Jim Chalmers:
This Budget is all about helping with the cost of living, strengthening Medicare and building Australia’s future in the face of some pretty substantial global economic uncertainty. Global uncertainty casts a shadow over the world’s economy and also over the Budget and that’s what makes the progress that Australians have made so remarkable.
Together as Australians, we’ve got inflation down, wages and incomes are up, unemployment is low, we’ve got the debt down, interest rates have started to be cut, and now growth is rebounding solidly as well, with a bigger and bigger role for the private sector, which is especially welcome.
This Budget is really a platform for prosperity in a new world of uncertainty. It recognises that cost‑of‑living pressures are front of mind for many Australians, and that’s why it’s front and centre in the Budget.
But it also recognises that in this context of 2 really defining pressures on our economy and on our budget, cost‑of‑living pressures and global economic uncertainty, the best thing that we can do to simultaneously deal with those 2 pressures at once is to do all we responsibly can to rebuild incomes and wages and living standards in our economy at the same time as we make it more competitive, more productive and more resilient as well.
Making our economy more resilient, making household budgets more resilient, is really the best kind of insurance that we can take out when it comes to this global economic uncertainty.
I’m going to run through a little bit of the context, global and domestic, the eco forecasts in the Budget. Katy’s going to talk us through the fiscal part of the story and also the women’s portfolio and then I wanted to touch on the policy agenda but really to pull out the 2 things that I know a lot of you have noticed which is the tax cut top up, and also the economic reform, the competition reform to abolish non competes for most workers who are impacted by them. But first of all, I wanted to start with the global economy.
The global economy is unpredictable and it is volatile. You see in those charts really 2 indicators of that. The first of them is the American stock market and you can see the really quite substantial fall in stock prices on the American market over the course of the first part of this year. You also know that the gold price is often an indicator of uncertainty and unpredictability in our economy and you can see how the gold price is absolutely galloping in the chart on the right hand side.
It’s tempting to think that the escalating trade tensions are the whole story. When it comes to global economic uncertainty, they are a huge part of the story but we’ve also got a slowdown in China, we’ve got a war in Eastern Europe, we’ve got a collapsing ceasefire in the Middle East, we’ve got political division and uncertainty in places like South Korea and, not that long ago, France.
All of this is creating the sorts of global economic conditions which make it even more remarkable what the Australian people are achieving in our own economy here at home. Now, this global economic uncertainty is not as episodic as we may have become accustomed to in earlier generations. Just in the 2020s, we’ve already had the global pandemic, the global inflation spike which followed it, and now the threat of a global trade war as well.
This is the uncertainty that we are dealing with as we put the government’s fourth Budget together. Amidst this uncertainty, you can see that growth in the 2 biggest economies in the world is expected to slow. The US because of trade tensions, and China is slowing down as well. And the reason we put that chart together in the way that we have is just to show you that as Australian growth picks up, we’re seeing growth trail away in the US and China.
That is, again, a pretty encouraging contrast that we’re seeing in our own economy. We are genuinely turning a corner in our economy. The Australian economy is genuinely turning a corner and what makes that exceptional, what makes that remarkable, is that we’ve been able to get inflation down without paying for that progress with much higher unemployment.
We’ve really got that combination that we’ve been seeking, that we’ve been planning for and hoping for, the soft landing that we’ve been speaking with you about over a long period of time now is now looking more and more likely and that’s more remarkable in the context of all of this global economic uncertainty that we are seeing.
We are emerging from this spike in global inflation in better shape than almost any other country and that does make us optimistic but not complacent about the future. We’ve always said, and all of the budgets that we’ve put together, and this is number 4, as you know, has always been about trying to engineer a soft landing rather than clean up after a hard landing and a lot of other countries and economies with which we compare ourselves, they’re cleaning up after a harder landing.
They’ve had negative quarters of growth, they’ve had recessions and this is what you can see in this soft landing chart that we’ve given you here. It shows headline inflation, it shows unemployment and it shows how many quarters of negative growth and you can see there the Australian experience has been exceptional, you can see that in the chart and so this is genuinely a story of Australian exceptionalism in the context of global economic uncertainty.
Instead of going through all of the forecasts in the Budget, you’ve had a bit of a chance to pour over them. I really just wanted to pull a couple of them out in particular. The first one is the Treasury’s expectations for inflation. And what Treasury is saying in this Budget document is that they now expect inflation to be sustainably within the band 6 months earlier than they had anticipated at the last update, so the middle of this year rather than the end of this year.
Again, that’s a pretty encouraging and pretty remarkable development in our economy to see inflation come back in a sustainable way into the target band around the middle of this year, 6 months earlier than was expected. We’ve also revised down unemployment and you’ll also see, and some of you, in ways that I’m very grateful for, have pointed this out in the documents. You can also see that as we go about trying to rebuild living standards, remembering that quarterly living standards when we came to office were falling 1.6 per cent in one quarter, we’ve got them growing again in the last 2 quarters.
But really our reason for being is about people, more people working and earning more and keeping more of what they earn. Really that’s about rebuilding living standards. And there’s a forecast in the Budget which shows that in the coming year, the best measure of living standards, which is real disposable income per capita, has been revised up pretty substantially from one and a quarter to 2. That’s really what we’re going for. We’re trying to make sure that people can have those stronger incomes. That’s a story of a combination of falling inflation, rising wages and also the tax cuts which I’ll come back to in a minute.
Real GDP is picking up in our economy. That’s a very good thing. But it’s even better when you realise the composition of that domestic final demand growth and that’s what the right hand chart shows you here. And what you can see here is that the private sector is reclaiming its rightful place as the main driver of growth in our economy.
There were necessary reasons why public final demand was doing a little bit more of the heavy lifting in recent times than we would have seen in normal times and because of that, we were able to avoid those negative quarters of growth but what you can see on that right hand side is really about the private sector taking over and you can see the composition of that growth. You see real GDP growth is picking up but the private part of that real GDP growth is picking up as well. Both of those things are a very good development. So, living standards are improving. They were falling dramatically when we came to office.
The other interesting thing from the forecasts is also dwelling investment picking up and business investment growing. And again, that’s about the private economy gathering pace and gathering momentum. And so our fiscal strategy that Katy’s going to run through now and our policy agenda, which I’ll run through after that, are really about making sure that we build on this momentum rather than waste this momentum that we’re starting to see in the economy.
The economy is gathering pace, we are picking up momentum. The Australian economy is genuinely turning a corner and what matters now is what we do with it and the Budget is really a plan to build on that momentum, to build living standards and wages and incomes and make our economy more resilient in the face of all these external shocks and the fiscal strategy is an important part of the story too, and Katy’s going to tell us all about it.
Katy Gallagher:
Thanks very much, Jim. This responsible Budget is all about building Australia’s future. So, it continues our responsible economic management that we have adopted since coming to government in 2022 and the Albanese government has overseen the biggest ever fiscal improvement in a single term over the last 3 years and we’ve done this while we’ve been able to invest in those cost‑of‑living measures, the relief that we’ve provided to households, whether it be through energy bill relief, strengthening Medicare, cheaper medicines, the work we’re doing, Clare O’Neil is doing in housing, the work Jason Clare is doing in skills and education, the work that Chris Bowen is doing in the energy transition and the work that Jim and his team in Treasury are doing to make the economy stronger.
So, we’ve seen that very significant improvement in the Budget bottom line over this time, whilst we’ve had a lot of pressures coming at us and a lot of investment needed in those areas. So in the Budget, you will see a $207 billion improvement on what we inherited when we came to government across the budget years, we’ve got the bottom line better in every single year than the bottom lines that we inherited when we came to these positions.
We turned 2 very significant Liberal deficits into 2 Labor surpluses and the deficit in the 24–25 financial year has almost halved from what was forecast at election time. Our Budget position in 25–26 is better slightly than MYEFO and better across the forward estimates. Gross debt is down by $177 billion less than what we inherited when we came to government in the 24–25 year and that avoids $60 billion in interest costs.
And as the Finance Minister, when I’m looking around to find savings or to find money to invest in key services, $60 billion is a very significant amount of money and the fact that we’ve been able to avoid that because of our strategy of upward revisions to revenue being returned to Budget, the vast majority of them being able to lower the debt burden and then lower the interest costs on that debt is a big thing.
We’ve done this as well by showing some spending restraint, banking the majority of upward revisions to revenue and also identifying responsible savings in every Budget. So, almost $95 billion worth of savings. This has been important work and it’s been a feature of the 4 budgets that Jim and I have worked on and again helps us find room for some of the investments that you see in the Budget.
At the same time, we’ve had to find quite a lot of money, about over $50 billion to unavoidable or legacy spending pressures. So, they’re things that weren’t accounted for by the previous government that are ongoing programs, and we’ve found room for that.
There’s a reform story for budget repair as well. So, the NDIS growing at 22 per cent when we came to government. We’ve done the hard work under Bill Shorten and now Amanda Rishworth and work with the states and territories to bring that growth which was growing unsustainable. As you’d know, anything growing at 22 per cent in budget terms is unsustainable. We’ve been able to bring that back down to just over 10 per cent and it’s tracking towards the 8 per cent target that we set a couple of budgets ago.
In terms of women, and I’ll just touch on this briefly, but there are some important measures in the Budget for women. This again builds on our previous 3 budgets where we’ve made women’s economic equality a key feature of the work we do. When we’re putting budgets together, they’re not an afterthought, they’re there at the table.
We’re thinking about it and we’re thinking about how do we improve economic equality for women and you will see continued effort in that area. Particularly, we want to just acknowledge the work that Ged Kearney and Mark Butler have done in the health portfolio. Really important investments going into contraception, menopause support, in support for health practitioners to actually provide the appropriate care to women. We know this has been an area that’s been under invested and under acknowledged.
We’ve got the fantastic Women’s Budget statement. I’d urge you to have a read of it. It’s a document of substance. It really tells the story of Australian women and some of the things that we’re trying to shift, whether it be in care and unpaid care, whether it be in ensuring women get appropriate wages for the work that they do, whether it be importantly in women’s safety.
So, there is plenty in there for you to have a look at more affordable IVF. Again, I think that’s something that has been underdone in previous budgets and we’re seeing the outcomes of this too. We’re seeing the gender pay gap close, we’re seeing women’s participation rise and we’re seeing women earning an extra $217 a week since we came to government because of the investment we’ve put in aged care wages and there’s more money in this Budget for aged care nurses to make sure we’re addressing those highly feminised industries. So, there’s some promising signs of the investments that we’ve made and the impact they’re having on women around the country. Thanks, Jim.
Chalmers:
Thanks, Katy. So, a very responsible Budget and in terms of policy, it’s got really 5 essential elements. First of all, helping with the cost of living. Secondly, strengthening Medicare. Thirdly, bringing together our housing agenda to build more homes. Fourthly, investing in every stage of education. And then fifthly, making our economy stronger, more productive and more resilient with our reform agenda.
A lot of you have asked us in the course of today about this Budget being delivered on the eve of an election. What makes this Budget unusual in that regard is it might be a Budget on the eve of the election, but we found savings and we’ve kept the wheels of economic reform turning as well. We’re providing cost‑of‑living relief, we’re doing budget repair and we’re also making sure that we’re reforming our economy and so, out of all the policy initiatives in the Budget, some of them you have seen before, but a couple of them we are especially proud of because they reinforce this objective, this motivation that we have to build incomes and make our economy more competitive at the same time.
Both of these initiatives are about earning more and keeping more of what you earn, but they also have a substantial economic dividend when it comes to participation and productivity and the 2 new measures that you’ve been poring over are our top up of the tax cuts and the abolition of non‑compete clauses for millions of Australian workers and they are related. They are about earning more and keeping more of what people earn but to do that in a way that has a broader economic dividend as well, they are substantial in that regard.
So if we start with the non‑competes, these are holding too many Australian workers back from going to better paid opportunities or setting up small businesses. They make no sense to have millions of Australians tied up in this unnecessary red tape preventing them from earning more and so the Productivity Commission says that this reform will add about $5 billion of growth to the Australian economy.
That’s appealing to us. But e61 has said that the wages benefit for an average full‑time earner would be about 4 per cent, so about $2,500 a year and so this ticks every box for us. Proper economic reform, competition policy, boosting wages, making our economy more productive and boosting participation at the same time. And so that’s a reform that we’re very proud of.
Now we’re also topping up the tax cuts that started rolling out in July last year. You all know that we took a big political risk to get the right economic outcome and make sure that every Australian taxpayer gets a tax cut and now they’re going to get 2 more. Now we know and we acknowledge and understand that in isolation these tax cuts are modest, but they are meaningful when you combine them with the tax cuts which are already flowing and with the cost‑of‑living relief which is central to this Budget.
So, if you combine the tax cuts with the energy bill relief, cheaper medicines, more bulk billing, which means less pressure on families, the cuts to student debt, think about all of the ways that we are helping with the cost of living. This is an essential part, it’s a new part. But it’s not the only part of our efforts. But it does mean 2 new tax cuts for every Australian taxpayer. One next year and the second one the year after in combination with the first one which rolled out from July to 3 of those together means the average tax cut is about 50 bucks a week, which will help people with the cost of living and also have an economic dividend.
A lot of you have asked us about the phasing of the tax cuts. This is to ensure our fiscal position is consistent with inflation being sustainably in the band and we think we’ve struck the right balance here between being responsible with the budget and providing more cost‑of‑living relief using the tax system which is one of the more effective ways, one of our preferred ways of providing cost‑of‑living relief, the economic dividend, labour supply about 1.3 million hours, extra nominal household income up by 1.9 per cent.
So, that supports our efforts to strengthen the economy and strengthen household budgets as well. Now, to give you a sense of the combined impact of our cost‑of‑living help, if you take the average household or if you take 2 average earners, if you combine the tax cuts and the energy bill relief over 4 years, it’s about 15 grand. And so we acknowledge in isolation, some of these measures are relatively modest, we would call them responsible, but in combination, you can see the fruits of our efforts to help people deal with the cost of living and rebuild incomes.
The last thing I wanted to say is about tax to GDP, obviously very relevant to these tax cuts, but also relevant to the political contest. Tax to GDP is falling from 23.7 per cent last year to 23.1 per cent this year and because of what we’re doing with the tax cuts, the 3 rounds of tax cuts, we will be comfortably below the tax to GDP cap that our political opponents keep talking about and so when they talk about limiting tax to GDP to 23.9 per cent, firstly, John Howard breached that 4 times and equalled it once.
He’s the only one who’s breached it. We haven’t breached it in any year of the forward estimates. But secondly, what we’re talking about here is tax relief, getting average tax rates down, making sure that people can earn more and keep more of what they earn. And this is one of the contrasts in the contest. This election, which is being set up by this Budget, is really a pretty simple choice. It’s about Labor helping people with the cost of living, or it’s about Peter Dutton having secret cuts that will make people worse off.
That’s what it all boils down to. This Budget is primarily about the economics not the politics but we are on the eve of an election and that’s the choice that Australians will be asked to make.
Journalist:
Thanks Treasurer. In Budget Paper 1, it says spending growth, real spending growth this year is about 6 per cent which is 4 times the growth rate of the economy. Then next year says it’s going to fall to 3 and then to 0.5 afterwards. Does that mean you’re going to have to put the anchors on spending as well, what you’re saying Dutton’s going to do?
Chalmers:
We have put the anchors on spending.
If you look at when you’re looking at real spending growth, it’s important to look over a period of time.
Our real spending growth is something like 1.7 per cent. That’s about half of the 30 year average and it’s substantially lower even than the pre‑pandemic average of our predecessors.
Real spending growth is obviously something we keep an eye on. It’s a better measure than nominal because nominal’s got all the indexation in it and the like.
If you look at real spending growth over the 7 years that we’ve been responsible for, 1.7 is very restrained in the context of 3 decades of history.
Journalist:
Treasurer, the new tax cuts. Within 2 years of coming into effect, they are effectively eaten up again by bracket creep. You’ve called them a modest top up. When can Australians expect some structural reform to deal with the tax cut system beyond just this return of a few years of bracket creep?
Chalmers:
I saw your story today, Clare, and I think the story that you wrote today really goes to the motivation, one of the reasons why we’re providing these tax cuts is because we understand our responsibility, our obligation to return bracket creep in the most responsible way that we can do that.
We are also motivated by the fact that by providing a tax cut to every taxpayer in this way, there is a disproportionate benefit for younger people and for women and for workers who might be working more.
The effective tax rate story is more compelling when you do it the way that we have done it now. We do understand and accept and appreciate there will always be an appetite for more tax relief.
Frankly, in our government there will always be a lot of enthusiasm for more tax relief. But what we’ve shown here is 3 tax cuts. We’ve only been here for 3 years. It’s only our fourth Budget. We’re budgeting for 3 tax cuts. We do acknowledge that they’re modest in isolation, but we think they’re meaningful in combination together and with the other cost‑of‑living relief. That’s because we know that people are still under pressure even as inflation starts to trail away now into the future.
Governments of both political persuasions will find ways to return bracket creep, including Labor governments. We’ve shown a willingness and an enthusiasm to do that.
Journalist:
You rightfully point out how uncertain the global environment is. Given that, how much can we trust the forecast, particularly on the private sector? And does Australia really have the power to shape its future in light of what’s going on with Trump?
Chalmers:
First, I’ll take it in reverse order. Of course we do. One of the things that makes me really optimistic about our country is that we have found a way to make some pretty remarkable progress the last couple of years.
What will really make that matter is if we use that as a platform to make our economy more resilient into the future as well. Now, we can’t be complacent about these global risks. They are substantial. And forecasting the economy is difficult in easy times, but especially difficult in uncertain times, unpredictable and volatile times.
We acknowledge that. And so you’ll see, for example, the forecast about American growth, which trails away to about 2 per cent, so slower than our economy. A lot of the commentary around that is about some quite severe downside risks to the outlook.
We’ve acknowledged that and been upfront about that. But we have shown an ability to perform well, not just during this escalation of trade tensions, not just during the inflation spike or COVID or before that, the GFC.
Australia has shown an ability to outperform our peers in difficult times. Our task is to make the most of that and build on that momentum. That’s what this Budget is a plan to do.
Journalist:
Put the anchors on anchors on spending. You’re keeping well underneath that supposed tax cap. You found space for tax cuts. How much time did you spend putting this budget together, going, how can we neutralise every economic argument against us from the coalition?
Chalmers:
We didn’t come at it that way, genuinely.
If Angus Taylor’s own colleagues don’t take him seriously, I don’t see why we should. We were driven not by what the Coalition might have been saying, but by the developments in the economy and how people are faring in the real economy. ‘
We’ve acknowledged, even with this stunning progress we’ve made on inflation and unemployment growth rebounding and wages growing, real wages growing and incomes recovering as well, we acknowledge that that doesn’t always immediately translate into how people are feeling and faring in the economy. We know that, and that’s guided us, it’s driven us.
We’re a Labor government, so in focusing on the economy, we focus on people in the economy and their living standards and how we can play a meaningful and responsible way in helping them out.
So that’s been our motivation. We’re in the fourth Budget of a term, we’re on the eve of an election, but we’ve genuinely tried as much as we can to be driven by the economics, not the politics.
There will always be people who try to dismiss and diminish the progress that Australians have made together.
Our job is to focus on managing the economy in a responsible way and making the most of this momentum for which we give the Australian people credit. Josh.
Journalist:
Every year since you’ve launched it, the Economic Inclusion Advisory Committee has said the welfare rates, Jobseeker rates, should be dramatically increased as recently as 2 weeks ago. Obviously, the tax cuts do go to people on very low incomes, but if you’re someone who’s not earning a wage, if you’re entirely dependent on welfare, there’s not much in this Budget really for you beyond indexation, is there?
Could I ask, if Labor was re‑elected, would this be something that you would be moving on a path towards in future budgets, a general increase to welfare payments?
Chalmers:
First of all, we set the EIAC up and we take its recommendations very seriously. That’s been one of the recommendations, but not the only recommendation.
We’ve actually acted on more than most people realise and acknowledge. I’m not including you in that, but necessarily the difference between what’s happening in Social Security and what’s happening in the tax system is that the Social Security system is indexed.
First of all, we did actually fund a $40 a fortnight permanent increase to working age payments in an earlier budget. So we ask you to look at our body of work across 4 budgets, not just one, but social security is indexed. I think the single JobSeeker rate is about $138 a fortnight more than when we came to office, a combination of those things.
The tax system, for reasons that you understand is not the rates and thresholds aren’t indexed.
From time to time, we make a decision to give a tax cut. So, tax relief for working people is a big priority in this Budget, but not the only cost‑of‑living help.
Strengthening Medicare is about taking pressure off people. Cheaper medicines obviously got a big impact for people. Energy rebates, slashing student debt, I encourage people to look right across the Budget and some of the things that we’re doing have been motivated and influenced by the good work of the committee.
Journalist:
Thanks, Treasurer, you said that the global economy is unpredictable and volatile. It’s fair to say that the same could be said about geopolitics.
Could you outline your thinking here about why you’ve chosen not to back defence spending with real boosts to our capability with new defence funding and sooner?
Chalmers:
First of all, I don’t think anyone looking at the Budget or our first 4 budgets could conclude anything other than there is a very substantial ramp up in defence spending. I understand your question is why aren’t we ramping it up beyond what we’re doing to ramp it up? But already, you know, we’re taking defence spending from 2 per cent of our economy to more than 2.3 per cent of the economy by the early 2030s, and that is a very substantial ramp up. It was $50 billion over the 10 years in the last Budget.
I think it’s 57 now from memory. As Rich said yesterday, it’s $10 billion or so over the forwards and there’s a billion brought forward. So we’re doing what we can to invest in our capability. It’s actually been a huge and high priority of this government.
Now our political opponents have been saying they want to spend more. Let’s see how they’ll pay for it and let’s see how they’ll budget for it. But already in the Budget, there’s a very substantial increase and that’s not reluctant. We’re doing that in recognition of the pressures that you rightly identify. The global economy and the world more broadly is a dangerous place right now.
And it is casting a dark shadow over the world and over our own deliberations. And that’s why the substantial increase in defence spending is so important.
Gallagher:
In addition to Jim’s answer, I think we also need to acknowledge the investment that’s gone into Home Affairs, DFAT, AGD, AFP, AUSTRAC, ONI, the Submarine Agency, all of those, particularly, even if you take DFAT on its own, the investment we’ve put in to make sure that the work that Senator Wong has been doing, the Foreign Minister in The Pacific and in Southeast Asia is strengthened. So, it’s a combination of all of that work, not just defence in isolation.
Journalist:
The federal tax base, the Budget Papers show there’s a pretty significant reduction in excise and duties over the forward estimates. At the same time, even with your income tax cuts, the share of personal income taxes to the Commonwealth tax base is rising to 54 per cent. Are you concerned with the overwhelming reliance of the federal tax base on living personal incomes?
Chalmers:
That’s one of the reasons why we’re taking action in the way that we are with 2 more tax cuts. That’s why we’ve shown an enthusiasm for tax relief, to get those average tax rates down. That’s what we’re able to do in this Budget with these topped up tax cuts for every Australian taxpayer.
When it comes to the tax base, and this might pre‑empt a few questions that people might not be able to ask in a moment, one of the biggest movers in the tax base is the excise, particularly when it comes to tobacco. There are good reasons and bad reasons to collect excise on tobacco. The reason we like is when more people give it away. The reason we don’t like is when more people avoid it.
So here’s a substantial investment in compliance and enforcement trying to rectify the bottom falling out of tobacco excise. That is a big part of the revenue story in the Budget.
Journalist:
We’ve spoken a lot today about the global uncertainty caused by Donald Trump in the White House. Part of this Budget is more support for Australia’s steel and aluminium industries. How much of that is about tariff proofing the Australian economy?
Chalmers:
Our agenda when it comes to the Future Made in Australia and the $3 billion of investment budgeted for in the Budget that we hand down tonight, it is about making our economy more resilient, not just in the face of escalating trade tensions, but more broadly, the way that our supply chains are changing as the economy goes from globalisation to fragmentation, as we go from hydrocarbons to renewables, from IT to AI.
Some of the big shifts that are happening in our economy identified in our Intergenerational Report, our Future Made in Australia agenda, the emphasis is on the future and the emphasis is on making ourselves an indispensable part of these global supply chains as they change.
We are seeing an acceleration in the change of these supply chains because of escalating trade tensions and for other reasons as well, and we think we’ve got a pretty compelling offer to the world, even as the world changes and becomes less certain.
So we’re trying to make the most of that combination of our industrial base, our human capital base, our resources and energy, our attractiveness as an investment destination. And we’re trying to bring all of that together in our industrial strategy and the Future Made in Australia. That will be helpful in making our economy more resilient. So will some of the things we’re doing in competition policy and economic reform, but also rebuilding households balance sheets as well.
All of this is of a piece because it’s all about making us more resilient in uncertain times. That was necessary before the escalation in trade tensions. It’s especially necessary now.
Journalist:
Paper number 4 talks about rebalancing and rebuilding the APS. It also identifies about 11,800 new public service roles that the government has created in place of contractors or consultants. Because the opposition have made such a big deal of Labor government’s waste being reflected by APS bloat and specifically their desire to cut 36,000 public service jobs. 36 is more than 3 times the 11,000 identified in Budget paper number 4. What are your concerns about where those numbers of cuts will come from?
Gallagher:
I think the work we’ve been doing over this term has been about rebuilding as well as rebalancing.
So, we came in, the public service had been underinvested in, it was not capable of delivering the outcomes that it was being asked to do. There was not enough staff in many agencies and a lot of effort had been put into outsourcing what is essentially public service work. So, we’ve come at this 2 ways.
One, we want to make sure that those jobs that were being done by essentially labour hire, mainly in high volume work in Services Australia, in the NDIA, in the Aged Care Quality and Safety Commission, where lots of roles were filled by labour hire and so we have converted those and made some savings in the process because they’re cheaper, bringing them on as public servants.
But we’ve also been realistic about ensuring the public service is actually resourced to do the job. We don’t want a public service delivering programmes like Robodebt. We want a public service that’s able to do its work. We’ve been methodical about going through and lining up how many, in order to ensure that your carer pension is provided in reasonable time, how many staff does Services Australia need to do that.
Take ex ‑Cyclone Alfred as an example, payments going out the door. $168 million are out the door now because we had staff there available ready to do it. NEMA was there responding to an emergency because it was resourced and able to do its job.
So, it’s been a big part of the work that we’ve been doing. The Coalition, they say they’re going to cut 36,000 jobs. They don’t provide much more detail. They demonise the public service. But you know, if previous record is how they’ll operate, then we know what that looks like. Robodebt, where they hunted down Australian citizens for money they didn’t know and threatened them with jail. That’s what they did last time.
If they’re going to go back to those days, that’s the kind of public service they’ll have hollowed out. Not independent, not providing frank and fearless advice, not acting independently in the nation’s interest. And we’ve rebuilt that. So, there is a lot at risk.
Chalmers:
What we’re going to do is we’re going to take 3 in one hit and then we’ll answer that in one go and then we probably better let you go.
Journalist:
Whether you earn $50,000 or $500,000, these tax cuts in isolation, the new tranche delivers the same relief. $268 a year or about $500 a year thereafter. Can you just expand on why you think that those different income levels require the same relief? And 20 years ago, you recall, Peter Costello stood in this building, he delivered a tax cut of the same amount, $5. It was lampooned as a piddling tax cut that wouldn’t buy a sandwich and a milkshake. What do you think $5 would buy today?
Journalist:
Foreign aid, you mentioned consistently that we’re in a tough geopolitical time. And Penny Wong always says there’s a vacuum that’s been created with cuts to US aid as well. Why is foreign aid being cut or going backwards?
Journalist:
When did you start considering this tax cut, implementing it, and when did you finalise the decision?
Chalmers:
So on Sam’s question, we acknowledge that these tax cuts in isolation are modest, but they’re meaningful in combination. This is not just one round of tax cuts for every Australian taxpayer, it’s 3 rounds and the average taxpayers benefit.
The average tax cut is $50 a week. Now, we know there’s an appetite for more tax relief. We understand that we provide tax relief when we can afford to do that, but we’re operating in the context of some pretty substantial fiscal constraints.
On the timing question, this has obviously been something that we have been considering more seriously as we get closer and closer to the Budget. They were finalised in the usual way. The Expenditure Review Committee played a role.
But these tax cuts are really all about recognising and ensuring people can earn more and keep more of what they earn. That’s one of the best ways that we can help people with the cost of living, acknowledging the point about their relative modesty in isolation.
But we’ve been working on this for a little while, not for a long time, but in the back of my mind, there has always been an enthusiasm to top up those tax cuts which started rolling out in July, because we’re very pleased with the economic impact that those tax cuts have had. We do see it as a very important way to rebuild household incomes after they were smashed when we came to office. And so even acknowledging that they’re relatively modest in isolation, we’re proud that we’ve been able to afford them.
Gallagher:
We’ve increased investment in foreign aid by about $1.4 billion since coming to government. There will be, like in other departments, you might see adjustments where there are programmes that are essentially finishing.
So, coming off is probably the answer. There hasn’t been any cut. There may be a programme that’s terminated because it’s come to its natural end. But we have significantly invested in foreign affairs because we recognised that we needed to when we came to government, we needed to stabilise and invest in relationships in our region. Senator Wong’s been leading that and I’ll leave it for her to answer questions specifically about her thinking on foreign aid budgets.
Chalmers:
Thanks very much, everyone. Appreciate it.