JIM CHALMERS:
This will be a responsible Budget and it will be a restrained Budget. It will ease cost‑of‑living pressures, and it will incentivise investment in a Future Made in Australia. Investment has been really strong under this Labor government, but we’re not complacent about it, because we need more investment to fund and finance the future.
Investment has grown every single quarter in the life of our government, but it fell 2 out every 3 quarters under our predecessors. So the Budget will be all about attracting and incentivising more private investment in the future of our economy and in the Future Made in Australia. And there will be public investment in the Budget, but there will be an even bigger emphasis on getting that private capital flowing. We have seen some quite encouraging private investment in our economy over the last couple of years, but we’re not complacent about that because we need much more.
So the Budget will balance the near‑term pressures that people are under and the longer term goals and opportunities in our economy. It will fight inflation without smashing the economy. It won’t be a smash and grab budget, because people are hurting and the economy is slowing. But there will be a premium on responsibility and restraint. There will be savings in the Budget. There will be spending restraint in the Budget so that we can get the budget in much better nick to make room for our priorities, which are cost of living and a Future Made in Australia. You’ll see the spending restraint in the real spending growth numbers that we are releasing today, and you’ll also see it in the savings numbers that Katy will talk you through shortly.
The real spending growth in the Budget will be just 1.4 per cent over the 6 years – the 2 years gone and the 4 years ahead. That compares with real spending growth averaging 4.1 per cent under our predecessors and 3.2 per cent, which is the average of the last 30 years. So real spending growth in the budget will be around a third of our predecessors and less than half the average of the last 3 decades.
This is a big reason why the budget is in much better nick on our watch. Our responsible economic management is paying down debt, it is making room to help with cost of living and invest in the future. That combination of real spending growth restraint and the savings that Katy will talk about in a moment are a key reason why we have been able to save so much debt and debt interest over the life of our first 2 budgets, and you’ll see more of that in the third.
Before I throw to Katy I just wanted to say something specifically about the Bruce Highway. By making room in our Budget and managing the Budget responsibly, we are making room for important projects like the Bruce Highway. We are backing the Bruce in this Budget – half a billion dollars in investment to go with $10 billion already committed, and this is because we recognise that Queensland is a crucial part of the national economy, and the Bruce Highway is a crucial part of Queensland and we are supporting both in this Budget. Katy.
KATY GALLAGHER:
Thanks very much, Jim. I thought I’d just take you through some of the details around the spending and the savings side on the Budget. So you’ll see in this Budget a continued approach that we’ve taken since we came to government on responsible budget management – always looking for savings, reprioritisation, and making sure that the quality of the spending is spot on, and making room for our priorities. So you’ll see that continue in the Budget.
Across the Budget it will include $27.9 billion in savings and reprioritisations. We’ve identified savings across all portfolios really and ministers have done a great job on that. In terms of those savings – and they will be reflected in the budget papers, of course – there’s $22.5 billion in National Defence Strategy reprioritisations, the billion dollars that we spoke about earlier this week in terms of external labour and saving that across the public service, there’ll be over $400 million in childcare subsidy compliance activities, some savings from Services Australia in terms of redirecting staff and back office functions to support frontline service delivery. This, of course, is different to the investments that we’re making in Services Australia to get those waiting lists down. And then across all 15 portfolios you’ll see a combination of smaller savings and reprioritisations in the order of about $3.8 billion.
So, since the election when you look at that across our October‑May, MYEFOs, and this one, you’ll see savings in the order of $77.4 billion. Now, that has allowed us to make room for budget repair, as Jim has outlined, but also to fund some of those unavoidable spending areas and also some of our priorities.
When you look at the spending, a lot of the spending is unavoidable spending, and it’s certainly the majority of net decisions in the Budget. So in 24–25 unavoidable spending is 2‑thirds of net spending. And so that includes terminating programs or things that have been put on the backburner and haven’t been funded and need to be dealt with. So that’s things like ICT rebuilds, which are often very expensive, but really important terminating programs like, particularly in health there’s a lot of them, palliative care, public health chronic conditions, alcohol and drug treatments, all – and you’ll see those listed. So you’ll see the approach there. These really are things that aren’t discretionary. We have to keep them going. They haven’t been properly funded and we’re addressing that.
And I think that – the unavoidable spending, really, when you look at what we’ve done in this, that has been a significant part of the work we’ve been doing to clean up the Budget. So since we came to government, if you look at it, we’ve had about $21 billion in unavoidable spending since the election, and then you’ll see it reflected in this Budget too. So that goes to some of the issues we’re looking at, trying to contain real spending or restraint but also the fact that there are things that we just need to fund and get on and do. And they’re not really subject to should we do this or should we not. We have to do them so that people get the services they need and the infrastructure to support the delivery of those services.
JOURNALIST:
Treasurer, I see this morning you’re out talking about you want Australians to have more children. Are you saying never, ever to another baby bonus?
CHALMERS:
We found a better way to support people who make that choice. And the point that I made in that interview with your colleagues here is I know that some people can’t afford to have more kids. I know that people will make their own choices, and I don’t pretend for a moment that government should direct those choices. But we want to make it easier for people to have bigger families if they want to. And that’s why we’re making these enormous investments in early childhood education. That’s why Katy and I work so closely together to make sure with Amanda Rishworth that we could expand Paid Parental Leave and pay the superannuation guarantee on that Paid Parental Leave. That’s one of the proudest things I think Katy and I have been working on over the course of the first couple of years.
I was asked about birth rates in the Budget. That has been on a trajectory of long‑term decline, as you know. A predecessor of mine from a few ago, Peter Costello, talked about this a lot. A healthy birth rate is good for Australia and we want to make it easier for people to make that choice if they want to.
JOURNALIST:
Last year’s Budget forecast the NDIS would cost $42 billion this year. Can we expect next week’s Budget to show that that costs forecast was achieved, or can we expect another cost blowout this year?
CHALMERS:
Look, I don’t want to pre‑empt the NDIS part of the Budget on Tuesday, but there is movement on the NDIS. As you know, our highest priority in the NDIS is making sure we’re providing the services that people need and deserve and keeping faith with the design of the system. But in order to do that we need to make sure we’re getting value for money and that it’s sustainable into the medium term and into the longer term as well. And we’ll have more to say about that on Tuesday.
JOURNALIST:
Your MPs are complaining that Australia is not getting out of gas quickly enough, and yesterday the Resources Minister released a document that’s been likened to a reboot of Scott Morrison’s gas‑led recovery. What is your message for climate conscious voters who are weighing whether the Labor government is doing enough to get out of gas?
CHALMERS:
Well, the future is renewable. And there is a huge focus in the Budget on becoming a renewable energy superpower. That is one of the defining objectives of the Budget on Tuesday, is how we make the most of this net zero transformation in the global economy and in our own economy. Big investments in the future of renewable energy while we recognise that gas has a role to play in the interim. And so the Future Gas Strategy that was released yesterday recognises that gas has a role to play, but overwhelmingly the Budget will be about renewables.
JOURNALIST:
Treasurer, yesterday we had the WA Budget, a big spending budget, a big infrastructure spending budget. We had Victoria – bigger deficits looking ahead. Queensland, 2 and a half billion, I think, in relief for households in Queensland. You talked about restraint being prudent. Are you worried that all your efforts to show restraint will be undone by big spending state budgets essentially that will drive inflation higher and work against some of the things that you’re trying to achieve at the Commonwealth level?
CHALMERS:
Not especially. Obviously we pay attention to the decisions that my counterparts make in their state budgets. I welcome their efforts to help people with the cost of living. And this cost‑of‑living challenge is so substantial that we need all shoulders to the wheel. And so I think that that cost‑of‑living relief that the various state governments have announced will be welcomed by the people that we jointly represent and is welcomed by us.
We all have pressures on our budgets. The West Australian Budget is in a bit better nick than some of the other budgets. We were talking about that on the way here. But overwhelmingly there’s pressures an all of the budgets. And my colleagues and counterparts will make the best decisions that they can.
I’ve tried to not make a practice of second‑guessing the decisions that state and territory Treasurers make. I acknowledge the pressures on their budgets. I ask them pressures on our budgets. And I appreciate, frankly, the efforts the governments have put into those Budgets to help ease cost‑of‑living pressures, because cost of living is the main concern that we have in the near term.
JOURNALIST:
Treasurer, regarding business investment measures that you alluded to in the Budget, can businesses expect, like, a broad instant asset write‑off that has been in previous budgets, or is this going to be a more targeted focus, like tax credits, reductions that we’ve seen sort of in the Inflation Reduction Act. Is that similar to what you’re going to do through your Future Made in Australia plan?
CHALMERS:
You’ll have to wait and see. But we have indicated a willingness to use the tax system to incentivise the kind of private investment that we need in the future of our economy. We want to grow our economy into the future. We want to build a more productive and dynamic and innovative and inclusive economy. And that requires a lot more private investment. And the tax system has got a role to play there in incentivising that investment and that private capital. And that’s one of the levers that we are prepared to pull, and you’ll see more of that on Tuesday.
JOURNALIST:
Treasurer, you’ve flagged additional cost‑of‑living relief for some time before this budget. I’m just wondering what expectations families should have beyond the tax cuts about what sort of money will hit their pockets soon after this Budget?
CHALMERS:
That’s an innovative way of asking a question that you’ve asked me before. There will be cost‑of‑living relief in the budget. The foundation stone of the cost‑of‑living relief in the Budget is a tax cut for every Australian taxpayer – all 13.6 million Australian taxpayers will get a tax cut to help with the cost of living. The average tax cut will be something like $36 a week, but there’ll be additional help as well. There’ll be additional help for people on pensions and payments and fixed incomes, and there’ll be additional help for people who are doing it tough. And the details of that will be provided on Tuesday.
JOURNALIST:
I just wanted to go back to the gas plan. Obviously concern from backbenchers yesterday. Do you think that Australians should also be concerned about this government’s plan to rely on gas for decades to come now?
CHALMERS:
I wouldn’t characterise it exactly the way that you have. But I think that there is an appetite in the Australian community for a renewable future, and that’s why that’s where the overwhelming focus of the Budget will be. The future is renewable. The Budget is focused on renewables. We want to become a renewable energy superpower, and there is a role for gas in that energy transformation.
Some of the issues that have been raised in the last 24 hours or so, for example, have gone to public investment. There won’t be any new money for the Future Gas Strategy in the Budget on Tuesday, but there will be billions of dollars in investment in our renewable future. And I think that should assure people and reassure people who want, like I do, a renewable future for this country, where the government’s priorities lie. We need to be realistic about the role for gas in the interim.
JOURNALIST:
Minister, you’ve mentioned all the funding cliffs and all the things that weren’t allocated. Why didn’t they end up in the contingency reserve? That’s partly what it’s there for. And, Treasurer, in your first budget you had the theme Building a Better Future. The second one was Stronger Foundations for a Better Future. What sort of better future is coming on Tuesday night?
GALLAGHER:
So the answer to that is as we’ve been working through the budgets, programs come forward that just have no continuation. And these were decisions of a former government often. And so they were funded for, say, 2 years or 3 years or 4 years and then as those programs near terminating, they come forward through the budget context. So, I guess, the question you ask is why weren’t they in the contingency reserve? Well, because the decision that was taken at the time was we will fund this for 3 years. So that’s how it’s reflected in the Budget – no provision made.
You know, there’s many programs that we wish a provision had been made. It would have been more honest budgeting probably at the time. But I think it was used as a way of minimising spending decisions, even knowing that year by year you were going to have to top them up. So it looked like your Budget was probably in better shape than it actually was. And since October we’ve been uncovering, you know, these right across government.
And so when you see us making decisions about things that are limited or, you know, 2 years or 3 years, that’s either because we think that that is how long they go for or there’s another process, like, we’re funding for 3 years but we’re going to review it with a view to driving efficiencies or something like that. So that’s why it wasn’t in the contingency reserve. But it’s a big pressure on the budget and the decisions that we’ve taken. Like I said, two‑thirds of net spending is unavoidable.
CHALMERS:
A Future Made in Australia. A future powered by cheaper and cleaner energy. A future which recognises this golden opportunity that we have as a country to make ourselves an indispensable part of the global net zero economy. We have a big chance as a country. Our combination of industry and energy and resources and skills and our attractiveness as an investment destination make it possible for us to be the biggest beneficiaries of the way that the world is changing. And as the world is changing and as that pace of change is accelerating, we need to change as well, and not as a repudiation of the past but because we can recognise that the opportunities now are very different to what they might have been 30 and 40 years ago.
So a Future Made in Australia will be a defining theme of the Budget, but the Budget doesn’t just have one job; it has multiple jobs. And the 2 key ones are investing in a Future Made in Australia at the same time as we help people with the cost‑of‑living pressures that they confront right now. And so by helping with those cost‑of‑living pressures and investing in the future, we can have a Budget which is responsible and which is restrained and which puts downward pressure on inflation and satisfies some of those big, national economic objectives.
JOURNALIST:
Thanks, Treasurer. So you’ve said there are no new public funds for this Future Gas Strategy, but you’ve also said it will underpin the Future Made in Australia industry policy. I’m just hoping you could explain where the role for gas is in that strategy?
CHALMERS:
It’s a similar answer to what I gave earlier. It is common sense to recognise that there will be a role for gas in this energy transformation. Overwhelmingly our focus is on adding new renewable sources of energy to the grid. We are making and mobilising historic investment in renewables. Since we came to office a 25 per cent increase in renewables in the NEM since we were elected. Total emissions and emissions intensity at record lows. We’ve doubled the rate of approvals for energy projects. We’ve delivered billions of dollars for homes and businesses to upgrade their own energy efficiency, and we’ll have much more to say between now and the budget and also in the budget itself.
Overwhelmingly our budget is about becoming a renewable energy superpower. A Future Made in Australia is not about manufacturing the past, it’s about powering the future in the context of this global net zero opportunity. And you’ll see a lot about that on Tuesday.
JOURNALIST:
Maybe first to Katy and then you, Jim. 1.4 per cent real spending growth forecast over 6 years, but this year alone, according to MYEFO, it’s going up by 4.7 per cent. History shows governments always exceed their real spending growth forecasts. Jim would know that from his time. Coalition Ministers as well since. I mean, I put it to you that you have absolutely no chance of hitting that 1.4 per cent over 6 years. Would you stand up here next year and think you’re going to actually hit it. And, Jim, quite a few economists are voicing concern that you’re ditching the old economic model that has delivered prosperity. The PC, former heads, also a former Treasury official says that it’s a future made in focus groups. Why are they wrong and you right?
GALLAGHER:
So, firstly, well, that reflects the decisions that we’ve taken. So I stand by that. And I think you’ll see – and if Jim and I are fortunate to continue handing down budgets, you will see continued the approach that we’ve taken since October where we have showed significant restraint. There is no shortage of calls on the Budget, believe me. And those 5 key areas which we often talk about continue, the pressures are intensifying. We get that. And we know that we have to work out ways to prioritise within the Budget to fund them. But it’s not just an add‑in approach. We don’t just say: oh, well, we’ve just got to keep loading the Budget up. We’re constantly looking at ways to reprioritise, to find savings, to, look at what those priorities are across government, whether there’s things that are deprioritised, so that we can, find and strike the right balance. But it’s a constant piece of work that’s before both of us.
CHALMERS:
John, I appreciate the question. And I genuinely appreciate the fact and understand the fact that when you are contemplating the sorts of really important investments that we are contemplating in this budget there will be a range of views about them. And I’m really relaxed about that. There will be people who say we should invest less in a Future Made in Australia. There will be people who say we should invest more in a Future Made in Australia. This is our third crack at this, and it’s not uncommon or unusual or especially troubling that there’s a range of views about economic policy. I see that as a good thing in this country, that there’s a range of views. And just getting yourself on to the opinion page of a paper doesn’t necessarily make you right. Not everyone can be right about all of these things but it’s good that people have views and people have opinions. I like that. I welcome that.
I say to people who have made the kind of commentary that you describe, John, is we have to recognise the world has changed, the world is changing. The pace of that change is accelerating. And the economic orthodoxy of the mid 1980s is not necessarily the right economic orthodoxy for the mid 2020s. This is a conversation I have with your colleagues and your editor from time to time, and I genuinely believe it. If some of those people who I greatly admire from the 80s and 90s – probably nobody in this place has spent more time thinking about or admires more the vast achievements of those incredible reforming governments under Bob and Paul. But we have to recognise that the world moves on and we need to move with it, because if we get stuck in the past, this country will be poorer, it will be more vulnerable and we won’t make the most of this golden opportunity that we have been presented.
We have been dealt the most incredible cards as a country. And if we don’t play those cards that would be an egregious breach of our generational responsibilities. And so what we are contemplating here is not in any way, not for one second, a repudiation of the past; it’s recognition that as the economy changes and the world changes, we’ve got a big chance here. The orthodoxy needs to change as well. And the sorts of things that we’re talking about are not out of place in the investor circles I move in, global and domestic, or in the context of my colleagues and counterparts around the world. Thanks very much.