.
Commins:
Part of that analysis as well that Ben’s done from the ANU, you’ll have to take my word on it –
Chalmers:
I believe you. You’ve never really let me down before, Pat.
Commins:
Even though it’s clear at the top end, bottom end, older, younger, kind of how this distributional and the progressivity in the changes, it’s quite interesting around the middle. Again, not a massive change, but around the middle of the income, middle age, there’s not much in there for the kind of the middle part of these distributions. I’m just interested in terms of the working age tax offset. You’ve talked about that as a down payment and I wonder how you think about this kind of missing middle, I suppose, in this tax package?
Chalmers:
We’ve been very focused on that challenge, recognising that really all 5 of our tax cuts now have got benefits for middle Australia. We speak in our own decision making forums quite explicitly about what does this mean for the middle. Some elements of this tax reform package obviously disproportionately benefit younger people, people on lower incomes, obviously people on the highest incomes have often got the most assets which are accessing some of these arrangements. So, I think if that’s the conclusion that Ben has reached, I’ve got no reason to doubt Ben or you, if that’s the conclusion he’s reached. But I think overall, looking across the government, middle Australia has really been the major focus.
McIlroy:
75,000 new homeowners over a decade. It’s quite a low number in a context of a country as big as Australia. Could we have been more ambitious here?
Chalmers:
Well, a couple of things about that, Tom. I’ve heard that put to me. 75,000 is not a small – not in my view – a small number. These are people who, absent these changes, would be locked out of the housing market. It’s a much bigger number than nothing. There will be a lot of people who say we should go harder and further. I accept that too. Some people just want to go to the wall to defend the status quo. Some people will always want us to do more. I welcome the push and pull of that.
We are a government which welcomes people teasing these things out in the public domain. But what we’ve had to do is to make sure that we recognise and respect some decisions that people have taken in the past under the old arrangements. So when people say we should have gone harder, really, that’s typically code for not being quite as accommodating of the decisions that people have already taken. But from the PM down, really in every element of this decision making, we’ve tried to be forward looking rather than backward looking when it comes to the changes.
McIlroy:
One issue that some of our listeners and our readers at The Guardian will have been frustrated with in this Budget is the lack of changes to tax settings for gas exports. I know the government’s heard that criticism given that Treasury was asked to look at this issue, look at the PRRT. Was that a missed opportunity absent the crisis, could you have done that?
Chalmers:
I think it’s on the public record that governments consider all kinds of different options in this area. I reformed the PRRT in the first term. That actually was relatively difficult, but we got an outcome there. It meant a bit more revenue, a bit sooner. Again, I recognise that there’s really quite strong views from a lot of people on social media, I’m sure in the comments section of your news site, people who want us to go further and some people want us to go much further. I acknowledge that and I understand their arguments.
The point that I would make and the priority that the government settled on was really there is a good reason to prioritise these 2‑way supply arrangements with our trading partners, particularly the big Asian refiners. That had to be a big priority when we’re all chasing barrels trying to keep the country moving during a major historic global oil shock. So, there’s good reasons to prioritise that.
Similarly, when it comes to that big gas reservation policy that we announced the Thursday before Budget, that’s a very, very big reform. It decouples the Australian market from the rollercoaster of international prices, including during crises. We think those 2 things together, our efforts to get more fuel combined with the big change we’re making in gas reservation, I think that’s more than enough for the time being.
McIlroy:
Perhaps looking a little bit longer term in that case, are changes to gas export tax settings off the table permanently? Obviously, there’s a bit of a debate at the moment about things that have previously been ruled out but have come back in different circumstances.
Chalmers:
Obviously I’m conscious of that. When we took the decision not to do this in the Budget, to focus on those other 2 areas we’ve been talking about, we didn’t decide then that we’d kind of come back to it at some future point. So it’s not, you know, I’m not writing the next budget 2 or 3 days after the getting the last one out the door –
McIlroy:
Even for you, that might be ambitious.
Chalmers:
We start thinking about the next one, but we haven’t really started working on it. But I guess the point I’m making is it’s not something that we are anticipating, but any government will consider its options from budget to budget really.
McIlroy:
I think the inquiry that happened before the Budget, some of the Labor senators supported a review after the fuel shock has passed and that could be some way off yet. Obviously we saw some worst case scenarios in the Budget if it continues or gets worse. Would you be interested in that? Once this crisis has passed.
Chalmers:
We paid pretty close attention to the committee and we did a big review in the first term. Actually, to be honest and to give him his due, my predecessor, Josh Frydenberg, set up a review which got handed to me once I took over from Josh. So that led to those reforms that we made in the first term. We did a big review then and we worked through the recommendations and that was tougher than people remember to land some of those changes.
The other thing which is relevant here, and again I don’t want to trigger people who’ve got a very strong view about collecting much more revenue, but there’s about $1.6 billion extra in the Budget, upward revisions to the PRRT. So, we’re collecting a bit more. Again, I know a lot of people would like us to collect much more, but we’re collecting a bit more in the Budget. We’ve got those reforms in place and we’ve got these other priorities for the time being.
Commins:
You mentioned the historic oil shock that’s happening that we’ve kind of temporarily forgotten about. I’m sure you haven’t, but in the news it doesn’t seem to be in the headlines so much –
Chalmers:
There hasn’t been a 5‑minute period in the last few months that I haven’t thought about it, Pat.
Commins:
All right, well, I can’t catch you there. But you know, in the Budget, obviously it had some quite scary forecasts for what it might mean for the economy if things get worse, if oil prices keep going up. Tallking about inflation going to 7 per cent, unemployment going up, maybe even the economy shrinking for a quarter. I mean, when you think about the likelihood of that, how do you describe the chance of that happening? How are you thinking about it in your head?
Chalmers:
I’m pleased you asked me about that, because what we tried to do in the Budget, and I’m grateful to the Treasury colleagues for the way that they facilitated this. When we make decisions about budgets or even day‑to‑day governing, like a lot of organisations, we always have a range of scenarios and a range of contingencies. Really the story of the last couple of months, in the context of the Budget more broadly too, is to understand the range of possibilities and to work out what are our series of contingencies if we get the worst case, the middle case, or if things pick up.
We’ve spent a mountain of time on that. So, what we decided and I hope people understand our motivations here, is to say why don’t we present a downside scenario in the Budget? You’ve read a heap of budgets, you both have over the years, and so you know that usually just there’s a central case and then later on there’s a kind of a statement of risks. We thought why don’t we tell people what we think is at the darker end, the darker scenario, realistically dark. So, we’ve put that in the Budget.
There’s a couple of reasons why that matters. First of all, to give people a sense of, even if the war ended today, we still think the consequences would roll out in our economy for a while. I think you understand that. But maybe people would think the day after the war, the Strait reopens all, the infrastructure’s fine, ready to go, global economy gets the show back on the road. We don’t think that will. So, we’re trying to manage people’s expectations on that front.
But there’s another reason I’m pleased we put that in there and it goes to these deeper questions around reform. Any government looking at the range of scenarios that we’re looking at had every reason, every excuse, frankly, to look at some of these bigger issues that we’ve taken on and to say we will do them another day or we’ll leave them for a subsequent government. There is plenty of excuses in the global environment for us to leave a lot of this stuff unattended. Personally, one of the things I’m proudest of about the Budget is we did the near‑term crisis management, which is familiar to us. Five big shocks in 2 decades.
This crisis management function of a government is very familiar to Australians and familiar to me. But we didn’t see that as a reason to say all of this other stuff that we might consider, let’s kick the can down the road. I’m actually quite proud of that. To mix the metaphors, we did grasp the tax reform nettle in this Budget and we acted with urgency, even though we had all of these other issues playing out in our economy as well. I’m personally quite grateful to the PM and the colleagues for the ability to do that in this Budget.
Commins:
I mean, the fact that the scenario is even in there means that it’s distinct possibility. I mean, it’s not expected, but it’s there, right?
Chalmers:
Yeah, it can happen, sure. We talk about realistically dark. So, when we commission different scenarios, the central case is obviously the Budget, which is difficult enough. Inflation peaking around 5 per cent in the middle of the year, growth coming off a bit slightly higher, unemployment. That’s already a serious economic shock by our standards, but it could be much more severe. When we commission these scenarios, we talk about giving people a sense of what is a realistically dark scenario. And in a world where we got to that kind of outcome, then we have prepared as any diligent government would a whole bunch of, effectively, decision making trees about how we’d respond.
Commins:
The NDIS and the changes to it. I mean, I don’t know how you would describe them, I’ll leave it to you to describe them. But in terms of trying to pull back the spending that your colleagues are doing as, you know, part of a really valuable but increasingly expensive and perhaps unsustainable program. Unsustainable is probably the word. But how fundamental is getting control of the NDIS and how fundamental is that to the Budget in terms of the longer‑term budget settings? To also do your longer‑term kind of policy outlook, I suppose, how fundamental is the NDIS in getting it back under control?
Chalmers:
All of those things in your question are key to our considerations. The first point, the most important point, is if you love the NDIS like we do and cherish it like we do, then and we have to save it. If you cherish it like we do, you understand it can’t keep growing like it was. And again Mark Butler, Jenny McAllister, Katy Gallagher, the Expenditure Review Committee, there’s a whole bunch of people working on this for a really long time and that’s because we believe in it. But we understand it’s gotta be sustainable and so very ambitious package and not kind of nips and tucks, but a genuine reform. It’s actually a genuine economic reform.
What we’re doing with the NDIS, when we think about the incentives and all of the rest of it of the Budget, a big part of our reform effort – because we released it a couple of weeks before the Budget, I think it’s kind of been a little bit forgotten how central it is. But if you look at those longer‑term or, sorry, medium‑term projections in the Budget, you would know Pat and Tom, that it’s on page 91 of Budget Paper 1.
McIlroy:
Of course, yeah.
Chalmers:
You’ve got that tabbed up over there. There’s a chart on there and what the chart says is that over the next 10 years we’re going to get the budget into balance. And people assume wrongly that that’s because of the tax changes by the end of that medium‑term period. Actually 3 times the improvement comes from spending restraint and savings and reform on the spending side of the budget, not the tax side of the budget. The NDIS is a big part of that – very, very big and important part of that.
McIlroy:
I think even people like Paul Kelly have praised the government for taking on that reform challenge and describing it as a serious effort, especially on something so important to Labor.
Chalmers:
Yeah.
McIlroy:
In the speech at the Press Club on Wednesday, you talked about challenges coming at the government. I think you said, from Farage to Farrer. Talk to us a little bit about that. Are the measures that you’ve outlined, these big reforms, these changes, are they enough to push back on those right‑wing forces? Those populist forces coming at the political system?
Chalmers:
Your listeners won’t see me smiling, but we were just talking before we went on air about our love for alliteration and so –
Commins:
Our love?
Chalmers:
Yeah, our love. When I say our love I mean my love for alliteration. So, Farage to Farrer, really what I’m trying to say there – and again, I really value that Press Club opportunity, the day after the Budget, it’s probably my favourite hit out because I like talking to you about what sits under the Budget. In the Budget night speech, you have to go through all of the numbers and all of the constituent parts of the Budget and I like that too. But the next day, and what I was trying to say at the very end of that speech, is to say that as a serious governing party, then we have to take seriously, not dismiss or deny the very, very real concerns that people have about becoming disconnected from the opportunities of an economy like ours, or worse than that, becoming kind of disregarded.
I think about this a lot. The Budget is not a political strategy, but it is an economic plan which, at least in part, responds to what we think are very real anxieties that people have. Very, very real anxieties that people have. It’s forcing some people to consider political alternatives and we have to be upfront about that. So, the other thing I said in that part of the speech was to say we are the last one standing in the sensible centre of Australian politics, but we’re not standing still. What I mean by that is while our political opponents are off chasing One Nation voters and the like, we’re trying to work through serious issues in a considered, methodical way. But that doesn’t mean standing still, being a stationary target for people’s legitimate concerns.
A lot of what’s in the Budget is about recognising people’s legitimate concerns and anxieties about where they fit in the place. If governing is anything, it’s about finding a place for more people in a story of Australian success, which is forward looking and not backward looking. It comes back to all these really hard decisions that we took, because it would have been much, much easier – I would have had a much easier week – it would have been much easier if we’d understood that there are these challenges here; people getting locked out of the housing market, the imbalance between assets and labour in the tax system. It would have been easier just to muddle through and pretend that those problems didn’t exist. But some of these challenges are driving this fear of being disconnected and disregarded.
So, I think dealing with those things transcends the political conjecture about the difference between our view now and the view that we took to the election, and all of these other sorts of things. I think more important than any of that is this sense that when you look around the world, we are at risk of what we’re seeing in other places and that is this proper fracturing, and that has an economic element to it. The Budget’s an economic strategy, but I think if you want to apply it to the kind of political atmospherics of the day, it’s really trying to address these concerns that people have.
McIlroy:
Let me just test one of the things that some people in the cohort that you’re describing are putting forward, and it’s here in the parliament as well. Wouldn’t effective planning for how the country operates, based on number of houses available, number of people coming into the country – some kind of nexus there – wouldn’t that make sense?
Chalmers:
I don’t think so. I don’t think, to be real with you, I don’t think Angus Taylor is trying to make it hang together as a policy. I think he’s trying to make people angrier. I think he’s trying to be divisive. When we look around the world, we want to avoid the kind of divisive politics we’re seeing in other places. When Angus Taylor looks around the world, he wants to copy. He sees that as a model, we see that as a warning sign. Which is disappointing.
I know you don’t want a big kind of partisan rant from me today, having just come from Question Time. You don’t want to rerun a Question Time, but that’s my fear. The difference is we’ve got a plan which is about trying to strengthen the economy and I think he’s got a ploy to try and stave off One Nation. I think all of the decisions that he makes are more or less about the internal politics of the right, increasingly the far right in Australia. Some of these things that he is proposing also forget that net overseas migration’s come down considerably, come down 45 per cent since its peak. We’ve got commencements on building coming up and all the rest of it. So I don’t think he’s engaging in those issues in an economic way. I think he’s got a political strategy where he’s facing almost entirely towards One Nation rather than trying to come up with proper solutions.
McIlroy:
Alright, I’m hogging the questions a bit, but I’m going to ask you another one. You said this weekend in an interview that you’d be happy if you were the Treasurer at the end of this government. I put it to you that that’s not really true.
Chalmers:
It is true.
McIlroy:
Really?
Chalmers:
It is true. I’ve run out of different ways to say it but I mean it, because I like. One of the things I like about this government, this Prime Minister, this job is – and we’ve seen it in other governments and we’ve seen it in other times – we don’t spend all of our time looking over our shoulder at each other. I love this job and I love it because it’s difficult. I’m not looking for a more difficult opportunity. I’m not bored. It’s an extraordinary job.
I genuinely, genuinely, nothing would make me happier than to be a good reforming Treasurer in a long‑term Labor government led by Anthony. I genuinely think people have had enough of the prioritising of internal politics over big national solutions and big national economic reform. So, you read stuff about treasurers and prime ministers all the time, but one of the things that I’m really grateful for – really, really grateful for and I’ll never forget – is the way that Anthony has empowered us to make some big difficult reforms in this Budget. I’m extraordinarily grateful for that. I tell him that privately and I’m happy to say that publicly.
Commins:
You convinced, Tim? Tom. Sorry, I just called him Tim, let’s keep that in there. You convinced, Tom?
Chalmers:
Tom looks convinced.
McIlroy:
No, I’m not sure I am convinced and perhaps I’ll ask him in a different way. Do you think Anthony Albanese will be the Prime Minister at the end of this government? Wouldn’t a transition at some stage be expected given you’re going to be a long‑term government on the current numbers, given people have been around a long time, given that transitions usually happen?
Chalmers:
Well, I do think he’ll be the Prime Minister at the end of the government. I don’t know when the end of the government will be and I get really jumpy, as you can probably see in my face, when people make presumptions about the outcomes of future elections. I get super jumpy.
McIlroy:
That’s smart. That’s smart, I accept that.
Chalmers:
My view, my plan, my hope is that I hand down the Budget in 2027. That we get all of this through and we hand down a budget in 2027, and then after that the timing of the next election is in the hands of the PM. The outcome of the next election is in the hands of the people. Both of those things are appropriate, and I’ll keep working my tail off for as long as I can in this job that I really value.
McIlroy:
Okay, we’re nearly out of time, although our listeners tell me I need to stop saying that because I say it in every interview. This must be the busiest week of the year for you and your family, the Chalmy Army, as you call them, must be looking forward to seeing you –
Chalmers:
I got a laugh at the Press Club calling them that, but I’ve been calling them that for so long that I forgot that people might find it strange.
McIlroy:
How far off is your next day off? You must be looking forward to some family time. Give us a sense of what you’ll do to relax, catch up on some sleep.
Chalmers:
You know, I was talking to David Speers today about when he said, when do you exhale? And he said, is it, you know, Thursday night? Is it Friday morning? Is it when you touch down in Brisbane? The truth is you exhale the first time when the Insiders interview ends on the Sunday after the Budget night.
McIlroy:
It’s a Sunday at about 9:45.
Commins:
Yeah, that’s what I said.
Chalmers:
9:40 on a Sunday. So, there’ll probably be a lot until then and then we hit the road and we do this big post‑Budget roadshow. So, there won’t be a full day off for a while.
But I mean, I really miss my kids. Like, I really, really miss my kids. So hopefully a bit of junior sport on the weekend. Probably my favourite thing to do is to be the taxi between basketball and netball and dancing and all that sort of stuff. So, if I can do a bit of that on the weekend. My battery is relatively low, but it recharges quickly and the way that it recharges the quickest is knocking around with those 3 little people, and particularly on getting them from one weekend activity to the other.
McIlroy:
Sounds pretty good. Jim Chalmers, thanks for coming on the pod again. It’s great to talk to you about this.
Commins:
Thanks so much, Jim.
Chalmers:
Appreciate it a lot. Thanks, guys.