Interview with Andrew Clennell, Sunday Agenda, Sky News
ANDREW CLENNELL:
The man due to hand down his first Budget in just over 48 hours is the Treasurer Jim Chalmers, and he joins me live from Canberra. Treasurer, thanks for your time. I wanted to start with paid parental leave, the announcement this morning, couples up to $350,000 in earnings will now be eligible. What’s the thinking behind this, and wasn’t this Josh Frydenberg’s policy in his Budget? I know they were 20 weeks - the Coalition - and you’re 26, but it’s the same threshold.
JIM CHALMERS:
What we’re talking about is the biggest expansion to paid parental leave since Labor created it. And this is part of what will be a family‑friendly Budget, a Budget which recognises that even though this global pressures come at us from around the world, its impacts are felt around the kitchen table.
So central to a family‑friendly Budget is the biggest on‑budget new investment, which is child care, but also making sure that we get paid parental leave right so that families can better manage their work and family responsibilities.
CLENNELL:
But wasn’t this Josh Frydenberg’s policy as well?
CHALMERS:
No, our policy is to extend it to six months. That’s the primary part of our policy. The key part is to get it to six months in a timed and targeted fashion, to get there in a responsible way, to recognise that one of the big challenges that we’ve got in this country is we don’t have a big enough workforce, and part of making sure that we can build a bigger, better‑trained workforce so that people can earn more and work more, is to get the combination of early education and paid parental leave right, and that’s what we seek to do in this Budget.
CLENNELL:
Treasurer, before the last election on this program, the Deputy Prime Minister Richard Marles said that Labor’s instinct was not to get in the way of the Australian people and a tax cut. So why in internal Budget discussions were you seeking to do exactly that?
CHALMERS:
I’m seeking to have a broader discussion with the Australian people about the pressures on the Budget. And there’s no point ignoring some of these policies which have been legislated. I think that’s something that you would expect from a Treasurer, to talk about the Budget in its entirety and the pressures on the budget. And that’s what I did.
CLENNELL:
Do you think the stage three tax cuts in the way they are at the moment, are not fair?
CHALMERS:
I think the stage three tax cuts that come in in a couple of years’ time, they kick in at $45,000, and so they will provide some welcome tax relief when the time comes for people on those kinds of incomes. You know, I’ve made that clear throughout. But our focus in this Budget is not on the stage three tax cuts; we’ve got far more pressing priorities. We need to provide responsible cost‑of‑living relief with an economic dividend. We need to have these targeted investments in a stronger, more resilient, more modern economy. And we need to start unwinding this legacy of rorts and waste in the Budget. So those are the primary tasks for the Budget. That’s what we’ve been focused on.
This Budget will be more than battening down the hatches; it will be backing in families. It will be building a better future, and it will be trying to bring people together around these big economic challenges that we confront together.
CLENNELL:
Well, how many billions have you been able to identify and cut in terms of what you call rorts and waste?
CHALMERS:
That will become clear in the Budget on Tuesday night. But my colleagues, led by Katy Gallagher and other colleagues, have done a heap of work going through the Budget line by line, making sure that unwinding some of the wasteful spending makes a key contribution to improving the quality of the Budget and making room for some of our other priorities. And so, people will see the fruits of that effort in the Budget on Tuesday night. There will be substantial savings. But there will also be substantial spending restraint, taking a much more responsible approach to the temporary revenue upgrades that we expect to see in the Budget in welcome ways – being more responsible about that, but also trimming spending where we can. Also some multinational tax reform and tax compliance. But most of all I think showing people that you can have more restraint in the Budget and more resilience in the economy. That’s why the Budget will be solid and sensible and suited to the times, and a key part of that will be our effort on savings.
CLENNELL:
Because you have been blessed by a lot more revenue, haven’t you? People are talking – Chris Richardson is talking about 100 billion over the forward estimates. That is something of a blessing. It must be difficult in a way to paint this picture of caution and gloom ahead, when you’re banking so much extra revenue.
CHALMERS:
I don’t really see it that way. It is very welcome that we’ve got this near term boost in revenue coming from higher commodity prices. We’ve got that going for us. We’ve got low unemployment as well. And I’m optimistic about the future of the economy. But even with that very substantial and very welcome boost to revenue over the next couple of years, it goes absolutely nowhere near making up for the bigger structural, persistent spending pressures on the Budget. The fastest growing area of spending in the Budget is the interest rate bill on the trillion dollars of debt that we inherited, but beyond that we’ve got the NDIS and aged care and health care and investments in defence. And so, these are the big growing areas of Commonwealth spending. It’s a combination of either unavoidable spending or desirable investments in the future and in people. We’ve got to find room for that. And what we see in commodity prices and how that flows through to the revenue, that will lead to a welcome improvement in the bottom line for the next couple of years, but it won’t make up for some of these pressures after that.
CLENNELL:
And as unemployment rises an extra $32 billion I understand over the next four years in social security payments.
CHALMERS:
There will be. One of the big features of the Budget is just under $33 billion in spending, new spending, on pensions and payments. That is primarily a consequence of the indexation arrangements which are an important part of the architecture of the Budget. So an extra $33 billion on pensions and payments. About a third of that is the aged pension. Another third of that is Jobseeker. These are the consequences of a high inflationary environment on the Budget. We’re used to thinking about some of the benefits to the Budget from higher commodity prices, but there are swings and roundabouts in the Budget, and one of them is this extra $33 billion on pensions and payments, which are important, which we’ve found room for, but which are putting additional pressure on the Budget too.
CLENNELL:
Inflation in Australia at the moment seems stuck at about seven per cent. We’ve seen it stuck in the US at eight per cent. Month by month, quarter by quarter, that continues to be the annual rate. How confident are you then, with this Treasury forecast of 5.75 per cent for the financial year?
CHALMERS:
This is Treasury’s best estimate, best forecast of how they see inflation in our economy. They still expect inflation to peak around the end of the year and to begin to moderate after that. But we’ve got to level with people and say that unfortunately we think that inflation will be a bit higher for a bit longer than we’d like. That’s because of a combination of electricity prices and energy markets brought about, the impact of which is being felt from Ukraine. But also the natural disasters will have an impact too. But, again, when it comes to that inflation forecast, there have been troubling developments in energy markets, obviously troubling developments in flood‑affected communities, and that will push up inflation. But petrol has come off a bit quicker than what we were anticipating, or what Treasury was anticipating in the middle of the year. So all of that will be factored into inflation forecasts which we think means inflation peaks towards the end of the year, begins to moderate, but is more consistent than we’d like.
CLENNELL:
How much do you expect electricity prices to rise next year?
CHALMERS:
We’ll have more to say about that in the coming days. But I think I’ve been upfront with people about what happens when you’ve got the havoc being wrought on the energy market by what’s happening in Ukraine, combined with the costs and consequences of a decade now of energy policy chaos. And unfortunately, we’re seeing the costs of that. The pressures on our economy are coming at us from around the world, but the impacts are felt around the kitchen table, and people are seeing that in their electricity bills. We’re very conscious of that, and we’ll have more to say about that in the coming days.
CLENNELL:
Is it time to dump the election promise of $275 cheaper per year by 2025?
CHALMERS:
The modelling that that was based on goes to something which is broadly accepted right across the board, which is renewable energy is cheaper and cleaner energy, and if we get it right it will be more reliable energy as well. And so that modelling that had that number by 2025, I still believe that the impact on energy prices of cheaper, cleaner, more renewable, more reliable energy will have a positive impact, but in the near term a war in Ukraine and the consequences of the Liberals and Nationals stuffing up energy policy for a decade - there are consequences for that in the near term. And so, electricity prices will be part of our inflation challenge in coming months, and we’ve been clear about that.
CLENNELL:
But, Mr Chalmers, is it time to admit that that promise – I think in December 2021 – that they’d be $275 cheaper from that time just ain’t going to happen?
CHALMERS:
What you’re referring to was the modelling that said it would be that much cheaper by 2025. And we’re in 2022, and we’ve been upfront with people about pressures on energy markets, whether it’s gas, whether it’s electricity. We all know what’s happening around the world. We all know and have been through unfortunately a decade of stuff‑ups on energy policy. And so that will have consequences in the near term. And I’ve levelled with people, Andrew, about this. I’ve been saying for some weeks that one of the reasons why the primary influence on this Budget is inflation, is because inflation will be too high for too long. Electricity will be part of that. Natural disasters will be part of that. Issues in our supply chains will be part of that. And the responsibility for this government is to methodically and calmly work through that complex combination of challenges. And that’s what we’re doing.
CLENNELL:
What action are you considering against gas companies to keep gas prices down?
CHALMERS:
Look, I think it’s pretty clear that high gas prices are absolutely smashing our local industries. And the onus on us is to work through that challenge in a way that doesn’t cause problems for our international partners, but which recognises that getting some more supply into the system, as Madeleine King was able to do with that important Heads of Agreement, we need to see if more can be done. And if more can be done, more should be done. I work really closely with Madeleine King and Ed Husic and Chris Bowen and the Prime Minister on this challenge. It is a big part of what we’re confronting in the economy. And it requires our best efforts. And so there will be more work to come following that Heads of Agreement. And that work will recognise we’ve got responsibilities to our international partners, but we’ve also got responsibilities to local industry, and local industry is getting smashed by high gas prices brought about by all this geopolitical uncertainty.
CLENNELL:
Just briefly on that, would that involve legislation, the ACCC cracking down on gas companies? Are they possibilities?
CHALMERS:
I’m not going to pre‑empt the legislative agenda, but certainly I see a role for the ACCC. A lot of my thinking on this challenge, has been guided by some really important work that the ACCC has done this year. I really pay tribute to the ACCC under Gina Cass‑Gottlieb’s leadership for the really important contribution they’ve made to our thinking and the community’s thinking about gas prices. And I would like to involve them more substantially in the work that we will do collectively as a cabinet going forward.
CLENNELL:
Nearly out of time – just a couple of things briefly: you came to office repeatedly saying the Government would lower wages, and yet the wages forecast after the first couple of years in this Budget doesn’t seem to reflect that. Is that going to be another broken promise?
CHALMERS:
No, of course not. Wages growth is going to pick up from what was expected at Budget time. And that’s partly because we’ve got a government now that doesn’t think that wage suppression and wage stagnation should be a deliberate design feature of our economic policy. We’ve already acted to support a decent minimum wage rise. We’re already supporting wage increases in the care economy beginning with the aged care sector. Our policies around training are about training people for higher wage opportunities. Our policies around child care are making it easier for parents, especially mums, to work more and earn more if they’d like to. Our investments in a stronger, more modern, more resilient economy are all about creating more secure and better paid jobs. And so, our wages policy is central to what we’re trying achieve here. It’s central to the cost‑of‑living challenge. Real wages have been going backwards since before the election, and if we want to get a handle on that, we’ve got to do the right thing on the inflation side and we’ve got to the right thing on the wages side. And that’s what we’re doing.
CLENNELL:
Jim Chalmers, thank you so much for your time.
