Tom Connell:
Thank you, Treasurer. Last week, Michele Bullock said it doesn’t take much additional spending to make the job of returning inflation to target more challenging. From the Budget papers, the net amount of extra money in the economy, including government decisions, payments, etcetera, is $18 billion next financial year. Does $18 billion in one year qualify as much additional spending?
Jim Chalmers:
Well, a couple of things about that. First of all, if you look at that $18 billion figure, Tom, that is mostly variations. Things like the indexation of the pension is part of that number. If you look at the net impact of our decisions, it gets closer to $3 billion. There’s some fairly substantial defence spending in that number as well. And so, the composition of those numbers matters as well. Overall, if you look at the Budget papers and the advice that we received from Treasury colleagues, I think from memory page 86 of the main document, what it says is the Budget is taking the pressure off inflation, and it’s doing that because we took the task of responsible economic management very seriously. The underlying cash balance in each year of the forwards is better than what it was in December. Same when it comes to the debt trajectory. Spending as a share of the economy gets from up around [20] per cent of GDP to closer to 26 per cent of GDP. $64 billion in gross savings, $26.1 billion net save.
If you look at some of the commentary from the private sector economists, they make it clear as well that the Budget that we handed down is not adding to inflationary pressures in our economy. So, obviously, I’m not going to give free advice to the independent Reserve Bank. They will make their own decisions in the usual way. But everybody should rest assured that the Budget we handed down last night, and I pay tribute to Katy and other colleagues for this, is historically responsible. If you compare our net impact we made on the budget, compare the magnitude of the savings that are in the Budget, that is a historically responsible document and that’s because we take the inflation challenges in our economy very seriously.
Connell:
I do have a few questions. I’ll just make note of my colleagues. I’m only going to ask one of them, so perhaps that could be an example. We’ll begin on the floor from recent lifetime achievement award winner, Michelle Grattan, from The Conversation.
Michelle Grattan:
Thank you, Treasurer. The government has a target of 1.2 million new homes by 2029. At the moment, you’re falling behind that aspiration. Is the government still firmly committed to that target? And how much closer in precise numbers will your various housing measures collectively bring you to meeting that target?
Chalmers:
It’s an ambitious target, and I’m confident that we can get there if everybody does their bit. And the Commonwealth, I think, has proven we are not just willing but enthusiastic about building more homes. If you look at the housing package in its totality in the Budget last night, the combined impact of all of the housing policies that were released last night would see another 30,000 homes built in our communities and in our economy. That’s the net impact of the Budget on the housing numbers. If you look right across the $47 billion of investment, there’s a huge emphasis on supply. Overwhelmingly, the government’s is on housing supply. I pay tribute to Clare O’Neil and before her, Julie Collins for the work that gets done in the housing portfolio. And so, the Budget is making a net contribution to housing to get us closer to that ambitious target. It will be difficult, but I think that we can get there.
Now, if you think about recent developments in the housing market, acknowledging that there is much more to do, not just on supply but some of these other issues about the difficulty that a lot of Australians feel in getting a toehold in the market. But if you think about some of the raw numbers – when it comes to commencements, we saw commencements go up by 26 per cent last year. That’s progress, especially when you consider they were falling 28 per cent when we came to office. So, commencements starting to come good last year. Approvals through to March of this year, we’re up 13.1 per cent. They were falling 21.6 per cent when we came to office. So, turning approvals around, turning commencements around, similar story for investment and in some of the other categories as well.
The point that I’m making is we made some progress. We know that there’s heaps more to do to try and hit that ambitious target, but the Budget shows that we’re willing to do our bit.
David Speers:
Treasurer, thank you for the speech and appreciate the spotlight that’s on this microphone.
Chalmers:
We’re waiting for you to sing a song David, I think.
Speers:
Don’t tempt me. You began the speech by talking about the difficulty of this Budget. Can I take you to something that was arguably more difficult, that was taking some of these tax changes to an election in 2019? You were the Shadow Finance Minister, and you talked about some of these tax incentives going to the top end of town, and you were going after that top end of town. You’re not using that language now. You’re talking more benignly about rebalancing the incentives from income earned from assets to income earned from labour. But I wonder, should those who have built up an asset regard this as the limit of your ambition to go after them, whether you call on the top end of town or not? Or should they expect this is the start of more to come?
Chalmers:
Well, my ambition when it comes to future tax reform is to try and provide more tax relief for working people. That’s why I’ve set up this architecture. That’s why we’ve been very upfront in the Budget papers and in interviews since the Budget was released in saying that this government is very enthusiastic about returning more bracket creep when it’s affordable and responsible to do that. This is a government which has already cut income taxes 5 different ways, and we’ve only been here 4 years. And so, people should take their cues from that.
The reform ambition I have into the future is to try and provide more tax relief to provide to return more of this bracket creep, which you can see in the Budget papers. We’ve been up front about that. The architecture that we set up in recognising that we need to better align the tax paid by workers with the tax paid by people who make their living in other legitimate ways is we set up this architecture to make that easier on the income tax side for workers. And so, I would intend to make the most of that at some future point. I suspect that successive governments after us would do that too.
Katina Curtis:
Thanks, Treasurer. There’s about 110,000 first home buyers every year. The changes in the Budget, you say, will help about another 75,000 people, but that’s over a decade, so it seems like hardly a very big annual increase. Is it worth it, or does that show that this is just an ideological change?
Chalmers:
Well, it’s worth it for 75,000 Australians who wouldn’t otherwise get a look‑in in the housing market if we hadn’t taken the difficult decision that we announced last night. I’ve heard this argument put through the course of some other interviews today, Katina, and I understand where it’s coming from. It’s essentially an argument to go further, but we think we strike the right balance here. We think getting another 75,000 Australians, and most likely primarily younger Australians, into the housing market is a very good thing to do. It’s worth the political risk that we’ve taken in coming to a different view and changing our policy position in some contentious.
For those 75,000 Australians and for other Australians as well, the status quo is busted in the housing market and in the tax system. Where those 2 things intersect creates a level of intergenerational inequity that we’re not prepared to tolerate. It would have been the easiest thing in the world to see that problem, to recognise that the longer we leave it, the worse it gets, and to leave it unattended. That’s why we took the difficult decision that we took and announced last night.
I’d rather – I think I said this to one of your counterparts last night – I’d rather do the right thing by those 75,000 people and explain why a change in policy was necessary and own that, than to leave this problem for someone else to fix down the track and in the meantime, to let this problem get worse. Too many Australians, particularly young Australians, are locked out of the housing market. It requires government policy to help rectify that, rebalance that, and that’s what motivates us.
Andrew Clennell:
Afternoon, Treasurer. This Budget has a big new tax take of more than $100 billion over 10 years from your new taxes. And according to Treasury’s modelling, the policies increase rents and only lower the growth in cost of a median home by 19 grand. On top of this, myself and the older people in the room here can negatively gear now on existing property, but young people can’t anymore. So, when it comes to young people in this country, are you really on their side? Or, as young people would say, is it all about getting that bread for the taxman?
Chalmers:
Are you sure young people say that, Andrew?
Connell:
He did actually ask the office, and we didn’t come up with much. Maybe we’re all too old.
Clennell:
I sent it to my son to double‑check it just before I came up here.
Chalmers:
Tom reckons you asked around the office. I think there are 3 important parts to your question. Let me try and touch on each of them. First of all, the impact of our policy we’ve provided, the Treasury modelling negligible impact on rents. House prices will continue to grow but more slowly, about 2 per cent more slowly. That’s the $19,000 figure that you’re rightly referring to. Right across the Budget, though, our housing policies will add to supply and that will put downward pressure on rents. So, on impacts, that’s the first part of your question. And in terms of this issue of are we providing a level of concessionality to older people that is no longer available to younger people? Obviously, one of the most important counters to that is that if you’re a younger person with the means to invest in housing. Go for it, just invest in a new home, add to housing supply.
We are not ending negative gearing entirely. We’re saying if you want negative gearing the future, buy a new home, genuinely add to housing supply in this country and then that will tick a couple of boxes at once. And so young people can avail themselves, can avail themselves of that. Now the third part was your question about the longer term, the tax arrangements into the medium term of the Budget. So, first of all, everybody needs to understand that over the forward estimates, what we are collecting from negative gearing, capital gains and trust changes is being returned to workers and to businesses in the tax package. The tax package over the forward estimates is broadly neutral.
But you’re right to say that over the longer period, some of these tax changes will raise a bit more. Now the thing that I wanted to point out here, the really important point which is missing in some of the coverage today is if you look at the chart on page 91 of the Budget papers, Budget Paper 1 last night, we’ve provided a chart which shows that the very substantial medium term improvement in the Budget is driven, by some multiples, by our savings decisions. By the good work that Mark and Jenny and others did on the NDIS and some of our other savings. By the end of that 10‑year period, 3 times more of the improvement comes from savings rather than tax changes. That’s because the heavy lifting in this Budget, the most responsible part of this Budget, is being done by savings rather than by tax changes.
To the young people who have the concern that you have raised, we are trying to rebalance the tax system on their behalf. We’re providing tax relief 5 different ways to younger people. It’s a government which is very enthusiastic about cutting income taxes, where we can.
Phil Coorey:
Thanks, Tom. Treasurer, when you remodelled the stage 3 tax cuts in the last term of government, when you undid the legislation you inherited, you reintroduced the 37 per cent tax bracket, and you dropped the income threshold at which the top tax bracket would apply from $200,000 to $190,000. In your speech today and on radio this morning, you’ve made it quite clear that you envisage future tax‑free relief being delivered via the WATO. So, it just focuses on salary earners, not people who earn their taxes from other sources, like assets. Are you saying that as far as you’re concerned, going forward that income tax reform in terms of lowering tax brackets is over and the easiest way to do is just increase the WATO.
Chalmers:
No, I’m saying it gives us another option. It gives us another piece of architecture. If we want to target very specifically future tax relief for working people, we’ve got the architecture to do that. Now, this is a new development in our tax system. It’s a genuine reform. What it does is effectively lifts the tax‑free threshold for people who work for a living. It’s another option that governments will have.
Our government and other governments which follow us, they can choose between providing tax relief the usual way, the way that we have 3 times, or via the Working Australians Tax Offset. So, in creating that architecture, I’m not for one second ruling out providing tax relief, income tax relief, in the way that we already have 3 times. I think any government would weigh up its options in the future and provide as much income tax relief as it can afford to, to return some of that bracket creep and provide cost‑of‑living relief, essentially primarily for people who work for a living.
Anna Henderson:
Thank you, and thank you for your address, Treasurer. Why is it that the Treasury has repeatedly underestimated net overseas migration? And given we are seeing those higher figures, can we be confident that the years ahead, the reduction that is forecast, is going to be a reality?
Chalmers:
Well, first of all, it’s not the case that Treasury has always underestimated. In fact, I think in the last full year, net overseas migration came in 30,000 people fewer than the Treasury forecast. I’ll check that, in case I haven’t got that quite right. But that’s my off the top of my head, I think it came in lower last full year than what the Treasury was anticipating. There’s the usual amount of uncertainty about forecasting a range of numbers in the Budget, including that one. What we’re seeing this year and next year is more a reflection of fewer people departing Australia rather than another spike in arrivals like we saw, which began before we came to office.
There is a little bit of volatility in those numbers. But we see volatility in other forecasts as well. It’s gone in both directions from memory in the Treasury forecast. And there’s a couple of measures in the Budget which are about putting downward pressure on that net overseas migration number a bit further. The most important thing for people to remember, including people – not you, Anna, of course – but people who seek to politicise the migration system for the most divisive reasons is net overseas migration has actually come down 45 per cent from its peak. When we came to office, net overseas migration was surging. We got that down by 45 per cent back closer to more normal levels. We still expect it to normalise over the course of the next couple of years, but fewer departures are complicating that story.
Matthew Cranston:
Treasurer, just to follow on from Phil’s question, you’ve said the architecture of the WATO is an option for returning bracket creep. And you said also the use of the way you’ve given tax cuts in the past as a way to return bracket creep. Can you rule out indexing any or all of the thresholds as a way to reduce bracket creep? And when I mean indexation, that’s a permanent fixture. And you’re a big fan of looking at the trust reform, that’s been your thing. Is there much of a difference between a non‑refundable credit and a franking credit?
Chalmers:
Well, on your first question, when it comes to returning bracket creep, as I said to Phil and I think in the speech and on other occasions, we’re enthusiastic about returning bracket creep. We’ve now done it both ways. We’ve done it by cutting rates and thresholds, and we’ve done it by providing this other architecture. We haven’t been exploring the option of indexation. There are good reasons, I think, for governments to decide the appropriate level of tax relief to return as much bracket creep as they can when they can afford to do that.
If you look at one of the consistent themes throughout the life of this government, it’s cutting income taxes for working people. We’ve only been here 4 years, and we’ve done it 5 times in really 3 different ways. The usual way, the instant deduction and now the Working Australian Tax Offset. All of those options are available to our government and to future governments. If another government wants to take a decision to index the thresholds, then that’s a choice available to them. But I think there are good reasons to tailor tax relief to the conditions and to make sure that they are as responsible as they can be. We can only ever provide as much tax relief as we can afford to do. And for those people who say that the Working Australian Tax Offset is relatively modest, we understand that, but it’s part of 5 different ways that we’re cutting taxes and it will give us the architecture to dial up that tax relief in the future if we want to.
On your other question, we’re not proposing in this package to change the treatment of franking credits, including the way that we think about some of the associated issues of refundability and the like.
Paul Sakkal:
Thanks, Treasurer. Treasurer, you’ve talked about this Budget being the most responsible in a long time. Your fiscal strategy relies in large part on enormous savings in the NDIS as well as the really large revenue upgrades on the housing tax concessions over time. Those NDIS changes haven’t passed the Parliament. The states may oppose some of it. Even Mark Butler says the changes to eligibility may be really difficult to work out. Do you accept that there’s a huge level of risk if that underpins your fiscal strategy and return to balance in the budget?
Chalmers:
Well, there are a number of elements of the Budget which are difficult but doable, and again I pay tribute to those colleagues for in the NDIS portfolios, Mark and Jenny. But Katy’s done a heap of work. The ERC’s worked very closely with them. Probably the issue that came back and forth to the ERC the most over the course of the last 12 months or so, and that’s a really important reform in the Budget. It’s not just a saving – it kind of diminishes it to describe it in that form. It’s really a very, very key reform in social and economic policy and it will pay dividends.
Now, I understand that there is a level of trepidation amongst the commentators because what we’ve seen in the NDIS in the past has exceeded the original expectations that we had for it. So, I understand that, and we’re very cautious about changes that we make to the NDIS. But our motivation there is really clear, and we’re trying to save the thing from itself. It was growing too fast. It would have consumed itself. Some future government with different motivations to ours would have been tempted to end or effectively ruin the scheme. And so as big supporters of the NDIS, we took very seriously our responsibility to it. I understand that there are big numbers associated with it because the costs were blowing out so substantially. I understand that it will take a lot of work and not just at the Commonwealth level to make sure that the numbers that we’ve accounted for in the Budget come to fruition. But I’m confident that we can.
Patrick Commins:
Thanks, Treasurer. I think going back a little bit to Katina’s question earlier, and you spoke about a broken status quo, we know that housing is very much at the heart of that. Would grandfathering the changes to CGT and negative gearing, you know, totally grandfathering them, would that have delivered a bigger improvement in housing affordability now? And if so, why did your government not pursue that option?
Chalmers:
Well, I think like every difficult policy area, you’re looking to strike a series of fine and correct balances, and we think we have in the tax package. We respect and recognise decisions that people have taken in the past. It is essentially a prospective set of tax reforms that we are proposing. Respecting and recognising investments is one of the principles that we tried to stick to. Now, of course, there will be some people who argue that we should do more, that we shouldn’t provide transitional arrangements. There were some, obviously, who wanted to defend every element of the existing arrangements. But we think we found the right way through here. We’ve balanced respecting and recognising those former investments at the same time as we’re changing the system for the future, so that we continue to provide a discount in the CGT system but calculated in a way that minimises some of these other distortions.
What I tried to say in the speech and what I’ve tried to say over the course of the last couple of days, is the change that was made in 1999 introduced, I think, a very serious distortion in the tax system, flowing through to how people think about investment in this country. If you look, there’s a two‑decade period in the last quarter of a century where, on average, the CGT arrangements were overcompensating people piling into the existing housing market and undercompensating people investing in shares or units or in other investment categories. We’re trying to fix that distortion, but we’re trying to do it in a way that smooths out and minimises the market disruptions and recognises that a whole bunch of people made a whole series of decisions based on the old arrangements.
Connell:
You spoke about the generations in your speech and not being a war between them and wanting younger people to be able to sort of catch up on opportunities. What about people, perhaps Gen X millennials, who are going to try to go down the same path their parents did? Are you unapologetic that it’s going to be harder for Australians to get ahead financially from now on?
Chalmers:
I wouldn’t agree that that’s the conclusion. I mean, first of all, we are the party of aspiration. And if people, younger people, have got the means and the inclination to invest in housing, they can continue to negatively gear a new property. That option is still available to them. But I think this question of aspiration is really one of the big differences between the political parties, the different way that we view aspiration. Our opponents have got this kind of narrow, backward‑looking view about aspiration. They see aspiration as the exclusive preserve of people who are already doing well. They’re about fewer people doing well, and we’re about more people doing well.
And that’s the difference. And that applies to different levels of income, that applies to different generations, as well as aspiration is something that every Australian should feel entitled to. And for too long in this country, I think younger people in particular have felt disconnected, disregarded, disrespected, particularly in the housing market. The way that our housing market and our tax system intersect has created this sense that aspiration is something that we admired in the past, but not aspiration that people can feel entitled to in the future. And so that is underpinning all of this. That’s really one of the big things that’s driving us.
There’s nothing aspirational about stacking the deck against younger Australians. There’s nothing aspirational about knowing that the housing market and the tax system are intersecting to shut a whole generation of Australians out of the dream of home ownership and leaving that undisturbed or unattended to. So, this is an aspirational package, an aspirational government, an aspirational country. But we can’t have a situation endure where we say to a smaller and smaller group of people, ‘you’re entitled to aspiration’. But this bigger and bigger group over here is not.
Mark Riley:
Treasurer, I just want to take a broader look at your decision to change negative gearing and CGT and the implications that has on your government and the complexion of your government. The reasons you’ve given today is that the young generations are locked out of the housing market. That was apparent abundantly before the last election. So, abundantly, in the Prime Minister’s words. We asked him and you and others at least 50 times whether you’re going to change these tax arrangements and you said no.
A lot of people were compelled to vote for the Albanese government in 2022 and again in 2025 because of that promise of openness and accountability and integrity. You will be a different government. These are people who heard ‘never ever a GST’. They heard ‘there will be no carbon tax’. They heard no cuts to the ABC, no cuts to the SBS and then they heard the opposition say we’re going to be different. Won’t those voters wake up this morning and say, you’re not different, you’ve just proved you’re just another lying government?
Chalmers:
Look, to be frank with you, Mark, we expect that that charge will be levelled at us. It’s not unexpected. And to the extent that we have changed our position on these policy areas, it’s not especially unfair for people to point out that the position that we put last night in the Budget is different to the position that we held and expressed 12 months ago. The comments that we made in the last election reflected our position at the time, which was that we thought we could do enough in the housing market to focus overwhelmingly on supply and with the 5 per cent deposits. And it’s become increasingly clear to us that in addition to doing all of that work that we needed to take on this status quo, which is locking people out of the housing market, and make some difficult changes.
We know that that brings with it political controversy. We expect the view that you just put in your question, Mark, to be put to us. We obviously knew when we took this difficult decision that people who didn’t want to engage on the substance of this issue will engage on the politics of this issue. So, we knew that. I think the worst thing to do, the easier thing to do, would be to leave things as they are and understand that the longer we leave things, the worse they get.
And so, my view, and I know that some people will have a different view, but it would have been easier but wrong to leave these arrangements in place for longer and leave it to someone else to fix them. And it is my view, increasingly my view, and I think I’d be very surprised if people here didn’t share this view, that there is a growing sense and accelerating sense in our society and societies like ours around the world that there is a huge risk of people feeling disconnected and disregarded when it comes to our economy. And in my view, the prospect of more people losing hope or more people losing connection is a problem which transcends all of the others, including the political considerations you’ve put to me.
Jason Koutsoukis:
Treasurer, thanks for your speech. 40 years ago tomorrow, Paul Keating issued his famous warning about the banana republic, prompting that government to cut Commonwealth spending to around 23.5 per cent of GDP. What’s changed since then [inaudible] spending above 26 per cent?
Chalmers:
Well, I mean, you all know that I’m a – I’ve spent a lot of time thinking about that period and that Treasurer and that Prime Minister and had a lot of discussions with Paul in the course of putting this package together last night. I think Paul would recognise and all of you would recognise it’s not 1986 anymore, and our economy has changed largely for the better and largely thanks to some of the gutsy things that Paul did. Our economy is different. Forty years have passed, our society is different, the demographic make‑up of our country is different.
So, some of the pressures on our budget that Katy and I spend a lot of time grappling with, you know, the pressures around ageing, the pressures around caring for people with a disability, the big defence investments that Richard leads with Pat, all of these things are putting additional pressure on the budget. One of the things that I’m proud of and confident about in the Budget last night is that we have taken these challenges of big, long‑term spending pressures more seriously than our predecessors did. And even if you think about that measure of spending as a share of the economy, even though it’s changed over time, as some of those pressures have intensified, we’ve still got a situation where spending as a share of the economy under our predecessors was up around a third of the economy.
And we know there are reasons for that, but it was up around a third of the economy. We got it down under a quarter. It settled in the 26s. But at the start of the forward estimate, spending as a share of the economy is about up near 27 per cent, just south of. By the end of the forward estimates, it’s closer to 26 per cent. And in the context of all of the pressures that the budget is under, we think that’s a big and serious effort.
Charles Croucher:
Thank you, Treasurer. You’ve made it clear you think getting into the housing market is difficult, particularly for young people. That’s not new. You knew that in 2016 and 2019 when that was Labor policy. Given you’ve now changed your decision on that, I want to get to the mechanics. When did you rediscover that housing is difficult? Was it when you won 94 seats at the election? Was it when you were looking at the kids in the backyard with one eye on them? Was it an informal or formal conversation? In the 15 months since, it wasn’t difficult enough to take it to the public? What’s changed?
Chalmers:
Well, I think some of these challenges have intensified, and as I said in responding to some of those earlier questions, the position that we took to the election reflected our almost singular focus on supply. Our focus on the housing package last night is still supply, but it’s expanded to include some new measures on youth homelessness, for example.
Croucher:
Was there a number that brought that on?
Chalmers:
Yes, coming to it, Charles. And so those pressures have intensified. And as I said before, I think in response to Mark’s question and other questions, the choice that we had was whether to let that continue and get worse, or to do something about it and take the political risk to change our position now on the timing of all that.
These decisions were taken by the Expenditure Review Committee of the Cabinet relatively late in the process, either towards the end of April or perhaps the beginning of May. But in the last few weeks, we changed our position. Over the summer, I was thinking about tax reforms. I was thinking about business tax reforms. I was engaging with probably a number of people in this room about business tax. In and around the reform roundtable that we hosted in the second half of last year, we were thinking about tax reforms.
We knew that there were a series of challenges in our economy, inflation, productivity, some of these other challenges. So, we were thinking about tax reform over the summer. There wasn’t a moment where we flicked the switch into considering some of these sorts of issues. But the decision was taken relatively recently to change our policy.
Jessica Wang:
Thank you, Treasurer, Jessica Wang from The Daily Telegraph. Given that buying into shares has become a method of investing for young Australians who are struggling to get into the housing market, in some cases they use micro investment platforms or buy directly off the ASX. What is your response to a young Australian who has observed that Labor has made it significantly harder to build their wealth and, in some cases, save for a housing deposit, while older Australians remain unaffected?
Chalmers:
Well, what we’re doing is removing the distortion in the capital gains tax system. And as I said before in response to an earlier question, you know, if you look at a couple of decades of averages, what we’ve seen is that shares have been undercompensated for in the old system. What we’re trying to fix here is this big distortion introduced in 1999. And what that distortion meant was more and more people getting into buying established homes rather than getting into the share market.
You can actually see since that 1999 change, it’s changing Australians’ appetite to invest in the share market. And so, it’s entirely possible, depending on that person’s circumstances, their marginal rate, how long they invest for, what kind of shares they’re invested in, you can’t create a blanket arrangement for every different circumstance. But it’s entirely possible that by removing the distortion that we make shares more attractive rather than less.
James Mayger:
Thanks, Tom and thanks, Treasurer. Switching from housing, looking at the assumptions on iron ore prices, coal prices, LNG prices, that kind of thing in the Budget, they’re very low compared to where markets are now. And looking at what’s happening in the Straits of Hormuz, they’re probably very low where they, you know, where those kind of prices are going to be in 3 months time.
Does that difference between where you’re forecasting to be and where they’re likely to be provide a lot more room for either a better bottom line of the Budget than you’re actually forecasting yesterday or tax cuts going down the road? And you know, you had this doomsday scenario in the Budget where oil goes to $200, but it doesn’t actually have any kind of costing on the benefits to Australia from through again, those higher taxes. So, do you, sorry, those higher market prices, do you see the overall benefits of that being positive or negative for the economy? Thank you.
Chalmers:
First of all, we’re deliberately conservative in the way that we forecast – when I say we, when Treasury forecasts – the commodity price outlook, that’s been a feature of governments of both political persuasions to try and be conservative about that. It can go the other way. And so we try and be as responsible as we can and sometimes that means being as conservative, maintaining that sense of conservatism. When it comes to those sorts of forecasts, we take a price in those markets, bulk commodity markets, and it typically trails away to an agreed endpoint over a period of time, over a number of quarters. And so, we haven’t made big changes to that. We made a minor change in iron ore not that long ago.
We made a minor change, I think, in gold not that long ago. But overwhelmingly, we’ve tried to maintain the same kind of arrangements that successive governments have used to be conservative about that. In terms of the impact of what we’re seeing in the Middle East on commodity prices flowing through to the Budget, I think the revenue upgrade ex GST was I think 34.5 billion in the Budget, about 9.5 billion of that was from the conflict. And so relatively modest numbers. In terms of the impact of what we’re seeing in the Middle East, that doesn’t take into consideration, of course, some of the downside as well. It’s a net figure, but it doesn’t take into account all of the downsides. So, a long way of saying deliberately conservative. The revenue upgrade from what we’re seeing in the Middle East is not anywhere near what some people were anticipating. And also, don’t forget that there’s a year in the Budget where we’ve actually had to downgrade our revenue. And that’s because of the impact of the conflict, lingering impact of the conflict on growth and jobs.
Connell:
Coming up to time. You’ll make Joseph’s day if you can squeeze him in. What do you think?
Chalmers:
Yeah, let’s go.
Journalist:
Thanks, Treasurer. I think we’ve covered housing a fair bit, so it might just shift to something else. So, AUKUS, the Budget confirms that the Australian submarine agency budget would – It blew up by 33.3 per cent. I think it’s grown to about $512 billion, or sorry, million dollars. So, over the next 4 years, the cost of the nuclear submarine program has grown by an additional $431 million. I’m just wondering, with the total 10‑year undersea warfare bill, basically, I think it was put at $130 billion over the next decade. Can Australia really afford to continue this without cannibalising other areas of the ADF, especially at a time where we’re seeing conflicts pop up left, right and centre?
Chalmers:
Well, the world’s a dangerous place and I think big investments in national security make a lot of sense, and there will always be the risk in some of these big defence projects that the cost blows out. I really want to thank, in Richard’s absence and Pat’s absence, so much effort, so much effort in our government goes into making sure we get value for money from these big sums. But overwhelmingly, in principle, when I go to these discussions about investments in our national security, first of all, I recognise that national security and economic security are effectively the same thing now.
And nothing comes cheap in defence if you’re serious about making Australians safer. And I know that there’s a range of views about that, but from my point of view, big investments in national security make a lot of sense. You can see big investments in the Budget we handed down last night, and in making those big investments, the responsibility on all of us is to make sure that we get maximum value for money when we make them.
Connell:
We’re at time, but a yes, no question’s always easy. Road user charges, you said its time has come in August. It wasn’t in the Budget so, yes, no, is it still on the to‑do list?
Chalmers:
Yes.
Connell:
Okay. I know your favourite part of Budget week is talking to journos, so you’ve got another press club membership to come down and have a yarn with us later on. We do thank you for continuing tradition, though, Treasurer. Ladies and gentlemen, please.
Chalmers:
Thank you. Thanks very much, everyone.