Interview with Chris O'Keefe, 2GB Drive
CHRIS O’KEEFE:
The Federal Treasurer, Jim Chalmers is live on the line. Treasurer, nice to speak with you.
JIM CHALMERS:
Thanks for having me on your show, Chris.
O’KEEFE:
So, is capping how much someone can have in their super account? Do you class that as a minor change?
CHALMERS:
First of all, in relation to your introduction a moment ago, I mean, some of those things that you said that the government might be considering, the government's not considering all of those things. But I think that there is an opportunity, whether it's the size of somebody's balance or other kind of minor changes that could be considered. Our interest here is in making sure that these tax concessions are affordable and sustainable. And so all I've said this week, and the reason we're talking about it here, which is a good opportunity to do that, is because people need to know that at a time when we've got to fund Medicare and aged care and provide some cost‑of‑living relief in the Budget, that we need to be able to have a conversation about whether some of these tax concessions are affordable. I'm not going to kind of quibble about the words of major and otherwise, but we're not contemplating major changes to superannuation. We haven't made any decisions here. We've said that if there are ways to make the thing more affordable and more sustainable, and people have got ideas about that, then any responsible government would consider that, given the state of the Budget.
O’KEEFE:
It's clear you've got an issue with people piling millions of dollars of cash into a super account and minimising their tax. Is that fair?
CHALMERS:
It's more that we think that there should still be generous tax concessions for people to save for their retirement. I think you were bang on a moment ago in your intro when you said the point of superannuation is people saving for a decent retirement, and there should be tax advantages to doing that. But what we have to accept at the same time is the average super balance is about 150 grand. Less than one per cent of people have got more than three million in their super. The average amount that people have when they've got more than three million is 5.8 million.
O’KEEFE:
And is that too much in your view?
CHALMERS:
We should be up for a conversation about whether paying a lot of taxpayer money in concessions for that group is the best use of that money. And this is the conversation I'm trying to have, it's why I'm on your show. That's why I think we should be contemplating these kinds of things, but not because we want to make major changes to the system, not because we want to end the generous tax treatment of superannuation that is part of the system and an important part of the system. And this goes back to the grab that you played from me from before the election. I'm a big supporter of the system. I know why it's designed as it is. And as a big supporter of the system, I've got to make sure that we can afford it into the future, that it's sustainable into the future. And I think that's the conversation we need to be having.
O’KEEFE:
On capping people's super balances and it's very clear that you don't like the idea that someone's got five million dollars in their super account. Well, doesn't this go to the late, great Kerry Packer's point?
[Excerpt]
KERRY PACKER:
I am not evading tax in any way, shape or form. Now, of course I am minimising my tax. And if anybody in this country doesn't minimise their tax, they want their heads read. Because as a government, I can tell you you're not spending it that well, that we should be donating extra.
[End of excerpt]
O’KEEFE:
And that's the point, isn't it, Treasurer? It's people's money and they're just playing by the rules.
CHALMERS:
Yeah, of course, it is. And I'm not taking shots at anybody with lots of money, good on them. Genuinely. I genuinely want more people to be successful. I want more people to be comfortable. I want more people to have enough money to retire on. That's kind of the point of the whole system. The question really for us is, can we continue to pay big tax concessions when you weigh that up against some of the other things that I want to fund in the Budget? I want to make Medicare better, I want to provide a bit of help for people's energy bills, I want to strengthen aged care. I want to pay decent wages for people who work in aged care, all these sorts of things. These are the sorts of pressures on the Budget. And so, once again, so that I'm really clear for your listeners, Chris, we're not contemplating major changes. We haven't taken a decision to change anything. But I think any responsible government and our Liberal predecessors, by the way, made changes along these lines in 2016‑17. They did the same thing. I think if there are opportunities to make the Budget a bit more responsible and a bit more affordable and sustainable, then we should look at it.
O’KEEFE:
Is one of those opportunities increasing the tax rate on any extra money you throw into your super?
CHALMERS:
I haven't been considering that. Even in the course of –
O”KEEFE:
So it’s off the table?
CHALMERS:
Well, it's not on the table, yeah.
O’KEEFE:
Good. Can I ask you the next one? We can cross that one off the list because that'll give people –
CHALMERS:
Well, I don’t really want to work through whatever list you have.
O’KEEFE:
The problem is what you've been doing is you fly the kite, see which way the wind blows, and then make a decision based on public perception. So, this stuff comes out of the public. But Treasurer, you must understand, and whether it's your intention or not, people get anxious when they see this stuff written in newspapers as a result of what you're saying.
CHALMERS:
I understand.
O’KEEFE:
So, can I ask, is this on the table? Is increasing the tax rate on earnings you make from investments on the table?
CHALMERS:
It's not something I've been considering either. But Chris, I really want to pick you up on something you just said. This really matters to me. What I'm trying to do and what I've tried to do really, since I became the Treasurer, is to try and be upfront with people about the challenges in the Budget or the economy or whatever. And I do understand, I genuinely do understand that when you point to a challenge in the Budget, like the sustainability of some of these tax concessions, I do genuinely understand that people want to know more and they – particularly when it comes to their retirement incomes. And one of the reasons I've come on your show is because I want to talk directly to people about it. This is a pressure that we're concerned about. Again, we're not trying to kind of revolutionise the system. We believe in the system. We think it's a good system overall but if it requires some kind of tweaks to make sure that we can afford it in the longer term, then I think as a responsible Treasurer, then I need to be open to that.
O’KEEFE:
One of the problems that I've got is that there might be a perception that you have – don't people just – because this is revenue that you've forgone, it's tax revenue you have forgone because it's not money that you can spend. Because they are tax breaks that you were looking at cracking down on. Won’t those people who are making the most of those tax breaks just funnel their money elsewhere and you don't get any money out of it anyway to pay for Medicare, the NDIS, et cetera, et cetera.
CHALMERS:
Well, let's take that example I used a moment ago, right? And that's not because I'm flagging some kind of change or anything like that, but just take that example I mentioned before. Less than one per cent of people got more than three million dollars, good on them, right? We're not talking about taking money from people. We're saying, can we afford for very generous tax breaks to apply even in cases where people are doing really quite well?
O’KEEFE:
What do you class as quite well?
CHALMERS:
If you've got a few million bucks in super, that's pretty good. I think that's good, and good on you.
O’KEEFE:
Because there were some reports this morning that you were potentially looking at reducing that threshold from the 250,000 dollar mark to 200,000 dollar mark. And any money that you put into super above, if you earn over 200,000 dollars, would be taxed at 30 per cent. Is that something that's off the table?
CHALMERS:
Well, that's not something that we've been proposing or considering either. But the reason why that's in the paper today and the reason I'm glad you raised it is because that used to be a much higher number. And in 2016, a Liberal Government brought that down, right? And some of the people who are in the newspapers having shots at us now for opening up this conversation, I don't remember them having shots at the Liberals when they did it, right? Peter Dutton sat at the Cabinet table and agreed to make the kind of change that you've just described. They brought that threshold down. And really, I don't raise that, I genuinely don't raise that to have the usual kind of partisan shot. I raise it because I think any responsible government with a trillion dollars in debt and deficits as far as the eye can see, and the things we want to fund in aged care and Medicare and national defence and all of these sorts of really important things, I think any responsible government of any political colour will look to these sorts of concessions. It may be that we decide, and it may be that others decide that they are fine as they are, but people have put proposals to us about how we might be able to make them a little bit fairer. Not major changes, but tweaks. And I think any responsible government listens to that.
O’KEEFE:
We had a caller just before Treasurer who wanted me to ask you if you're looking at taxing the earnings in a superannuation account when it hits the pension phase, yes or no?
CHALMERS:
That's not something we've been looking at, no.
O’KEEFE:
That was Phil, so there you go, Phil. You can rest easy on that one. Treasurer, you are just crossing them off for us. This is very useful, but it seems to me that you're looking at two things. One, making sure that early access to super is restricted, which is fair enough, in my view. And number two, it's that top bracket, that top one per cent. Is that fair to say?
CHALMERS:
I think on the first one, we are worried about the ideas that you can kind of raid your super for all kinds of reasons, but it's a good opportunity for me to assure your listeners and reassure your listeners, we're not talking about changing the hardship provisions. There are ways you can access your super if you're in all sorts, and I think that's a good feature of the system that's not determined by the government but by the funds. And some of the stories that have been written in the last couple of days have made it sound like we want to mess with those hardship provisions. We're not talking about that. We're talking about some of the other ideas that are around about raiding your own super and compromising your retirement. So that's that one. And on the other one, again, I'm not trying to be kind of neat with my language here, but just that thing about how much you can have in your super account is one of the things that has been put to us by the industry itself.
O’KEEFE:
What's a fair cap? Is it two million? Is it five million?
CHALMERS:
I don't have an answer for that. I mean, that's not I don't have a concluded view on that. The industry, I think, has pitched up five. I think others have pitched up two. This is one of the things that's been in the newspapers a lot this week, as you know, because a lot of people out there think that it would be smart to do something like that. We haven't come to a concluded view on it.
O’KEEFE:
I'm speaking to the Federal Treasurer, Jim Chalmers. Just on interest rates, do you think it's fair that 30 per cent of the population with mortgages and people with business loans shoulder the entire burden of Australia when it comes to fighting inflation?
CHALMERS:
They do shoulder a big chunk of it, but I think eventually higher interest rates work their way into the economy more broadly. And one of the reasons why the Reserve Bank, when they take these decisions independently, they've got to weigh up the impact on people with a loan, but also the impact on the economy more broadly. They got to try and get on top of this inflation challenge without crunching the economy. They do that, they go about their work. I've got a different job to do, which is to try and provide a bit of cost‑of‑living relief in the Budget without adding to inflation, try and fix our supply chains and our workforce issues, which are pushing up inflation, and to try and be really responsible in the Budget at the same time. So, I'm focused on that. The Reserve Bank will do its own job.
O’KEEFE:
Sure, but economists say Reserve Bank can use the blunt instrument that his interest rate rises. That's their business. But as a government, as an elected government, fiscal restraint is a way to ensure that inflation starts to get back to where we want it. Can we expect cuts and restraint in the May Budget?
CHALMERS:
You can expect restraint, and in addition to that, you can expect the kind of investments in growing our economy the right way and fixing our supply chains and providing some cost‑of‑living relief. We want to do all of those things simultaneously. Every budget involves some fine balances and some difficult choices, and there'll be plenty of those in the Budget in May.
O’KEEFE:
Any cuts?
CHALMERS:
I would have thought so. We're always looking to trim spending where we can. We did more than 20 billion dollars of trimming spending in the October Budget, which was a good start. There'll be a little bit more, I think, in the May Budget. But spending restraint will be important too. And where we are spending money, it's not just the amount of money you spend, but the kind of the quality of it and what it's for. Where we do spend money, we'll try and make sure that we get an economic dividend out of it so we can grow the economy without adding to this inflation, which is putting so much pressure on your listings.
O’KEEFE:
Treasurer, I appreciate your time, just before I let you go. Well done on the caps on coal and gas prices, there was a lot of bleating from the resources sector. And I just noticed Santos, who called it a Soviet‑style plan, has just reported a 3.1 billion dollar net profit. Get the hammer and sickle out for Santos.
CHALMERS:
Chris, it's very kind of you to mention that. It was a series of difficult decisions, but there is some evidence that those caps that we put in place are going to work this year. Some of the forward pricing and pricing forecasts have been really encouraging. We don't get carried away by that. We know people are still under pressure, but it's very clear now that those difficult decisions we took in December are likely to pay off.
O’KEEFE:
Good on you. I appreciate your time.
CHALMERS:
Appreciate yours, Chris. All the best.
