Katy Gallagher:
Next week’s Budget, obviously, is a really important budget, ambitious, all about reform, resilience, productivity, dealing with inflation, but also importantly, looking at how we can find savings right across government. This has been a huge piece of work. We started it really in our first budget, but we’ve continued it through every economic update since.
This one, we have spent months working across government to find responsible savings to be able to repair the budget, but also to reprioritise, to deal with some of the spending pressures that are coming at us. And I mean, those are pretty well ventilated. But we know that there’s pressures in health, in aged care, in defence, in NDIS, and we already know the decisions we’ve taken around the NDIS to manage some of that pressure and to find savings.
But next week’s Budget will include savings of $64 billion in reprioritisations and savings. $64 billion. This means that since coming to government, we have found total saves and reprioritisations of $178 billion. In every single budget, we have found savings to return to budget, reprioritise to meet those increasing pressures across the government. And this gross savings figure is much bigger than those that have come before.
I’ve taken you through, I think, over the last couple of weeks, the big areas like the $35 billion in reducing growth in the NDIS, the savings around the private health insurance in the order of $3 billion, the savings I announced on Monday, I think earlier this week anyway, of $2.7 billion in reduced external labour and non‑wage spending across the APS.
But the Budget will also include around $5 billion in defence reprioritisations to support the delivery of the National Defence Strategy that the DPM has announced. $674 million in reducing MBS and PBS fraud, $800 million in uncommitted funding from the Australia’s Economic Accelerator Program, which will be redirected to support Australian science and research measures. $463 million in compliance activities to safeguard investment in schooling, including around the integrity of payments for students with a disability in schools.
Then there’ll be also additional savings in uncommitted grant funding. So, we’ve looked across government where there are essentially grant programs where uncommitted funding remained. And we have found $405 million in from the uncommitted grants in Climate Change, Energy, Environment and Water. $276 million in uncommitted funding in the Industry portfolio, $221 million in uncommitted funding from comms and regional grant programs. In addition, the decision to end Inland Rail at Parkes will reduce debt by over $4 billion from 4 years from ’28–29. And there’ll be other measures obviously included in the Budget papers.
Now, these savings will be used to offset investments in those essential services, national security, economic resilience and some of the unavoidable pressures that we’ve had to deal with in this Budget. It will improve the budget position overall to ensure that we are saving more than we are spending, and also to help pay down the debt that we inherited from the Liberals. So, just to summarise, $64 billion worth of savings, bringing to a total $178 billion since we came to government.
Jim Chalmers:
Well, these are 64 billion reasons why this is an especially responsible budget. There will be more than the usual amount of savings, more than the usual amount of reform in the face of more than the usual amount of global economic uncertainty. There are big pressures in our economy and in our budget. And despite all of these pressures, we will be saving more than we spend in the Budget that Katy and I hand down on Tuesday night. And that’s because we take this inflation challenge in our economy very seriously.
This will be a responsible budget which is focused on resilience and reform. It will have 5 major priorities. First of all, fuel security, secondly, cost of living and housing, there will be a productivity package, there will be a tax reform package, and there will be a very substantial savings package. This is all about making our budget more sustainable over time. It’s about making room for priorities and pressures and making sure that we are saving more than we spend in the Budget that we hand down on Tuesday night.
Now, a really important part of the productivity challenge in our economy is around investment, making sure that we get that capital, deepening that, we get those capital flows that will make our economy more productive. And so today we will be releasing the next steps in our efforts to reform the superannuation performance test. Not for one second are we looking to replace or weaken the superannuation performance test. It plays an absolutely crucial role in keeping superannuation funds up to the mark. The steps that we will be proposing today and consulting on from today are all about strengthening and modernising the performance test.
We have heard for some time that the performance test, as it’s currently written, deters, discourages investment in areas like housing and energy, venture capital and startups. We don’t want the performance test to unintentionally discourage investment in some of the most important parts of our economy. We won’t be watering it down, we won’t be replacing it, we won’t be ditching it. I couldn’t be clearer about that. But we will be improving it, we will be modernising it and we will be reforming it. And today we will put to industry some alternative steps forward in the hope of agreeing with them over the course of the coming months, the best way forward for the superannuation performance test. Investment is key to productivity, and productivity is central to the Budget that we hand down on Tuesday night. Happy to take some questions.
Journalist:
What is the net saving in the Budget? And just secondly, how can you, how can you say you’re not watering down the performance test when this will effectively be encouraging superannuation investment in government priority areas?
Chalmers:
Well, in reverse order, I mean, first of all, I don’t see it the way that you have when it comes to modernising the performance test. What we have heard from the sector, what we have heard from investors in the economy more broadly, is that the test, as it’s currently written, unintentionally deters and discourages investment in those areas. We have absolutely no intention of directing superannuation investment. We have absolutely no intention of messing with the superannuation fund’s primary responsibility to members to get the best return that they can. We are looking to see where there are unnecessary, unintentional impediments to some of those sorts of investments.
Superannuation managers and boards will continue to make the decisions about the best place for them to invest members’ monies to get the best returns that they can for people’s retirement incomes.
Now on the net save in the Budget, there will be a net save in the Budget, and we will release all of those figures on Tuesday night. What we are conveying to you today is just how seriously we have taken this savings task. $64 billion in savings in nominal terms is much bigger than normal when it comes to budgets, and it has meant that once we take into consideration all of the other pressures and priorities, pressures that come from the PBS and natural disasters and all of these other pressures in our Budget, we will still be delivering a net save. The details of that will be released on Tuesday night.
Journalist:
The net save won’t be $64 billion. This is the point of Greg’s question. It’s all very well talking reprioritisations if you’re spending it anyway –
Chalmers:
I understand.
Journalist:
What’s the net save?
Chalmers:
I understood the point of Greg’s question and the answer to Greg’s question and your question, Andrew, is the same, which is there is a net save in the Budget and you’ll hear all about it on Tuesday night.
Journalist:
Senator Gallagher, you mentioned the Inland Rail project earlier. So you can you get out of that. I just wanted to ask you, the government decided to scale it back after a recosting, put it at $45 billion. I note that both Barnaby Joyce, he doesn’t believe that recosting by the way, and Matt Canavan say, ‘we’re still doing it’. You’ve seen the figures. How can a $45 billion off budget investment get past Finance Department rules? Is that possible?
Gallagher:
So, the first thing I’d say about the Inland Rail is, when we came to government, it was clear that that project hadn’t been through the work that it needed in order to fully understand the costs, the route, how it was going to happen. And that work has been done and now further costing work has been done. And that advice to government is that it would exceed $45 billion. I think the other thing people need to understand is we’ve provided equity funding of $14.5 billion to this point. We’re going to, obviously, I’ve just made in my comments, we’ve got about $4 billion of that is going to return to budget now that we’ve made the decision to finish or complete it at Parkes.
But the advice to government is that there were, you know, the part beyond Parkes to Queensland, there would be insufficient return on investment to be accounted for that would allow equity funding for that project. So, the advice of government is that the balance of that, so in the order of $30 billion would have to be funded from the budget. These are some of the decisions we’ve had to make and that’s informed the decision we’ve taken to terminate at Parkes, and the Opposition will have to account for that in their costings now that they are saying that they will fund that project, they will have to fund it off the budget to the order of $30 billion.
Journalist:
Treasurer, what’s your advice to families who might be sitting down to look at their own budgets this weekend after another rate hike? Should they be looking for their own savings, should they be panicking and will your Budget leave them better off?
Chalmers:
Well, one of the important priorities in the budget is to take some pressure off people where we can afford to do that. So, the Budget will fund, for example, almost $3 billion in the fuel tax cut because we understand that that 32 cents a litre that we’ve been able to take off the price of fuel will help people through a difficult period. We’ve got the legislated tax cuts coming in on the 1st of July as well.
And so what this government always tries to do, and what this government will try to do in the Budget is to fund that responsible cost‑of‑living relief, but also recognising that the budget can’t afford a big cash splash. There are good economic and fiscal reasons why that’s not a good idea in the near term. And so there’ll be cost‑of‑living help in the Budget. The important part of that is the fuel tax cut, which costs us almost $3 billion and finishes at the end of June. And that’s because we recognise that people are under pretty serious pressure. They were under serious pressure already. The war in the Middle East made things much tougher for people and we expect the costs and consequences of that war to linger for longer. And there’s a lot of uncertainty associated with that war, even today.
Every day we see more speculation about the potential end of the war in the Middle East. But we know that even when we see a proper and enduring end to the war in the Middle East, that the costs and consequences for Australians will linger for a bit longer in the form of higher inflation, high prices in our economy. And the Budget will set out some of those sorts of scenarios as well. Australians are paying a really hefty price for that war in the Middle East. They don’t choose the circumstances of that war, but they’re paying a price for it. And that’s one of the uncertainties that we’re trying to deal with in the Budget. It’s another reason why it’s so important that this Budget is so responsible.
Journalist:
Thanks, Treasurer. You’re talking about responsibility. A couple of big‑spending state budgets handed down so far this week, few more to come. WA Treasurer Rita Saffioti, yesterday she was asked if she’d heard the RBA’s warnings and she said, ‘well, I didn’t like their interest rate rises, are they being helpful?’ And I’ll just go just as well, on the net save thing about last week, you said there was, I think it was about $61 billion worth of pressures on the Budget. And there’s been announcements of a few more billion dollars in spending since then. Like how does that square off with a net save when there’s $64 billion in savings?
Chalmers:
Well, you’ll see all the numbers on Tuesday night, obviously, and this is an historically large gross savings figure. And it is also exceedingly rare that a government will be handing down 2 budget updates in a row where there’s a net save. We had a net save in the December update, and there will be a net save on Tuesday night. It’s quite rare that governments hand down budgets where the net impact of all of the policy decisions is positive. But that will be the case on Tuesday night. And it’s because we’ve taken this savings task so seriously. There are a number of good reasons why that is important. So, I encourage you to check out the net save in the Budget on Tuesday night. We have to save some of those numbers for the Budget itself on Tuesday night. But what we are conveying to you is the seriousness with which we have approached this task.
Now, on Rita being Rita, obviously our focus is on our Budget, not the state budgets. Every state and territory is dealing with these cost‑of‑living pressures from the war in the Middle East in their own ways, in different ways. And I try not to be drawn on state budgets when 100 per cent of our time is focused on our own Budget. Our Budget is a very, very responsible budget. We take this inflation challenge very seriously because we know that people are under pressure. Different governments in different jurisdictions will go about that task in different ways. But overwhelmingly we’re focused on our Budget on Tuesday night, not the WA Budget yesterday.
Journalist:
Senator Gallagher, it’s been, I think, 6 or 7 months since Snowy Hydro said there would be a major blowout to the cost of Snowy 2.0. Will there be an update on the cost in the Budget? If not, why not?
Gallagher:
So, we’re still working through some of those issues around Snowy Hydro. And I would say again, it’s an example of a project being promised and if you remember, when it was promised, it was costed at $2 billion and a time frame that was unachievable as well. And we’ve, as an incoming government had to deal with the consequences of that poorly-scoped, poorly-designed project and deal with it –
Journalist:
But as Finance Minister you would get regular updates –
Gallagher:
Yes, we get regular updates, which is why –
Journalist:
Why can’t we get at least a more updated estimation of what it will cost?
Gallagher:
Well, that work is being done and will be finalised. I can’t give you a date on that, but it is being done as you would expect –
Journalist:
Can you cancel it in the same way that you cancelled Inland Rail? Or stop it? Because it gets to the point where you just think we’ve got to cut it off?
Gallagher:
Well, Snowy Hydro is an important part of the energy system going forward, and so we are committed to the project. It has, you know, it has had cost increases and the shareholders remain fully informed of that, and the work that’s been undertaken by the board, as you would expect. But – and the project, for any of you that may have gone down and seen it, it is a huge, massive infrastructure undertaking and it has encountered several challenges that, again, were not understood at the point that that project was approved by the former government. We’re working through all of those issues, as you’d expect.
Journalist:
I wanted to ask you about the numbers. $64 is your net, is your gross save, I think. Your cumulative deficits in MYEFO were $143 billion. Assuming that you still want to get back to surplus when you can, does that mean we’re short from tax, $79 billion, and you need to find that level of nominal dollars to make it balanced?
Chalmers:
Well, you’ll see all of the numbers on Tuesday night. You’ll see how all of these interactions play out in the bottom line. But in every year of the forward estimates, the bottom line will be stronger in the Budget that we hand down on Tuesday night. And that’s because of the work that we have done finding $64 billion in gross savings, delivering what is a pretty rare net save in a budget as well. Banking all of the upward revision to revenue.
Don’t forget our predecessors used to bank, I think Howard and Costello used to bank about 30 per cent of the upward revisions to revenue. I think our immediate predecessors may be closer to 40 per cent or something like that. We are banking every dollar of the upward revision to the revenue. And some years of the budget, there is a downward revision to revenue. So, you’ll see how all of that shakes out.
But overwhelmingly, any objective observer of the Budget on Tuesday night will conclude that we have taken this savings task very, very seriously. We’ve improved the budget in every year, and that has been our objective to get those underlying cash balances in better shape. There’s a lot of pressures coming the other way, and we’ve done our best to give you a sense of those as well. But you’ll see how the numbers shake out on the night.
Journalist:
In terms of – my mathematics says you’ve announced about $48 billion in net saves in your discussions this morning, leaving you about $15, $16. Do you consider tax increases a save? Because you’ve got to make up that, you’ve left us with $15, $16 billion unaccounted for. Separately, in terms of the decision on Inland Rail, the $4 billion improvement, will that be measured in terms of the off‑budget, part of the Budget? And will we see a reduction in expenditures through the off‑budgets, part of the Budget?
Gallagher:
Yes. So, the answer to the second part is yes. That’ll be dealt with in the off‑budget. So, it’s essentially, you know, in terms of our, lowers our debt, it’ll be returned in that way. On the savings side, it’s $64 billion in savings and reprioritisations across government.
Journalist:
But do you believe, do you count a tax increase, as I say, as it improves –
Chalmers:
No.
Gallagher:
That’s not included in that figure. So, it’s a savings across government.
Journalist:
Treasurer, in terms of your cost‑of‑living relief, putting the fuel excise cut aside, do you intend to deliver relief that will come immediately or at the end of the next financial year?
Chalmers:
Well, you’ll see the Budget on Tuesday night. I think anyone who’s seen the first 4 budgets knows that we try and do what we can to help people with the cost of living in the most responsible, affordable way that we can. And in this Budget, the fuel tax cut is the most important near term priority. And we’ve got the income tax cut coming in. We’ve also got the instant deduction, which provides a bit of extra tax relief as well.
And so, this is a government which cuts taxes when it can afford to do that. We have returned bracket creep already on one occasion, we are going to return more bracket creep on 1 July and again in July next year, because we think the tax system is a good way to provide cost‑of‑living relief to people, to workers, and to do that in a way that ensures that people can earn more and keep more of what they earn.
Journalist:
A broader question – before and during the last federal election, Anthony Albanese promised on a number of occasions not to touch negative gearing or CGT. It seems pretty clear now that you’re going to do that. What’s your message to voters about that broken promise? Why is it now okay to break a promise?
Chalmers:
Well, first of all, without pre‑empting or making assumptions about policies in the Budget on Tuesday night, the comments that we made at election time reflect the government’s sole focus on supply and the 5 per cent deposit. And my view is when governments come to a different view on any issue, then the responsibility of the government is to explain why.
And so, without pre‑empting whether or not those policies you’re asking me about are in or out of the Budget on Tuesday night, I think the principle here is when governments come to a different view, they have to front up and explain why that is the case. We have seen that before. And I think that’s the principle that this government would adhere to if our policies and views changed on some of those important matters.
Journalist:
So, there is evidence that the housing market is slowing of 1 per cent growth over the last quarter. I know from very high levels, particularly in Brisbane and Perth. But is there, are you concerned that you’ll be changing housing investments at a time when the market may actually be also facing a crunch from interest rate rises? Could this actually dampen confidence in housing? And as far as housing growth goes in the future, what is the government’s objective as far as housing growth? Do we need to see real declines or is it rates of growth below wage growth, for example?
Chalmers:
Our policy reflects the need to build more homes, many more homes, and to make sure that there are more affordable options for people to get a toehold in the market. And in my view, to deal with the legitimate concern that people have, that it’s getting harder and harder for people, particularly young people, to buy their first home. I mean, that’s the motivation behind the 5 per cent deposits. The supply question is the motivation behind, you know, tens of billions of dollars that this government is investing in housing. I think housing is one of the defining challenges in our economy, and our policies already reflect that, and for all of the reasons that I’ve just outlined.
But I see that our political opponents are talking about housing and migration today. And so, a bit of perspective on what I think I saw in, I think it was in your paper, Greg. Building approvals are growing at 13.1 per cent now. They were going backwards by 21.6 per cent when we came to office. So, the Coalition left us approvals going backwards 21.6 per cent, now growing 13.1 per cent. New dwelling construction CPI, so the cost of building new places, grew 4.5 per cent through the year to March 2026. It was growing 19.3 per cent through the year to May 2022. Dwelling commencements grew 26.1 per cent through the year to the December quarter 2025. They were falling 28.5 per cent through to the year of the June quarter 2022. That was the biggest annual fall in more than 2 decades.
So, for the first time in a decade, we’ve got dwelling investment has now grown for 8 consecutive quarters, in annual terms dwelling investment is growing at 5.5 per cent now through to the end of the year. It was going backwards 3.6 per cent when we came to office. And so, there’s heaps more work that we have to do to build more homes, make it easier for owner‑occupiers to get in the market, particularly younger people, younger families trying to buy their first home. But this is the kind of progress that we’re seeing in the data. These aren’t opinions. This is the data which compares what we inherited in housing, from what we’re seeing in more recent times.
And when you think about the migration part of the story as well, net overseas migration is down about 45 per cent from its peak. It was surging when we came to office. It was absolutely surging when we came to office. It’s come down about 45 per cent. In the last full year it was about 30,000 people fewer than what was in the forecast. We’ve seen a bit of a tick up because of fewer departures, but we need perspective. When the Coalition is going out of its way to divide people, to play politics, on the eve of the Farrer by‑election, we need to remember that they were hopeless on housing, net overseas migration was surging when we came to office. We’ve managed that down in a responsible way. We’re putting all of our effort into building more homes and making it easier for people to get a toehold in the housing market, and that’s an important bit of perspective.
Journalist:
Your own Infrastructure Australia, fathered by your Prime Minister, designed by him, says you’ve got a 141,000 worker shortage in construction work, rising to 300,000 next year. Who’s going to build these homes unless you bring in more foreign workers?
Chalmers:
Now, I understand that the workforce is a big part of the story when it comes to building the homes that we need in this country. Primarily, it’s a story of training. That’s why we’ve got incentives for construction apprentices. And there is a responsible role for skilled migration in that as well. But the primary role is in Free TAFE. It’s in incentives for construction workers. We know that we need more workers to build more homes. That’s obvious and that’s why it’s a priority for us. Got to go, thanks very much.