JIM CHALMERS:
The bodies of Callum and Jake Robinson have been formally identified as I understand it by their parents in Mexico. We can only imagine what this ordeal has been like for them, and for the loved ones of Callum and Jake. I think the whole country’s heart goes out to all of their loved ones. It has been an absolutely horrendous, absolutely horrific ordeal, and our thoughts are with all of them today.
We’re here to talk to you primarily about the Budget 8 days from now. This Budget will take a responsible, sensible and a balanced approach. The primary focus in the Budget is on inflation in the near term and then growth in the medium term. It will be an inflation‑fighting and future‑making budget. It will be a budget suited to the cross currents and the conditions that we confront.
There will be cost‑of‑living help for people doing it tough, there will be key investments in a Future Made in Australia and all of that will be underpinned by the responsible economic management which has been a hallmark of this Albanese government.
We will build on the substantial progress that we have made when it comes to budget repair over the first 2 years and our first 2 budgets and I wanted to take a moment to remind you here of our record: the first surplus in 15 years with a $100 billion turn around of what we inherited. The second is in reach, and if we achieve it, this would be the first back‑to‑back surplus in almost 2 decades. We have returned 88 per cent of revenue upgrades versus around 40 per cent for the former government. We have found around $50 billion of savings over our first couple of budgets, but the underlying position is around $200 billion better at MYEFO over the 5 years to ’26–27. We’ve made sure that debt peaks almost 10 percentage points lower than what we inherited. Debt is around $165 billion lower at the end of the medium term compared to what we inherited in the pre‑election outlook and annual inflation is now almost half – at 3.6 per cent – of what we inherited in the June quarter of 2022. So that is our record when it comes to budget repair and responsible economic management, and we are proud of that record. Because of difficult decisions taken by our government, whether it’s banking upward revisions, whether it’s finding $50 billion in savings, the Budget is in much better nick than the Budget that we inherited almost precisely 2 years ago.
There will be more spent – there will be more spending restraint in this Budget and there will be more savings in this Budget as well, and Katy will run through some of those in a minute. But this is not the time for scorched earth austerity. It would not be wise when people are doing it tough and when the economy is soft for us to slash and burn in this Budget. This is not the time to slash and burn in the Budget when people are doing it tough and when growth in our economy is weaker than we would like it to be.
There’s no shortage of opinions at this time of year about the budget position. We see that in the papers almost every day and we welcome that because it helps us to chart a responsible middle course between those who want us to slash and burn in the Budget and those who think that it should be some kind of free‑for‑all of spending. We are charting a responsible middle path. We are striking the right balances in the Budget that we will hand down in 8 days’ time.
Another point that is often lost is what matters here is not just the quantity of spending in the Budget but the quality of the spending in the Budget, the timing of that spending, the sequencing of that spending and that’s why some of the over simplified rules of thumb that you’ll see from some commentators don’t perfectly capture the sorts of balances that we are trying to strike in this Budget, our third Budget, in 8 days’ time.
Some extra spending is unavoidable – some of it is automatic, some of it is desirable, all of it is warranted. And you look at the last couple of days, the indications we’ve given about debt relief for students, paying students who are doing their prac, big investments in Western Sydney that we’ve spoken about in this room before. Now, recognising Western Sydney is a key part of Australia, it’s a very important part of our economy, and it will be a central focus of our Budget as well. All of that spending in the Budget will be warranted.
Some of the deficits in the Budget will be a little bigger than they were at MYEFO, some of them will be a little better. We will print 5 bottom lines this year and the consequent 4 years. Some of the deficits will be a little bigger, some of them will be a little better, and you will see that on the night, but overwhelmingly what you will get is a sense of the really quite substantial progress that we have made since the budget we inherited a couple of years ago. We have spent a big chunk of our time cleaning up the mess, and we’ve made good progress and that’s why we won’t be taking lectures from our opponents who left us debt and deficit as far as the eye could see. They left us higher inflation, they left us a bigger interest bill on that debt. We’ve made good progress against the benchmark that they left us with almost exactly 2 years ago.
Before I throw to Katy, I just wanted to point out something about recent commentary from my opposite number Angus Taylor. You need to be very careful about what Angus Taylor says about the economy. In the last couple of days he has had 2 quite egregious gaffes where he is either deliberately lying about key indicators in the economy or he doesn’t understand that he is wrong. So I caution you when Angus Taylor talks about the economy to make sure that what he’s saying has a basis in fact.
Responding to our HECS announcement he said that real wages have been falling under this government. Real wages are growing under this government for the first time in years, they were falling 3.4 per cent when we came to office, they are now growing again. Secondly, he made the point today I believe on Kieran’s show earlier today, he said that we had spent most of the revenue upgrades in the Budget – we have banked 88 per cent of upward revisions to revenue since we’ve come to government – 92 per cent in the most recent mid‑year budget update, 82 per cent in the 2023 Budget. So these are either egregious gaffes or egregious lies and so I caution you to take with a grain of salt anything that Angus Taylor says about the economy in the lead‑up or during or after the 2024 Budget. His time would be better spent coming up with alternatives rather than coming up with lies about the economy. Katy.
KATY GALLAGHER:
Thanks very much, Jim. I just want to concentrate on a couple of areas, so one around some of the unavoidable spending that you’ll see in the Budget. This is necessary spending, but it builds upon the spending that we’ve had to do cleaning up the mess of our predecessors around terminating programs, funding cliffs, permanent programs that had no ongoing funding built into the budget and you’ll see that that’s a reasonably significant part of the spending decisions that we’ve made in this Budget. But also on the savings front as well, as Jim said, we’ve made good progress. We’ve made $50 billion worth of savings across our 3 economic updates – so the October Budget, the May Budget and then December’s MYEFO. So you can see the approach that we take is every time we do this work, every time we lock ourselves into the room with folders and ministers coming to talk about their portfolios, we are – just as much as we’re open to listening to their good ideas, we’re also listening and asking about savings that we can find so that we can make sure we’re continuing the budget repair work that we’ve had to do from the beginning.
So in relation to savings, you will see savings in this Budget. They are getting harder to find, I don’t pretend otherwise. We’re looking line by line. We look under each desk to try and see what we can find but we have taken the decision to find another billion dollars in savings around the use of external labour – consultants, contractors, labour hire. That builds on the 3 billion that we’ve already taken that was in our October Budget. So you’ll see an extension of that saving in this Budget but also an additional saving on – through the ’24–25 year and across those years because we believe that whilst we’re making investments in the public service, that we’re restoring the balance and reducing the reliance on external labour, at the same time the public service can find savings in this area. You’ll see some of the results of that around the conversions of external labour into public service roles, but also some of the improvements that we’ve seen from this approach in service standards, whether it be getting rid of the backlog in Veterans’ Affairs, how long it takes to process a passport and some of the work we’re doing in Services Australia.
In terms of unavoidable spending – and these are really things that we’ve talked about before – terminating programs, funding cliffs, so looking at how we sustain myGov. It’s the way that people want to engage with government. I’m sure everyone in this room uses myGov to some degree, and we need to make sure that it’s got the resources to keep going. Extra staff at Services Australia, again, wanting to make that – or to provide the certainty there. A lot around digital capability and sustainment, and these often include pretty reasonable sums of money. So I know it probably won’t get attention on the day, but these are significant investments that have to be made. If we want the aged care system to continue working, you’re going to have to make sure that the IT system that underpins that actually works as well.
There’s a range of programs in health like through palliative care, cancer programs, public health chronic conditions funding, all of those, again, responsible, reasonable, needed investments but that didn’t have ongoing funding.
The other one which I’ll just finish here with is on the leaving violence payment as well. That was built – put in as a 2‑year trial. There was no ongoing support for that. We believe that it is necessary, and you’ve seen the announcements in the last week that that is a permanent, ongoing improved program, and we’ve made the investments to make sure that that’s the case.
I’ll leave it there Jim.
JOURNALIST:
[INAUDIBLE] from the national plan against violence – against domestic violence that the economy does seem to have impact on DV statistics. So whether the interest rate is kept on hold tomorrow or increased, what is your government doing to stop the increase of DV? I know you’ve made announcements, but are you able in any way to try and stop that hard axe of interest rates affecting DV?
CHALMERS:
We certainly understand that a lot of people are under pressure and that doesn’t excuse any of that kind of behaviour. We know that people are under the pump, that’s why a central focus of this Budget in 8 days’ time will be cost‑of‑living help for people, primarily through the tax system but not only through the tax system and also making sure that we’re doing what we can to put downward pressure on inflation. We know that people right around Australia are under pressure. We do more than acknowledge that – we have been rolling out substantial cost‑of‑living help. There will be more in the Budget. The centrepiece of that cost‑of‑living help will be a tax cut for every Australian taxpayer.
GALLAGHER:
Jim, can I just add to that, just because it is around the national plan. I mean, the issue about financial insecurity and its links to violence are well understood. And so this has been our whole push on economic equality for women. So whether it’s improving the payments women are on, whether it’s the wages in the feminised industries, whether it’s extra support for childcare, all of these areas we have been focusing on – even our announced PPL on super is about making sure we’re driving the economic independence or equality of women so that that intersection is reduced, that women have financial capability on their own grounds so that it reduces the risk of violence in the family unit.
JOURNALIST:
A question for you both: a parliamentary inquiry has heard that Canberra needs significant investments in a stadium, supporting other infrastructure to make a world‑class capital city. Will there be a funding announcement in the Budget for these projects?
GALLAGHER:
We are certainly working pretty closely with the ACT Government on their priorities. Obviously, we’ve had a piece of work done around the AIS. That’s coming to conclusion. The ACT Government is lobbying pretty strongly on a whole range of fronts, not just a stadium but transport, national facilities. So we’re working with them on those outcomes and some of that will be reflected.
CHALMERS:
And I’d just add to that that they’ve got an absolutely outstanding senator in Senator Gallagher, Finance Minister for the whole country, but a very determined and very passionate advocate for the people here in the capital.
JOURNALIST:
The Budget will have as one of its main themes the Future Made in Australia policy. One part of that is the government taking some equity in some projects. Could you talk around how you see that working, what proportion you’re looking at? And also how are you dividing this up between what – the spending between what’s on budget and what’s off budget?
CHALMERS:
Thanks Michelle. There will be a combination of levers that you’ll see in the Budget which are about making Australia a renewable energy superpower and powering a Future Made in Australia. For different kinds of opportunities, it will involve a different mix of policy levers. Yes, in some cases via our investment vehicles, there will be equity stakes, there will be a combination of equity, grants and other support as well. Depending on the type of opportunity and how far that opportunity has been developed already, that will determine the policy lever that we use. Different combination for each of them, and we’ll set all of that out in the Budget.
JOURNALIST:
Treasurer, also on the Future Made in Australia Act, I was just wondering if you could firstly provide some clarity on who the responsible ministers will be for the Act, and what will be the consequences of the existing Future Made in Australia Office in the Department of Finance? Are we expecting to grow or [INAUDIBLE] shift away from [INAUDIBLE] procurement?
CHALMERS:
We’ll make all of that clear when we announce the full suite of policies that we’re funding in the Budget. The Future Made in Australia Act is about imposing a rigour and robustness on the public investments that we’ll be making in the future of our economy, future growth in our economy. Last Wednesday I laid out some of the considerations, the 2 streams and the 5 tests which will be part of the Future Made in Australia Act. The way that the institutional arrangements sit around that will be made clear when we make the whole package clear.
JOURNALIST:
I think a few weeks ago we were here in this room and you were saying, you know, we’ll look at doing the HECS relief and the practical placements – either/or, maybe both if we can afford it. Now you’re saying you can afford both. But you’re still forecasting deficit in the forwards and beyond. How are you actually going with the structural fix to the budget?
CHALMERS:
Look, a couple of things about that and I don’t know if Katy wants to add to this. Budgets are about choices and we can’t fund everything that we would like to do in every budget and inevitably that requires prioritisation and sequencing and we’re trying to work out what we can fit in this Budget and what might have to wait for subsequent budgets. We thought the case for debt relief for students and to pay students who are doing prac, we thought that was a really compelling case and so we found a way to do that and there will be other announcements from the Universities Accord in the context of the Budget as well.
In terms of the structural position of the budget, I think we’ve been really upfront – every time we’ve been here we’ve said the pressures on the budget are intensifying rather than easing and we’ve got the budget in much better nick in the near term. That’s important in the fight against inflation. But aged care and defence and health care and interest costs, the NDIS, all of these important areas are putting additional pressure on the Budget. We have been chipping away at the structural situation that we inherited – $50 billion in savings, modest but meaningful tax changes, banking upward revisions when we can afford to do that and that’s all been part of getting the Budget in much better nick than it would be otherwise.
JOURNALIST:
You talk about timing. We’ve seen 2 announcements in the past week about the DV payment and the placements today. They’re not going to start for another year. Is that about inflationary pressures or are there other reasons why they can’t straight away?
CHALMERS:
It’s just about being responsible with the budget in most instances, but also sometimes it will take us a little while to make sure that we’ve got the relevant arrangements in place. It’s not unusual in budgets for announcements to be made that come in in the coming year or so. There are a lot of other examples of that. We need to get our ducks in a row. We need to make sure that it’s all ready to go, that the investment can flow. And on top of that we’ve got to make sure that we’re sequencing and timing and prioritising our spending the best that we can.
GALLAGHER:
Sorry, can I just add, on the leaving violence payment, that does continue. I just don’t want anyone to think that there’s nothing now. That will continue until the new program is in place and that will require a bit more work and a procurement process.
JOURNALIST:
Last week the Queensland Government announced households in the state will receive a $1000 power bill credit and then we have the WA and Victorian Budget later this week, and both are flagging cost‑of‑living relief. How worried are you about the states undermining more inflation fighting efforts, and how do you raise this with them?
CHALMERS:
I welcome the states making life a little bit easier for the people that we represent. I think it’s an important thing that states are doing – providing cost‑of‑living relief for people in their own jurisdictions in the same way that we’re looking to provide cost‑of‑living relief nationally. Primarily for us that’s a tax cut for every taxpayer and a bigger tax cut for 84 per cent of them than they would have got under the old stage 3 arrangements but I think these cost‑of‑living pressures are acute. They are still substantial. We need all shoulders to the wheel, and so I welcome the contributions that some states are making to that effort.
JOURNALIST:
Just on the state Budget, the Victorian Government will hand down its Budget tomorrow. What are you looking to see in it? Are you concerned about the state’s trajectory, and do you support ongoing big spend on infrastructure?
CHALMERS:
Look, I don’t mean this to sound unkind to Tim – I wish Tim well – but I’ve been focusing almost exclusively on our Budget rather than Tim’s Budget. I respect Tim and I like working with him and no doubt he’s had some difficult decisions and trade‑offs to make in the same way that we have difficult decisions and trade‑offs to make. I like to work with the states and territories rather than against them. I wish him well for his Budget. I haven’t been devoting large slabs of my day to thinking about the Victorian Budget when ours is 8 days away.
JOURNALIST:
Treasurer, it’s been about 2 weeks now since the latest inflation figures from the first quarter of the year. [INAUDIBLE] less than a month before your Budget. Were there any changes or tweaks that you’ve made to your Budget since those inflation figures were taken into account?
CHALMERS:
Our inflation forecasts in the Budget next week will take into consideration the most recent data. And you would know, everyone here would know, it’s not unusual for forecasts, whether it’s inflation or in other areas, to be tweaked based on the information that has presented itself in between the last budget update and the next budget update. And so people should anticipate that the inflation forecasts will be updated, in the same way the Reserve Bank will update theirs.
JOURNALIST:
[INAUDIBLE] policy changes, has anything you are putting in the Budget changed as a result of those figures?
CHALMERS:
Certainly the inflation forecasts in the Budget will take into consideration the cost‑of‑living relief that we’re providing and the investments that we are making and that will be the key difference, frankly, between the Reserve Bank’s forecasts this week and our forecasts next week, is ours will take into consideration the Budget. The Reserve Bank’s are unable to do that yet.
JOURNALIST:
A group of women in civil society, including the Chair of the Economic Inclusion Individually Committee Jenny Macklin, has written to the government raising the advocacy of JobSeeker as a women’s safety issue. Do you accept that it’s a women’s safety issue? And picking up on the Finance Minister’s reference to improving the payments, is that work that’s going to continue in this Budget?
CHALMERS:
Do you want me to go first? I’ll throw to Katy in a second to add to her earlier comments.
We take very seriously the process and the committee led by Jenny Macklin. We’ve made it clear on other occasions via Amanda Rishworth and I think in our own words that it is not possible to do all of the recommendations of the EIAC committee all at once. We have made substantial progress on a substantial amount of recommendations put forward by Jenny and her colleagues on the committee. We consider that to be ongoing work, to do as much as we responsibly can to help the most vulnerable in our community, including women under pressure and either experiencing or at risk of domestic and family violence.
I’ll ask Katy to add to that.
GALLAGHER:
Well, really just to say that this is work we look at every budget and I think the PM committed to that when we were in opposition, and that’s what we do. And as the Treasurer said, the Budget is the culmination of a lot of decisions and choices that we’ve had to make. But we’re committed to the national plan. That sets out our overarching goal to end violence against women and children in a generation. It has already got $2.3 billion attached to that plan. We are making additional investments to that, and you’ll see some of that in the Budget. We are deeply committed to this. But we also recognise we can’t deal with the epidemic level of violence against women unless we’re dealing with other issues like gender equality, like pay for women in feminised industries, like getting a better tax cut than they would have otherwise got. All of these issues build an economy that’s better for women and if it’s better for women it’s better for men, but it’s also safer for women as well.
JOURNALIST:
You talked about this being an inflation‑busting Budget but also no slash and burn. Can I just ask you to expand on what that means, because most of the inflation measures you’ve done so far have been targeting individual prices, but what you haven’t done is sought to take money on aggregate out of the economy. So when you say no slash and burn, are you suggesting that that approach will continue, or will you have a contractionary Budget in the first financial year specifically?
CHALMERS:
Well, I think probably 3 main points about that. First of all, the ratings agencies, the international institutions and the Reserve Bank Governor have all made it clear that our fiscal strategy over the first couple of Budgets did help with the fight against inflation.
Second point, be very careful about focusing only on the quantity or the magnitude of spending in the Budget – there are investments we can make in the Budget which can put downward pressure on inflation. The quality of spending, the timing and sequencing of that spending matters as well as the quantity of that spending, so be careful about this blunt assessment of contractionary or otherwise.
And then the third point that I would make is if you look at really right across the board, the way that we’ve designed our cost‑of‑living measures, the ABS has said that’s taken half a percentage point off inflation. You look at the way we’re doing competition policy differently, Food and Grocery Code, empowering the ACCC, mergers reform, tariff reform, all of these things are important parts of it as well and the overall fiscal position as well.
At the front end of this Budget there will be a primary focus on inflation, towards the latter years of the Budget there will be more of a focus on growth – that is entirely appropriate when it comes to the cross currents and conditions that we face.
JOURNALIST:
On spending that puts downward pressure on inflation, that’s what you’ve said about tackling energy costs. Is that still a priority, or are you worried that states and territories become addicted to your subsidy?
CHALMERS:
I don’t see it the way you’ve described it. But I think it has been a really important way to get downward pressure on inflation-
JOURNALIST:
You used past tense there. Is it in the future sense?
CHALMERS:
Well, it has been to here a really important way to put downward pressure on inflation, the ABS has made that clear. The energy plan that our opponents voted against has taken some of the sting out of higher electricity prices, whether it’s the price caps or whether it’s the rebates – not an opinion of mine but a fact in the ABS data – has put downward pressure on inflation. When our opponents voted against that they voted for higher inflation. We’ve made it really clear, as have the states – a question earlier went to this – that these are the sorts of things that we will be considering as we put the very finishing touches on the Budget. The Budget will combine cost‑of‑living help – primarily tax cuts, but more if we can afford it – with responsible economic management and investments in the future.
JOURNALIST:
Treasurer, the RBA S&P forecasts, as you noted earlier, will come out tomorrow without taking into account your Budget. A week later your Budget will come out with different forecasts. Are we suggesting – are you suggesting then that we will see perhaps a different or higher inflation profile in the Budget compared to what the RBA have? And if we see in the coming months that the RBA or the forecast for inflation is pushed out further, that interest rates need to stay higher for longer to get inflation down or even potentially rise, is that something you’re going to own?
CHALMERS:
Well, first of all on the forecasts, I’m not going to pre‑empt the Reserve Bank’s forecasts. Our focus is on our own Treasury forecasts of inflation. I’m just making the factual point that this week’s forecasts won’t have the impact of the Budget, next week’s forecasts will have the impact from the Budget, that’s just a fact.
In terms of the future trajectory of interest rates, you know that I don’t make predictions about that. That’s the job of the independent Reserve Bank when it comes to interest rates. My job is to make sure that we are focused on this inflation fight – and we are – that’s why we’ve got responsible economic management, that’s why we’re designing our cost‑of‑living help the way that we are and what we’ve seen in the last couple of years is inflation has come off substantially, it’s almost half what we inherited. It’s less than half its peak and that’s a good thing, but we know we’ve got further to go. It’s not mission accomplished on inflation because people are still under pressure, that’s why cost of living and fighting inflation are the primary near‑term focuses of this Budget.
JOURNALIST:
This might be for the Finance Minister: under the Future Made in Australia provisions, a policy you’ve already announced, you’ll take equity positions in various private companies. Are they going to be treated as contingent liabilities? Will we see in the Budget papers that you’ve made accounting – you’re accounting for possible losses on behalf of Australian taxpayers with these projects?
GALLAGHER:
Well, the package will be fully accounted for in the Budget. So you’ll see that, and it will be accounted for where it has on budget impacts and off budget impacts as well. And you’ll know that the Department of Finance and Treasury, when they’re finalising those budget books, are a very honest and upfront account of the Commonwealth’s finances.
JOURNALIST:
But there is a possibility you’ll lose money, at least by taking the equity-
GALLAGHER:
There’s a statement of risk in the Budget, and, you know, across the board, not just in the Future Made in Australia. And you’ll see the risks accounted for there.
JOURNALIST:
Treasurer, currently the government’s negotiating a new hospitals agreement and a new schools funding agreement, both of which will involve billions in extra spending from the Commonwealth. These agreements haven’t yet been finalised. So my question is: will the upcoming Budget reflect the impact of those extra spending commitments over the forwards, or is that something that you have to account for later once the agreements have been done?
CHALMERS:
What we try and do where there are negotiations underway but not yet finalised is we try and in some cases make a reasonable provision, in other cases, if they’re not particularly well formed yet, that’ll be the task of a future budget. It depends really where the negotiations are up to. There’s not just those 2; there’s housing, there are other agreements under way as well. So we do the best we can to make sure the Budget is as up to date as it can be. Sometimes that means making provisions, sometimes not. We’ll make that clear.
JOURNALIST:
You talk about $50 billion in savings that you’ve managed to find. But given that we’re still expecting larger cumulative debts in the forwards, is it the case that, you know, balancing the budget over the longer term or addressing structural issues with the budget has become a second‑order issue to driving growth, as that’s part of the budget process and part of the [INAUDIBLE]?
CHALMERS:
No, I wouldn’t describe it exactly like that. What we’ve demonstrated over the first couple of years is an ability to get the budget in much better nick not at the expense of investments in the future or cost‑of‑living relief but in addition to. Every budget involves and invites a series of fine balances, that’s what you’ll see in this budget as well. There are cross currents in the global and domestic economy that we’ve had to factor in. What you’ll see in the budget is cost‑of‑living relief, an emphasis on fighting inflation, big investments in the future as well, all underpinned by the kind of responsible economic management which has been a hallmark of our time in office.
JOURNALIST:
You said it’s increasingly hard to find savings in the Budget. One of the areas where we are seeing ongoing growth in commitments and significant growth is in the Defence Department’s budget. Is that – can you give assurances that you are continuing to look line by line at the Defence Department, and given you are still looking for structural improvements to the Budget, would you be willing to reconsider the target of getting up to 2.4 per cent of GDP?
GALLAGHER:
Thanks. Look, I don’t think people should underestimate the reprioritisation work that’s going on within the Defence Department led by Richard Marles and you’ll see that reflected in the Budget. So yes, while we are investing more because of the results of the Defence Strategic Review and the world in which we live, we’re also asking the Defence Department to find money within the organisation to reprioritise. So that is actually a big part of the structural story to this Budget, is the work that’s happening in Defence and in a couple of other areas like the NDIS as well. But, you know, we’re having to make appropriate investments into Defence at the same time because of the challenges that have been well articulated through the media. But reprioritisation is big part of that story.
JOURNALIST:
And the growth target is still one you’re fully committed to?
GALLAGHER:
Well, that reflects the decisions that we’ve taken.
CHALMERS:
Thanks, everyone.