JIM CHALMERS:
The Budget is a week away. This Budget will be responsible, it will be restrained and it will make our economy more resilient in uncertain times. It will strike the best possible balance between easing the pressure on people now and investing in the future and it will be built on the solid foundations of responsible economic management. And you see that in the new debt figures that we are releasing early. Our much more responsible approach to the budget means much less debt in the budget. Because of our efforts, debt in next week’s Budget will be much lower than was budgeted for by our predecessors. They budgeted for more than $1 trillion in Liberal debt this year and we’ve got that down by $152 billion. That means gross debt for 2023–24 will be $152 billion lower than it was going to be under the Coalition. To put that in context, that is roughly what we expect to spend on a combination of health and defence this year.
By being much more responsible with the budget than our predecessors, we will save Australians about $80 billion in debt interest over the course of the next decade and it also means that gross debt will peak almost 10 percentage points lower as well, compared with the Pre‑Election Fiscal Outlook. These are some of the dividends of our responsible economic management and you’ll see that in the Budget a week from today.
JOURNALIST:
If I can just ask Treasurer, can you expect the Treasury update to forecasts in the Budget to show a downgrade in growth and a more pessimistic trajectory for inflation than what we saw in MYEFO? Is that something that we can start to expect?
CHALMERS:
We’ll release the forecasts in the usual way. I’m not here to announce or release those forecasts. Today’s focus is on the really quite substantial progress that we’ve made in getting those debt figures down. We’ll make the Treasury’s forecast and the Treasury’s views on inflation and growth clearer closer to the Budget on budget night.
JOURNALIST:
Treasurer, have you and Angus Taylor found any common ground on the RBA board overhaul negotiations or should we expect it to remain stalled for some time?
CHALMERS:
Look, unfortunately, from my point of view, one of the reasons why there has been a bit of a delay is because Angus Taylor works with the Greens to kick it into the long grass of a parliamentary process, a parliamentary committee. I thought that that was unnecessary given all of the effort that we’ve put in to consulting him over the course of well over a year now and all of the efforts we’ve made: providing briefings from the review panel, conversations he’s had with the Reserve Bank Governor, with myself, with the Treasury. You know, our objective here is to get bipartisan support for the Reserve Bank Review. We think that’s important. We think the future of the Reserve Bank should be beyond partisan politics and that’s why we put so much effort into including Angus in our deliberations and our considerations, in the hope that we can land that bipartisan approach to the future of our central bank.
JOURNALIST:
You noted the $80 billion in interest savings over the next decade. I heard at the last budget you flagged that pressure of paying off the interest is one of the big 5 pressures on the Budget. Is that situation improving in this budget?
CHALMERS:
Well, certainly because of getting debt down we pay less interest and that will be accounted for in the Budget. Debt interest is still one of the big 5 pressures on the Budget. The others, as you know, are defence and health and NDIS and aged care, and they will remain big pressures on the Budget. They are a big part of the reason why those pressures in the Budget, which you will see in the shape of the Budget itself, they intensify rather than ease over time, and that’s why this responsible approach that we’re taking to get that debt interest down, to get that gross debt down is so important.
JOURNALIST:
Of the $152 billion that is less in debt since the Coalition’s forecast, do you want to differentiate how much of that is due to increased revenue from things like corporate tax, income tax, and how much is due to changes in policy decisions from the government?
CHALMERS:
Well, all of these are consequences of our responsible economic management. That is a combination of banking such a huge proportion of upward revisions to revenue. It is about the $50 billion in savings that we found in the Budget. It is about the spending restraint that we’ve shown in the Budget. It is about the labour market being more resilient than people may have anticipated. The combination of all of those things means that we’ve been able to get debt down substantially. This year we were expected, under the Liberals’ final numbers, to breach $1 trillion in Liberal debt. We’ve got that down by $152 billion because of a combination of all of those things which make up the much more responsible approach that we have taken.
JOURNALIST:
Treasurer, what anxiety do you have that China’s aggression on the high seas is going to cause trouble on the trade front, especially when you have President Xi saying in Paris today or overnight the world today is not very peaceful?
CHALMERS:
Look, I think one of the defining influences on this Budget, as we put the finishing touches on it, and our economy more broadly, is this really substantial geopolitical uncertainty that we’re seeing. I’ll come back to the specifics of the incident that you are referencing but, obviously, tensions in the Middle East, the ongoing war in Ukraine, combined with uncertainty around the world, this is a really key influence on the way that we have come at this Budget. This is one of the reasons why we’re getting the budget in much better nick in terms of debt, why we’re investing in the future, why we’re trying to ease the pressures that people are under now, because there is a lot of uncertainty.
When I was at the G20 and IMF and World Bank meetings in Washington D.C. last month, really the key part of those discussions was about the geopolitics and what that means for our economy. And so clearly, whether it’s volatility in oil prices because of the Middle East, whether it’s the way that the war in Ukraine and Russian aggression in Ukraine has busted up a lot of supply chains that the world relies on or whether it’s issues closer to home, it is a really key concern that we have tried to grapple with as a government, a Cabinet, an Expenditure Review Committee, as we put the finishing touches on the Budget.
In terms of the specific events involving China in recent times, we’ve expressed our concerns to the Chinese government. What we saw here was a very dangerous manoeuvre, unsafe and unprofessional, as the Prime Minister and the Defence Minister have said.
JOURNALIST:
Will you be calling in the Ambassador?
CHALMERS:
I don’t propose to add to that. There are opportunities today to speak to the Prime Minister about this and the Defence Minister has made some commentary about it as well. We have expressed formally, officially, our concerns to the Chinese administration. This was dangerous, it was unprofessional and it was unsafe.
JOURNALIST:
Just a follow‑up to Mike’s question, Treasurer, on the RBA legislation, will these delays in getting it passed mean a delay to the formation of the two‑board system?
CHALMERS:
I hope not. We are working away in close consultation with the Reserve Bank Governor to come up with some recommendations for those boards and, we are doing that in the usual considered and methodical way, consultative way. I’ve spoken with the Reserve Bank Governor multiple times about the make‑up of those boards. She has expressed publicly and privately an interest in having continuity on both boards, rather than just on one board and that’s been an important factor in our thinking. We would like to get these boards constituted and ready to go on the original time frame. The only thing that would prevent that is if Angus Taylor continues to play games with the Greens in the Parliament. We hear a lot of things from our opponents about the Reserve Bank Review and it’s not clear to me that Angus has the authority in his show, to land what would be a good and sensible outcome here. It’s a bit of a test, frankly, for him internally but also in the Parliament. We need a sensible outcome here. We’ve consulted. We want bipartisanship and we’ll do what we can to ensure that.
JOURNALIST:
Treasurer, a couple of months ago the government was feeling pretty positive about where things would land towards the end of the year I guess economically and then obviously the political flow‑on from that. Now you’ve come back from America more gloomy, a lot of uncertainty about what the RBA might be going to do today, survey out this morning saying generally Australians are feeling just as gloomy about the outlook as they did when we were in the middle of the COVID lockdowns. How do you think Australians will be feeling by the end of the year?
CHALMERS:
I’m not sure about that survey, but, respectfully, we don’t need a survey to tell us that people are under pressure. A key priority if not the key priority in the Budget will be helping to ease the pressures that we understand people are under. You referenced our commentary from earlier in the year. I think we’ve been really consistent in saying the defining challenge in our economy, certainly in the near term, is inflation. People are under a lot of cost‑of‑living pressure. That’s why the Budget will try and ease what we can of that pressure, primarily through a tax cut for every taxpayer, but with additional cost‑of‑living relief as well. And that’s because we don’t just acknowledge people are doing it tough, we’re doing something about it. We did in the last budget and we will be again in the next budget. We’ll do that responsibly. We’ll do what we can afford to do but we know people are under the pump.
Inflation is almost half what we inherited. It’s more than halved its peak in 2022. We are, in annual terms, ahead of our inflation forecast in the mid‑year budget update, so we have made welcome and encouraging and substantial progress in the fight against inflation, but it’s not mission accomplished because people are still under pressure and that’s why the Budget will have a big focus on the legitimate pressures that we know people are under.
JOURNALIST:
The Economic Inclusion Advisory Committee asked for a timetable on the increase of JobSeeker, not a spendathon of reaching 90 per cent of the aged pension overnight. If this is an aspiration that you share, why not commit to a pathway as the government has done, for example, on school funding?
CHALMERS:
What we’ve tried to do with the Economic Inclusion Advisory Committee is to implement what we can afford to implement in a responsible and methodical and sequenced way. We have done more from that first report than I think is broadly acknowledged and there will be additional steps in this budget, which are conscious of the recommendations that that important, well‑regarded, well‑informed committee has put to us. We take it seriously. We can’t afford to do every recommendation put to us by that committee. In some cases, announcing future directions is warranted. In others, we need to be a bit more careful because we need to be cognisant of the budget situation and what we can afford. We don’t want to over‑promise and under‑deliver when it comes to our most vulnerable people. If you look at that summary that we distributed when we released the EIAC report – I think we distributed it under Amanda Rishworth’s and my name a couple of Fridays ago, if memory serves – you will see that we have made much more progress on those recommendations than is broadly acknowledged.
JOURNALIST:
Just on the RBA meeting today, how closely will you be watching the decision and what the Reserve Bank Governor says as you put the finishing touches on your budget? It’s likely not to be good news today when you’re hoping for good news.
CHALMERS:
A few things about that. A couple of your colleagues have asked me about the Reserve Bank Review and I think one of the really great recommendations, which I’m really pleased to see already implemented, is around the Reserve Bank Governor making herself available after interest rate decisions. I think that’s been a really good development. I’m sure as working journalists, you would agree. And because of that, I’m really reluctant to front run her press conference later on or to pre‑empt what the Governor may or may not say, and you know that I don’t make predictions or pre‑empt decisions taken by the independent Reserve Bank more broadly.
Obviously, Australians will watch very closely what the Reserve Bank board does and what the Governor says in the aftermath of that decision. I think everybody would acknowledge that the rate rises in the system are putting a lot of people under pressure. They are one of the reasons, but not the only reason why our economy and particularly consumption in our economy has slowed considerably. What we try and do is we try and let the independent Reserve Bank do their job and I focus on my job and if you think about – I ran through before – the stats that show the really quite substantial progress we’ve made on inflation over the course of the last couple of years, you look at the fact that the IMF, the major ratings agencies have all said that our budget policy is working hand in hand with the work of our central bank, you look at the ABS saying that our cost‑of‑living policies have taken half a percentage point off inflation in the year to March this year, you can see that we are doing our bit and the Reserve Bank will take its decisions independently.
I also wanted to say something about some coverage that was in one of the newspapers today about when we spent time together yesterday talking about the Reserve Bank’s forecasts and the government’s forecasts. It is not unusual or unreasonable for the Reserve Bank or the Treasury to update their forecast based on recent data. It would be stranger if they didn’t do that, frankly. The difference between the forecasts that will be released this week by the Reserve Bank and by the Treasury next week in our Budget will be the timing. Their forecasts are pre‑budget and ours take the Budget into account. That’s not an opinion. That’s just a fact. That’s a fact of the timing of the 2 sets of forecasts. So, I won’t be pre‑empting their forecasts. We speak pretty regularly, the Governor and I, about these things. We compare notes, as you would expect that we would. I respect the independent job that the Governor has to do and I think she respects the job that I have to do. They are different jobs, but they are complementary and we are both very focused on this fight against inflation.
JOURNALIST:
The Senate Supermarket Inquiry reports today. If it finds that the supermarkets have engaged in price gouging, will that not add strength to the argument for divestiture powers?
CHALMERS:
Let’s see what the report says. We want a fair go for families and farmers. We know that it’s at the checkout where some of these cost‑of‑living pressures are most acutely, most harshly felt. We are very focused on that. That’s why we’re doing a range of things to try and make our supermarket sector more competitive. We’ve empowered the ACCC, the consumer watchdog. We’re looking at making the Food and Grocery Code compulsory and enforceable. We’ve got a broader set of competition policies under consideration. We’ve already announced a big change on the mergers regime. And I think what that demonstrates is there is a whole bunch of stuff that we can do, which doesn’t take the step that you have described. And that gives me an opportunity to remind you all that the opposition said that they would have their policy on divestment out by now. They are having an almighty barney in the Coalition about divestment and again this is a test of Angus Taylor’s authority in his show. The Nationals and the Liberals have got very different views here. They said they’d have a view out by now. They said it some weeks ago. We haven’t seen it. We haven’t seen the nuclear policy that they promised before the Budget. Sussan Ley was in all sorts on tax on the weekend. They’ve given us absolutely no idea if they’ll unwind our tax changes or how they’ll pay for another $40 billion of tax cuts for people on the highest incomes. So, our policy agenda on competition in supermarkets is clear. Theirs is not so much.
JOURNALIST:
Treasurer, the housing market has been called far from healthy. Is there going to be anything in the Budget to address that? And then you mentioned being able to afford priorities. Is there then an argument to reappropriate tens of millions of dollars set aside for an ad campaign for tax cuts that are automatically applied?
CHALMERS:
On housing yes, housing will be a focus of the Budget and for a range of reasons. Primarily we don’t have enough homes in this country. That’s why we’ve got an ambitious but achievable target of 1.2 million new homes built in the 5 years from July this year. And I note with interest that a lot of people say that we are falling short of those targets. The period hasn’t started yet. So, I think the country is capable of an ambitious target, achievable target. The pipeline is not what we need it to be. That’s the point I think made helpfully by recent reports and so housing will be a focus in the Budget. We know that in the inflation challenge rent is a big part of that. Renters are under pressure in particular and that’s why housing you can expect to see new initiatives in the Budget on housing.
JOURNALIST:
And the ad campaign?
CHALMERS:
We’ve made our position clear on that in the past. We think it’s reasonable to inform people so that they can plan their household budgets accordingly. We are providing a tax cut for every Australian taxpayer. More than 13 million people will get a tax cut from July this year to help them with the cost of living; 84 per cent of them will get a bigger tax cut because of the changes that we made and which we will budget for in the Budget. I think it’s entirely reasonable for us to inform people about that so that they can plan accordingly.
JOURNALIST:
Treasurer, as you speak, Israel is striking Rafah. Should Australians expect a bolstered humanitarian package for the civilians affected by that conflict? I’m not asking for any of the deliberations, but has cabinet settled on any position about the UN vote on Palestinian statehood?
CHALMERS:
Well, a couple of parts to your question. You know, I am and I think Australia is gravely concerned by the prospect of a major Israeli ground offensive in Rafah. More than half of Gaza’s 2.3 million people have sought shelter there from the fighting elsewhere. I think we have, the G7 has, and many other countries have called on the Netanyahu government to change course, and the Foreign Minister has made clear Australia’s view that [Israel] should not go down this path. These are deeply concerning, gravely concerning developments. A lot of people are in harm’s way in Rafah, a lot of innocent people, and we don’t want to see more people sacrificed to this conflict.
In terms of our vote at the UN, we will wait to see what the form of the question is that’s put to the General Assembly before we come to a view. Obviously, there are discussions about what form those words might take and what Australia might do, but I don’t intend to front run or pre‑empt those considerations.
JOURNALIST:
The market’s priced near a higher likelihood of a – not a likely rate rise, but it’s increasing its likelihood for later this year. How much personal blame do you and the government’s fiscal policy wear? What’s acceptable to apportion to the government in terms of blame if there’s another rate rise?
CHALMERS:
Look, I think one of the differences between our government and the government that came before it is we take responsibility for doing our jobs. And just as I have said from this lectern on a number of occasions, I take responsibility for my parts of the inflation fight. That’s why we designed the cost‑of‑living help a certain way. That’s why we’ve shown spending restraint in the Budget. It’s why we’ve delivered the first surplus in 15 years and we’re aiming for a second. Because I have a role to play here. It’s not the only role. The Reserve Bank has got a role to play independently. There are international factors at play as well. But I take responsibility for the fiscal settings in the Budget.
I know, as I said yesterday, that people will have a range of views about that. People will make all kinds of predictions about interest rate movements in the future. I don’t intend to get into that for obvious reasons. Some people want us to slash and burn in the Budget. Some people want us to double and triple spending in different areas. That’s just normal at this time of year. I’ve got a different job. I’ve got to put the Budget together. I’ve got to make it add up. That’s my focus.