JIM CHALMERS:
I spoke this morning with Murray Watt, the Minister for Emergency Management, on his way with the Prime Minister to inspect some of the flood‑affected parts of Australia. To everyone involved in keeping Australians safe, to preparing for the worst, to cleaning up after the event ‑ we say thank you. Thank you so much to all of the amazing Australians who are looking out for each other and looking after each other as we confront yet another set of natural disasters, which are impacting so many Australians around the country. This is the best of Australia in the worst of conditions. Australians are there for each other when times are tough and we assure people that the Government will be there for them as well. This is a human tragedy, first and foremost but it has obvious consequences as well for the economy and for the Budget. I think we need to brace ourselves for the impact of these natural disasters on the cost of living. We're talking here about some of the best growing and producing country in Australia, and it has been seriously impacted ‑ whether it's the destruction of crops, or the inability to access some of these farmlands, whether it's livestock and other consequences. I think Australians do need to brace for a cost‑of‑living impact from these floods. These are likely to push up the cost of living when Australians are already under the pump. It will also have obvious consequences for the Budget. We will be there for Australians in the usual way. I had a good conversation with Murray Watt about that this morning and no doubt there'll be more conversations about that, and with states and territories as well as we get our heads around the scale, the magnitude and the destruction which has been brought by these natural disasters.
It's also a reminder of the backdrop for this Budget, which I'll hand down in this building in eight days’ time. High and rising inflation ‑ a consequence now of natural disasters, but also global factors, the war in Ukraine, issues with their own supply chains here at home. Secondly, the persistent structural spending pressures that we've spoken about in this room quite a lot, including skyrocketing borrowing costs on the debt that we've inherited in the Budget. And thirdly, of course, the deteriorating global economy. I just got back yesterday, early yesterday morning from Washington DC after a really valuable opportunity to meet with my counterparts from the US, UK, Canada, India, Korea, New Zealand and Ukraine. The Council of Economic Advisers to President Biden, BNP Paribas, JP Morgan, the heads of the US Fed, European Central Bank, the World Bank and the IMF as well. The key takeout from discussions in DC is that the world is tiptoeing a narrowing and more perilous path when it comes to the prospect of another global downturn. That's why the Budget next week will downgrade our forecasts for growth in our major trading partners. The US has already had two negative quarters, and Treasury has downgraded the forecast for next year from two and a half per cent to 1 per cent in the US. It's likely that the UK is in recession already. Treasury has downgraded the UK next year from 2 per cent to [0.25] per cent, a quarter of a per cent. Euro downgraded from two and a quarter to half a per cent, and China has slowed considerably as well. Our best defences against uncertainty around the world is a responsible Budget at home, and that's what I'll be handing down next week. It will be focused on responsible cost‑of‑living relief with an economic dividend. It will have targeted investments in a stronger and more resilient economy. And it will begin to unwind the legacy of wasteful spending, which has given us a trillion dollars in debt and deficits as far as the eye can see. It will be a sensible, solid budget and suited to the difficult times that we confront.
JOURNALIST:
You just said that the foods will have an impact on the Budget bottom line. Could you elaborate on that at all and also before you left for Washington, you said that despite global factors you believed that Australia could avoid a recession ‑ has that view changed at all following your meetings?
CHALMERS:
It's our expectation, and obviously our hope, that Australia will avoid recession. We've got a lot going for us in this country: we've got low unemployment, we've got relatively solid growth, relatively solid demand, we've got good prices that people are paying for our commodities around the world with a positive impact of that on the Budget. But we won't be completely spared another global downturn, and so the job of this Budget is to make sure that the Budget and the economy is as resilient as it can be. Australians are paying a really hefty price for this wasted decade, which has given us stagnant wages and skill shortages and chaos in energy markets and a crisis in aged care, and made us more vulnerable to these global shocks than we should be. And so the Budget begins the hard task of making us more resilient.
JOURNALIST:
Thanks, Treasurer. Medicare rorts cost the government $8 billion dollars a year, that's more than the annual cost of the Air Force and about 30 per cent of the Medicare budget ‑ is this part of the Government's waste and rorts audit?
CHALMERS:
If these numbers are true, it's absolutely atrocious. Every dollar rorted ‑ whether it's Medicare or the NDIS ‑ is a dollar thieved from people who need and deserve good health care. And so the Health Minister will have more to say about this. Bill Shorten has been talking about this in the context of the NDIS as well. We do need to do more work here to make sure that our defences against people who want to rort and thieve from government programs are cracked down on. And so we will do that work ‑ very concerning reports, very troubling revelations, and something that we will get to the bottom of because we don't want to see a single dollar rorted or thieved from the system when it could go to helping people who are vulnerable, help them with their health care or their disability care.
JOURNALIST:
You said before you left that you would make specific changes to the Budget, in light of your information in Washington if necessary. Are you making specific changes as a result? And secondly, the money to do with the floods, the costs and so on ‑ will there be time to put an estimate in this Budget or will that have to wait until later?
CHALMERS:
In reverse order, when it comes to the cost of the floods, part of the commitments are automatic and part of them are discretionary. And we'll obviously have conversations with Murray Watt, Prime Minister, myself, Finance Minister and others to make sure that we are there for people as they rebuild from yet another round of natural disasters. There'll be an element of that in the Budget, we'll make sensible provisions where we can. We're in the process of putting the finishing touches on the Budget this week and to the extent that we can incorporate events as they unfold, we'll do our best to do that. Same with the international situation ‑ I think the key lesson from all of those discussions over a pretty hectic two and a half days in Washington DC, is that anything that we can do to build buffers against this international uncertainty, we should be doing. And so for me, I think it was confirmation that we're broadly on the right track with our Budget strategy ‑ unwind wasteful spending, redirect it to areas where it can be more productive, and make sure that we provide cost‑of‑living relief with an economic dividend so that it doesn't push up inflation. When you go around the room at the G20 and listen to my counterparts as economic ministers around the room and you listen to central bank governors from around the world, really the key take out is that this is a time for restraint and resilience and that's what the Budget will be about.
JOURNALIST:
The Building Better Regions fund, the Community Grants fund ‑ are any of those on the chopping block like to actually be abolished or are you just looking at lowering spending in them and reallocating programs out of them? Or is there a chance that any of them could go well together?
CHALMERS:
We'll make that clear on Budget night but our efforts here are all about getting maximum value for money, and in some of these programs, for too long there has been a culture of a lack of rigour making these kinds of commitments, and we want to change that. I think Catherine King and Katy Gallagher did a great job yesterday of explaining our approach to some of these funds. When you've got a trillion dollars in debt, when you've got deficits as far as the eye can see, you've got to make sure that your spending is defensible. We want to make big investments in the regions, we want to make big investments in infrastructure and we will. But we need to make sure that that's responsible and sustainable and profiled in a way that we can actually build what we commit.
JOURNALIST:
Treasurer, you talk about tough decisions and the need to make them in subsequent Budgets and you always list these five areas of structural spending but are you prepared to have a really solid look at things like ‑ I know you mentioned last week ‑ the waste in defence, rather than just aim for a spending figure, actually make sure you're getting value for money. And the NDIS where experts complain that the people who provide services also assess the needs of the person they're providing the service for and that is the real reason that things are blowing out ‑ it's the wrong stuff around the edges. Is Labor really prepared to sort of put the brain to those sorts of programs between now and the next election, to try to get them back on a sustainable basis, or too politically difficult?
CHALMERS:
No, I think an important part of making spending on aged care, disability care, health care, defence, and meeting these increasing borrowing costs is making sure we're getting value for money and where there's rorting of the system, obviously we need to crack down on that and where there's a lack of efficiency, we need to address that too. If you take the NDIS as an example, that's a very fast‑growing area of government spending. We believe in the NDIS and we want to make sure it's delivering for people with a disability in this country, and part of that means making sure that the money that's spent on that, really quite extraordinary sums of money that's spent on the NDIS, is doing the job that it's supposed to do. We don't have a lot of room in this Budget to spray money around unnecessarily. Where we can make programs more efficient, we should.
JOURNALIST:
Treasurer, one of the things Labor took to the election was making the Emergency Response Fund spend its money on mitigation rather than as it had been on clean up and recovery. What therefore is going to be the impact of having to pay for that clean up and recovery out of the usual Budget, rather than this off Budget fund, and give a sense of what this will cost us over the next few years, and particularly this floods?
CHALMERS:
We will in time. It's too early to gauge the full impact on the economy or on the Budget of what we're seeing right up and down eastern Australia. We will account for that in the usual way, when the full magnitude of the devastation and the destruction is known. But our commitment to Australians is that we will do the right thing by them, we will help them rebuild. We know that this has consequences for the Budget and we know that this devastation has consequences for our economy and for the cost of living as well. And so we will do the right thing by people. That will come with a cost and we will account for that cost in due course.
JOURNALIST:
Treasurer, just back on Medicare, these revelations which you said were absolutely atrocious, thieving from taxpayers and very troubling. One of the troubling parts of the reporting this morning apparently on face value is that these doctors being able to pay back hundreds of thousands of dollars, in some cases millions of dollars to Medicare without criminal consequences. Should these doctors be locked up?
CHALMERS:
I think primarily, this is an issue for Mark Butler the Health Minister to get to the bottom of. This is something that I've been made aware of, but the challenge of dealing with these revelations is really for Mark to speak about. My view is if you're stealing from Medicare or the NDIS, you're a grub. And it means that money that is not exactly thick on the ground in the Budget is not going to people who need it. And so Mark will get to the bottom of that in the same way that Bill is getting to the bottom of it in the NDIS. We don't have money to waste on these programs. If it's being rorted and thieved, then let's get to the bottom of it and make sure we've got the best arrangements.
JOURNALIST:
Treasurer, just on your global meetings, not only with the IMF and the World Bank, and the G20 but with the banks as well in the US. Before you went to the US, we'd seen financial markets really clobber the UK over their mini budget settings until it highlighted this revolt you can get from the financial markets if a government puts a step wrong with its Budget. What was the mood of the financial markets when you were in in the US? Do you think that that experience was restricted to the UK? Or do you think that they are more touchy now with all governments in terms of their Budget settings? Is that something that you're going to have to keep in mind on October 25?
CHALMERS:
Yes, and if there was one theme hanging over almost all of the discussions, is people were reluctant to be critical of the domestic policy settings of another country ‑ and in our respect, a great friend of Australia like the UK ‑ but clearly hanging over all the discussions was the sense that what had happened there, was as I've said before, a cautionary tale about what it looks like if you don't get monetary policy and fiscal policy working together in the same direction. People weren't exactly tiptoeing around that conclusion, including in the closed door discussions that I had with my counterparts from the G20. As you know, we've been following that situation in the UK really closely. And in those G20 meetings, you're sitting there with the the key economic minister and the central bank governor. And I think nobody would have left those discussions, thinking anything other than ‑ the best defences against this global uncertainty is responsible budgets ‑ you need to make sure that our budgets aren't making the hard task of central banks harder. And that's the inescapable conclusion of what we heard and saw over there.
JOURNALIST:
You did meet with Jerome Powell, and at the weekend Andrew Bailey signalled that the next move in interest rates in Britain is going to be higher because of what's gone on. One of the themes coming through out of the Washington meetings seem to be where central banks are headed. Are you fearful that the central banks can be too aggressive and will drive the world into recession?
CHALMERS:
The central banks have got a difficult job to do, here and around the world. And we've got high and rising inflation in many parts of the world. We've got all the pressure that comes from the war in Ukraine, and some of us have got additional pressures, like natural disasters and issues with supply chains. And so they've got a hard job to do, and we've got to make sure that we're not making that difficult task even harder. I think that there is a real concern around the world, that with inflation as high as it is and has been, and the blunt and brutal application of monetary policy to that situation does risk a hard landing. That is one of the main risks that people identify around the world, about the situation that we confront right now. The fact that central banks are having to act decisively in uncertain times, does risk a hard landing around the world. That's one of the reasons why the Treasury forecasts I've released today ahead of time, have been downgraded so substantially.
JOURNALIST:
Treasurer, you warned of cost‑of‑living impact from the floods. Are you able to quantify, or at least tell us what months that affect effect will be felt? And further to Shane's question, does the Reserve Bank have to be really careful to tease out those cost‑of‑living pressures, which are, well hopefully, one in 100 years?
CHALMERS:
The full costs and consequences of these natural disasters will be known in time. It's premature now, to try and put a number on the size of the impact or the shape of it, and the duration of the impact of these natural disasters. I had a preliminary conversation with Murray Watt about it this morning, but no doubt this will be pretty central to our thinking over the coming months. So it's premature to do that, but obviously, when you're talking about absolutely prime agricultural land, making some of the biggest contributions to our grocery aisles, there will be an impact, and it will be a substantial impact I fear. I think that's self‑evident. And the other part of your question was, Andrew?
JOURNALIST:
Ensuring that the Reserve Bank teases that impact out?
CHALMERS:
As you know, I don't give free advice to the Reserve Bank, and no doubt, they weigh up the temporary pressures on inflation and the structural pressures on inflation. They do that in normal times, and they especially do that in times like these. No doubt they are as attentive to what's going on in the food bowls of Australia as we are, and they'll take it into consideration.
JOURNALIST:
The downgrade to the projections for the UK in the US in particular are quite concerning. Given your answer to David's question, are you confident that those governments have their situation under control and that it won't get worse before it gets better? Particularly given how big an impact that will have on the Budget's bottom line, on the Australian bottom line?
CHALMERS:
My focus is on what we can do here in Australia. The best way to deal with these global conditions, the best way to deal with this deteriorating global economy, is to focus on what we can influence here at home. That means a budget which is solid and In sensible and suited for the times, and that's what our Budget will be. No doubt other countries are going through similar considerations. The policy agenda in the United Kingdom is a bit of a moving feast at the moment, as key personnel change, and as they recalibrate based on market reactions to policies that they've announced in recent weeks. I had a good discussion with President Biden's economic advisers about how they see the situation in the US, everybody's doing the best that they can in difficult circumstances. For me, the thing that I'm most focused on is a Budget which is sensible and solid and suited for the times. That's our best defence against what's happening around the world.
JOURNALIST:
You stood here last week and said that we needed to have an adult grown up conversation about what needs to happen. It feels like at the moment, that conversation, both sides in it are just saying, well, things are really bad at the moment. When we get to the point where you say, here's what we could or should be doing about it ‑ is that going to be after this Budget and looking towards May? How do we have that conversation?
CHALMERS:
I think you'll see the fruits of that in the October Budget. We will make changes to spending, we will start to make changes to multinational taxes, we will take a very responsible approach to the extra revenue that we get in the near‑term from the prices that people are paying for our commodities. And that's an important way to begin this conversation about the structural spending pressures on the budget. I've actually been really pleased the last few weeks, the way that people have dialled into the 'big five' spending pressures on the budget, for example, and the way that they have recognised that we need to rebuild our buffers and make our economy stronger and more resilient, particularly as the global economy gets weaker. So I think we are a good chance of a really important and productive national conversation about how we spend and invest on the things that our society values most. You'll see some of the fruits of that in October. But October was always intended to be the beginning of that conversation and not the end. One of the reasons why we decided to do a Budget in October and not to wait between March and May, 14 months, is because I think as Phil might have said yesterday, this is about implementing our election commitments. It's about giving a more realistic picture of the fiscal situation, not just the size of the challenge that we confront, but the shape of the challenge that we confront over the next four years and over the next 10 years. And it will provide, I think, a baseline for a conversation about the future of the budget. And one of the things that people say about this Government is that the adults are in charge ‑ that means speaking up to people like adults, not talking down to them. It means levelling with them and being up‑front with them. That's what I've tried to do every day that I've been in this job so far. And that's what I'll try and do every day that I'm in this job. Thanks very much.