JIM CHALMERS:
Thanks for the opportunity to update you on four different things. First of all, the IGR on Thursday. Secondly, the very welcome BCA contribution today. Thirdly, the PRRT legislation. And lastly, the decision by Moody's over the weekend.
So first of all, when it comes to the IGR on Thursday ‑ the Intergenerational Report is all about making the big shifts in our economy and our society work for us and not against us. Our population will grow more slowly, our people will live longer and healthier lives, and our care economy will become an even more central focus in the decades ahead. And what the report intends to do in a way which is a bit broader than the last couple, is to build our understanding of the five big shifts that are underway in our economy and our society ‑ from globalisation to fragmentation, from hydrocarbons to renewables, from IT to AI, from younger to older, and what that means then for our industrial base, and particularly, a bigger role for the care economy. I'm optimistic about the future but we need to adapt and understand the big challenges which are underway in our economy and our society, and the Intergenerational Report will help us do that.
And in that light, we welcome the very important contribution from the Business Council of Australia today. We don't agree with every direction that the BCA has proposed, you wouldn't expect us to, but there are more things in the BCA's welcome contribution that we agree with than areas where there is disagreement. If you look right across energy and housing, human capital, institutional reform, there is a great deal of alignment with the Albanese government's agenda, particularly when it relates to the central focus on making our economy more productive. The Intergenerational Report will put a more productive economy absolutely front and centre in what we need to do in the decades ahead. To prosper in the coming years, we need to make our economy more productive, not by making people work harder and longer for less, but by combining the things that we know will deliver productivity growth in the coming decades: economic dynamism and resilience, a role for data and digital, a more skilled and adaptable workforce, focus on the care economy and the services sector, and also the vast industrial opportunities that come from our pursuit of net zero and becoming a clean energy superpower. So we welcome the contribution from the BCA, there is so much in this BCA contribution which aligns with some of the things that you'll be hearing more about in the IGR on Thursday.
The third thing I wanted to tell you about is that the Treasury is releasing today the first tranche of the draft PRRT legislation. This is a sensible change. It's been worked through methodically to ensure that offshore LNG pays more tax sooner, so that we can fund our priorities. We have taken a responsible, methodical approach to PRRT tax reform in order to fund our priorities ‑ whether it be strengthening Medicare and bulk billing, or providing cost‑of‑living relief for Australians. Our changes are considered, they're methodical and they're responsible, and they're all about getting a better return for Australians sooner. Our model also best combines getting more revenue sooner with making sure that we can get that certainty of supply, and so we can also honour our international trading relationships as well. This will be an important test for the Coalition and for the Greens. If the Greens want the industry to pay more tax sooner, then they'll vote for our legislation. And if the Coalition want the model which best guarantees supply and best safeguards our international relationships, they'll vote for it as well. We will be putting this out in good faith. We are seeking the support of the Senate, in particular, when it comes to the implementation of the PRRT changes that I announced a couple of days before the May Budget.
The last thing I wanted to touch on is that Moody's over the weekend has reaffirmed Australia's triple A credit rating with a stable outlook. It is a source of some pride that the first time Australia got a triple A with a stable outlook from all three of the major ratings agencies was the last time that Labor was in government. It's very important that we maintain that position, because of the implications it has for our economy and for costs, in particular, in our economy. We welcome this endorsement of the Albanese government's responsible and methodical economic management. We have made some substantial progress when it comes to getting the budget into much better nick but we also acknowledge that the pressures on the budget will intensify rather than ease. And once again, that will be a big focus of the Intergenerational Report that I release on Thursday. Over to you.
JOURNALIST:
One of the things that the BCA talked about in their report today, and you mentioned ‑ a skilled and adaptable workforce. One of the things in their report is simplifying awards, for instance, because there's so much complexity for employers at the moment. And they're still worried about the next tranche of IR reform which your government has got coming down the pipeline. Are you listening to business on making sure that those reforms don't hurt productivity? Can you guarantee, in effect, that those next tranche of IR reforms will actually lift productivity, which is the aim of the game?
CHALMERS:
We've got an industrial relations agenda and we will work with all parts of the economy to implement it. Our interests here are in ensuring that we can get a more productive economy, that we can lift living standards, and part of that is making sure that we can have more secure jobs with decent pay. And what we'd like to do, what we seek to do, is to bring people together behind those objectives. Again, there'll be a focus on all of those things in the IGR on Thursday. But what I've also tried to do is I'm trying to broaden the conversation in this country about productivity beyond industrial relations. You read some of the commentary about productivity, and it feels like the productivity frontier has evolved substantially. But a lot of the contributions ‑ and I don't mean the BCA ‑ have not evolved substantially since the 1980s. We need to take a much broader, more modern agenda when it comes to productivity ‑ whether it be data and digital, the whole dynamism and resilience agenda, the workforce issues, particularly around skills, the care economy and services, and particularly when it comes to energy. There is more than one thing that matters when it comes to making our economy more productive and I've tried to show that, and there'll be more of that on Thursday.
JOURNALIST:
Mine's actually a broader cost of living question, Treasurer, just in terms of the Tax Office set to recoup on‑hold debts. SBS has reported 300,000 Australians potentially impacted, 69,000 people could have their tax return taken this financial year ‑ $270 million to be recouped by the Tax Office. I'm not sure if you're aware of all this detail, but I'll just finish off by saying the Tax Office acknowledges that this will be a surprise for many taxpayers, who on the face of it when they file their return, don't see that they have any debt at all ‑ so they're expecting a credit. So why is it justifiable for the Tax Office to take this step in a cost‑of‑living crisis?
CHALMERS:
Well, obviously, the Tax Office does the best job it can in ensuring that people are complying with the tax system, but trying to provide as much information as they can as the steps are taken. I'm obviously not going to criticise the important work that the ATO does. I know, speaking to the Commissioner and others in the ATO, that when they conduct this necessary work, they try and do it in the most sensitive way that they can and I expect that to continue.
JOURNALIST:
Does it need to be more transparent though, Treasurer? It's not obvious to people that they have this debt when they file their return.
CHALMERS:
I think the more information that the ATO can provide the better.
JOURNALIST:
You said you're interested in broadening the conversation. The BCA is calling for a broader conversation on tax reform, including the GST. What's your response to that?
CHALMERS:
That's one of the things that we don't have agreement with the BCA on ‑ we don't have any plans or any intention to change the rate of the GST. I think I've made that clear on other occasions when I've been asked about it, but equally, it's easy I think to focus on the limited amount of areas where there's a difference between the government and the BCA, but working closely with the BCA leadership, I've come to appreciate ‑ and I'm grateful for this ‑ the way that there is so much that the government is interested in that the business community is interested in as well. Energy, workforce issues, institutional reform ‑ there is so much more that we agree on with the BCA than disagree on, the GST is one of those things that we [disagree] on. When it comes to tax reform, we've made it really clear, multiple opportunities now and across two budgets ‑ we think the most fertile ground for tax reform is multinationals, high balanced superannuation, compliance, cigarettes and PRRT reform and we're releasing that draft legislation today. We've made our priorities clear when it comes to tax reform, there's a huge amount of common ground that we can work with the BCA on outside the GST.
JOURNALIST:
Treasurer, back to the Intergenerational Report, it's basically sort of very similar to previous reports. This one's telling us the millennials are going to be a burden on young people when they retire. They're going to become the new boomers when they grow old. Are you saying that in preparation for fewer people funding more services is it the case you think you can do it just with a more productive economy or does it need to be the combination of changing the tax system or what else? What's your sort of solution? Or do you have more user pays like you're currently contemplating with aged care? Is it inevitable you just have to move towards that?
CHALMERS:
Well, first of all, the IGR is a 40‑year timeframe, as you know, and governments of both political persuasions will do the best they can making good decisions to fund the services that people count on and the mix of services that people rely on will change as our population gets a bit older. I think we've demonstrated a willingness and an ability to make difficult decisions to put the budget on a more sustainable footing ‑ we do have meaningful tax changes in the system, we've talked about those already, we have found $40 billion dollars in savings across two budgets compared to $0 in savings in the last budget of our predecessors, we've banked an enormous proportion of upward revisions to revenue to try and get the budget in better nick. Now, what the IGR will show is that spending needs grow over time, the assumption about the tax take is stable consistent with other IGRs, it takes the last available tax to GDP number and draws a straight line as other IGRs have in one way or another and what it will show is ‑ as there becomes more and more pressure on the budget, then governments will have to do more to allow for that and to account for that and to respond to that but we have made really quite substantial progress getting the budget in much better nick to face the global economic uncertainty in the coming years and the demographic and other pressures on the budget in the decades after that.
JOURNALIST:
Treasurer, we're about halfway through this parliamentary term. You previously said at this point, this is when the nation should be looking at that big conversation going forward about budget sustainability. So can you give us a flavour of what sort of measures you're contemplating taking to the Australian people at the next election? Are you up for the big conversation on tax reform? Are you up for a big conversation on spending cuts that need to be made?
CHALMERS:
We're reforming the tax system, we're trimming spending, we're banking a huge proportion of upward revision to revenue and that's got the budget in much better nick in the near term and that means we avoid a lot of the debt that my predecessor has saddled us with and a lot of the debt interest costs and that's a pretty good start. Our focus is on bedding down the changes that we announced in the May budget ‑ the PRRT is part of that but other changes as well. The budget is in a much more sustainable position as a consequence of our efforts in the first 15 months and we've indicated a willingness going forward to make difficult decisions where those are necessary to make sure that we can fund the kinds of services in particular that Australians need and deserve as our society changes and evolves.
JOURNALIST:
Moving to a zero carbon economy, and you talk about that being a productivity enhancing shift. Can you tell us a little more? Can you pinpoint, in particular where those productivity gains will come from?
CHALMERS:
Well, when energy is cleaner and cheaper and more efficient, then we can get more output for less input which is, as you know, essentially what productivity is all about and really the point that I'm making about identifying energy as a key part of a new, more modern approach to productivity is to say if you look right across our economy, you see where the prosperity, where the growth, where the productivity is going to come from, it's going to be about having a much more modern, dynamic and competitive economy and energy is central to that.
JOURNALIST:
Treasurer, Mr Dutton this morning criticised a union push for representatives to be appointed to the RBA board, compromising its independence. What's your response to this? And do you believe it's appropriate that unions should have a seat at the table?
CHALMERS:
Well, first of all, I don't think it's especially controversial for the labour movement or for anyone to say that when we make appointments, we should consider a range of perspectives and the Reserve Bank Review made a pretty similar recommendation when I released that report. The RBA Review said; "the Review recognises the value of board members who are not professional economists. A group with diverse backgrounds brings a wider range of perspectives and expertise to decisions." And you compare that to the change to the platform over the weekend; "Labor will consider the appointment of board representatives to the Reserve Bank board who have a variety of skills and industry experience including worker representatives." So the platform asks the government to consider a range of perspectives, the RBA Review asks the government to consider a range of perspectives and I don't see either of those contributions to be especially controversial. Indeed, the three appointments I've made so far to the board and one the Governor, I have weighed up a range of different experience and different perspectives and I would expect future treasurers of either political persuasion to do that too. I think as always, Peter Dutton is looking for a fight where one doesn't exist. He's always looking to foment division, he's always looking to have a fight, he's always looking for an excuse to get angry about something, I don't think what we're talking about here is especially controversial.
JOURNALIST:
You want to have this broader conversation with people about productivity, but it tends to be a very esoteric concept. Can you quantify what the difference between the long run average of 1.5 down to 1.2, which happens in this IGR means for people in a very practical, understandable sense for them? You've been reforming the economic institutions of the nation ‑ the RBA, the Productivity Commission, what is still left in that agenda? Are you going to look towards the regulators, what else is coming up?
CHALMERS:
First of all on the productivity assumption, my predecessors were deliberately pretending that they would hit one and a half per cent for productivity, they were assuming one and a half per cent even though the 20 year average has been more like 1.2 per cent. I changed that in the October Budget last year as a consequence of that a lot of the projections and forecasts that you're seeing in the economy have come down a bit, purely as a function of having a more realistic assumption about productivity. What that means for people out there in our communities around Australia is ‑ and you see it compared to the last IGR that had a high productivity assumption ‑ the difference is in incomes, national income and in living standards. The more productive we can make our economy, the more we can lift wages, the more we can lift living standards, the more Australians can feel the benefit of that. Now, there are still some who pretend that the only way to get productivity gains in our economy is with harsh industrial relations, and what I've tried to do ‑ and this brings me to the second part of your question ‑ what I've tried to do is to say that the productivity challenges are evolving in our economy and we need to evolve as well. Data and digital and energy and human capital ‑ this is where we'll find the productivity gains, which will lift living standards and lift wages into the future. And the reason I've been so keen in refocusing and renewing and renovating our institutions is ‑ whether it's the Reserve Bank, whether it's the PC or the way that we come at some of these sorts of issues ‑ in lots of cases our approach hasn't changed for some decades or we haven't had a good think and reconsidered our approach for some decades. And so again, a bit like the question about the Reserve Bank Board, I don't think it's controversial to say how do we get our institutions thinking in the most modern way, looking forward rather than backwards. And that's what I've tried to do across the Reserve Bank and the PC so far.
JOURNALIST:
Just to follow up on the question regarding the RBA appointments ‑ so to be crystal clear, you would be comfortable with the appointment of union leaders to the board. And secondly, this issue, the 4.5 per cent full employment figure ‑ a lot of unions are very exercised about this. So would you anticipate the appointment of such people to this board would spark a conversation about if that needs to be looked at when we look at what full employment actually is?
CHALMERS:
I've answered the first part of the question. When I make appointments to the Reserve Bank Board, I'll weigh up a range of perspectives. I have in the past and I will in the future. When it comes to the technical assumption about full employment, I've made I think a very clear distinction between a narrow technical assumption which feeds the forecasts in the budget and our objective for the Australian economy to create a good, secure, well‑paid job for everyone who wants one. And I think once again, we shouldn't look for disagreement where it doesn't exist. I think broadly that objective is shared, whether it's the labour movement or the business community, certainly the government. And when it comes to the technical assumption about full employment, that's something that we will interact with in the Employment White Paper that I release after the Intergenerational Report.
JOURNALIST:
Given the IGR shows that the care sector of the economy is going to get larger and larger over time, and historically struggled to get Australians into low paid care work. Should we expect Australia is going to need to ratchet up net overseas migration over the next four decades to fill those jobs?
CHALMERS:
First of all, net overseas migration is not a government target or a policy lever, net overseas migration is driven by a range of things, including students and tourists and all of the other factors that we've discussed in this room before. What the IGR will show is that migration will play, as a per centage of population growth, will actually play a smaller part going forward, and that our population growth will slow as we head towards 40 million Australians by the end of the IGR period. We've made it really clear, we acknowledge, we understand, we accept that we need to do a much better job in this country training the workforce of the future, including and especially the workforce that our care economy needs. When the care economy is going to go from something like 8 per cent of the economy to 15 per cent of the economy, we obviously need more workers. Our first priority is to train more Australians for these opportunities to make sure that we get the human capital piece right here in Australia, but as has been the case for some time migration will play a role as well.
JOURNALIST:
Treasurer, over breakfast, you'd have seen the front page of the SMH and The Age. The report about the impact of climate change on the sovereign ratings coming through. And it's clear, S&P and Moody's are already looking at the possible impact of climate change on the interest bills for federal governments. How much are you worried that? The loss of a triple A credit rating people by 2030 would be a hit to the budget, and does that form a part of the IGR?
CHALMERS:
First of all, of course I read that story. Of course I did. It's the first thing I read this morning, Shane. Climate change is a big risk to our economy and our budget and our credit rating, but it's a much bigger opportunity for our economy and for our country. And we have acknowledged for some time the substantial risk posed by climate change, including to our economy and to our public finances. But we have an optimistic view about the future and one of the reasons we're optimistic about the future is if we get the policy settings right in this defining decade then we can be major beneficiaries and not victims of the big shifts underway ‑ and climate change is one of the most important of those. So we see energy policy, net zero, becoming a renewable energy superpower ‑ we see the vast industrial opportunities there to strengthen our economy and to lift living standards for our people. And we acknowledge that one of the reasons why we need to act here, in addition to grabbing these opportunities, is to safeguard ourselves against these risks as well.
JOURNALIST:
You've said in the past I think that you're going to have difficult conversations around things like tax reform. I wonder, do you think the public is ready for a conversation about tax reform that might finish up with some groups of Australians paying more tax?
CHALMERS:
I think the public is ready for a government like ours, which takes the big issue seriously. One of the things I get the most feedback about, largely about the Prime Minister but also the government he leads, is this is a government which takes the big issues seriously. We approach them in a responsible and methodical and considered and sequenced way. And what I hope the IGR does is feed and fuel this conversation about the future of our country, and I don't want it to be something which is dropped on the deck and quickly forgotten. One of the reasons why yesterday and today and tomorrow and Wednesday ‑ in advance of releasing the full thing on Thursday ‑ I'm trying to generate a focus in the broader Australian community on the big challenges and chances that we face in the decades ahead. What this government is showing is that we can help people with cost‑of‑living pressures in the here and now. We can seek important changes like a Voice to Parliament, at the same time as we can keep our eye on the future. And Australians are pragmatic people and they understand that there are vast opportunities available to us in the future but it requires us to understand the big shifts and trends and transitions in the economy and to adapt so that we're beneficiaries and not victims of that. That's what the IGR is all about, it's what the government is all about, and I think Australians have shown a willingness to engage in those big important things ‑ even as they're focused, as their government is ‑ on the cost‑of‑living pressures that people face right now. Thanks very much.