Interview with David Speers, Insiders, ABC

DAVID SPEERS:

Time to talk to the Treasurer, Jim Chalmers. And to take us there - he was the former boss of the ACCC, Rod Sims putting forward a proposal this week to force down gas prices.

ROD SIMS:

What I'm urging the government to do is sit down with the gas companies and get them to divert enough gas to get the price below $10 with the threat of export controls, which I don't think will be needed, because I think once they understand the threat is real, they will act.

SPEERS:

Jim Chalmers, welcome to the program.

JIM CHALMERS:

Thanks very much, David.

SPEERS:

So Rod Sims has suggested - government requiring the gas companies to take the gas that they make available on the spot market and require that to be made available domestically. Is that a good idea?

CHALMERS:

Obviously, we take very seriously the views of people like Rod Sims who've got a long record in this area and we've empowered the organisation that he headed - the ACCC - now under Gina Cass‑Gottlieb to advise us not just on the monitoring of the market, but on some of the steps that we might be able to take from here. We obviously acknowledge that very high gas prices are putting extreme pressure on Australians and on Australian industry. We've already - through Minister Madeleine King - taken steps to expand supply and that's important and we said that we need to build on that. We've got big investments in transmission, we've got energy efficiency grants for small business, Minister Chris Bowen is working closely with his state colleagues, I'm working closely with the ACCC, we have acknowledged for a little while now that there's more work to do. Our focus, I think as David Crowe just said from the couch is on the regulatory side in the first instance. We are contemplating the kinds of steps that perhaps governments wouldn't have contemplated a year or two ago and I think that's important but beyond that, we don't really want to limit our options or narrow our options. There's a lot of work going on behind the scenes, a lot of consultation and collaboration and if there's something sensible and responsible and meaningful we can do here, obviously, we'll consider it.

SPEERS:

So is supply the problem?

CHALMERS:

Supply is part of the problem, and that's why the heads of agreement is important that Madeleine King was able to sign with the with the gas companies but clearly, we need to go beyond that. There's a code of conduct that applies to this industry and we've said that we will work to make that code of conduct mandatory, and we'll make it more focused on meaningful offers and that means going beyond supply and considering issues like price.

SPEERS:

So I just want to be clear on that - is the heads of agreement Madeleine King struck - does that fix the supply issue or you still want more supply?

CHALMERS:

Obviously, we need as much supply as we can get but that was a really important step.

SPEERS:

But it's not enough in itself?

CHALMERS:

I don't accept the criticism that it wasn't an important step but obviously, supply is a big part of the story here, but so is price - that's why the code of conduct is important, that's why I've tasked the ACCC for some important advice on a relatively short timeframe and that'll be a big part of our considerations.

SPEERS:

I'll just pick up on something else you've just said - it will be a mandatory code of conduct. I think you said you're moving towards a mandatory code of conduct?

CHALMERS:

Yes, that's our intention. I think the Prime Minister made that clear during the week, as have I, as have other ministers. There's a code of conduct here which goes to price - one of the concerns that's been raised by the ACCC and others and it's a concern that I share, is that when these offers are made, quite often there's not enough attention paid to not just the supply side but also the pricing and clearly the pricing is what's putting a lot of pressure on local industry and on electricity prices as well and so that will be one of our focuses.

SPEERS:

And so will that be a price cap in that mandatory code of conduct?

CHALMERS:

Again, obviously, that's something that we're considering, David, but I genuinely don't want to limit our options or narrow them down excessively, I've said that regulation for us in the near term is a bigger priority than using the Budget to deal with this substantial challenge and the code of conduct is a good place to start. If there are other ways that we can do this responsibly, which takes into consideration our international partners, the contracts that have been signed and a whole bunch of other competing pressures, then we are prepared to do that. But if you think about this, and I think David Crowe from the couch was making a similar point, and others, Patricia, is that you can go down the path of tax, you can go down the path of direct support to households, we don't want to rule out those kinds of options but our focus, our immediate focus is on the regulatory side. I don't think it's meaningful, I don't think it's helpful for the Treasurer to engage in a kind of running commentary of our options, because there's a lot of market sensitivity here too.

SPEERS:

Understand that, but people are worried, business are worried, people are hoping to see some solutions to this problem. Can you tell us how quickly you're going to move on this? When can we expect to see your solutions?

CHALMERS:

We're making progress every day, David. We're working quite hard on this challenge, not just since the Budget, but before it as well and I ran through some of the steps we've already taken. And Tuesday's Budget had some substantial resourcing for the three major regulators in this area, recognising their important work too. Chris Bowen met with his ministerial counterparts from the states and territories on where -

SPEERS:

When are we going to see a solution, though Treasurer?

CHALMERS:

I'm not going to give you a date today, David, but I can indicate to your viewers that it's obviously a high priority for us. It is a bigger and bigger part of the inflation challenge that we confront more broadly and the government will work as hard as we can to get an outcome here as soon as we can.

SPEERS:

So the other question I have on this - we saw in the Budget the forecast for increasing prices - when under your plans, will energy prices start to come down?

CHALMERS:

First of all, it's important to recognise that those forecasts that everybody has been quoting since the Budget - and we tried to be really upfront in the Budget, I'm pleased to see Patricia recognise that a moment ago - we tried to be upfront about the composition of this inflation challenge and the fact that because of the war in Ukraine, electricity prices and gas prices will become a bigger portion, a bigger component of this inflation challenge that we have more broadly along with natural disasters pushing up the cost of living as well. And so what we tried to say is, this is what we're expecting. Now, importantly, in the electricity market, the 20 per cent number and the 30 per cent number - the 20 per cent number is already flowing, it's actually partly a consequence of those price rises that Angus Taylor hid during the election campaign and so, we need that perspective too. We expect 20 per cent, then -

SPEERS:

Just coming back to the question, sorry to interrupt, Treasurer - we've heard a lot of this during the week - when will prices come down?

CHALMERS:

We've just provided the near term forecast, the 20 per cent and the 30 per cent - that covers this year and next year. Obviously, as we invest more in cheaper and cleaner forms of energy, obviously, depending on what regulatory interventions we can sensibly make in the near term, that will have an impact but I think most importantly for families and for Australians and for Australian industry, we do expect prices to rise this year and next year. Part of that's already flowing and all of the work that we're doing now is to try to take some of the sting out of those price rises.

SPEERS:

Okay, but just coming back to this question, I mean, we heard in the election what Labor promised about a price reduction by 2025, just wondering this morning if you can tell us when prices will come down?

CHALMERS:

Well, I'm pleased you asked me about that modelling, David, because that was done in 2021 for an outcome in 2025 and the reason why there's so much unpredictability in this market and in relation to your question, is because we've got a war in Ukraine which is hanging around and is entrenched far more than anybody predicted at the time of the election, the impact on energy prices is far more sustained, and far more extreme than people expected earlier in the year and that's why we've got these forecasts for price rising -

SPEERS:

Accept all of that sorry, but I just want to be clear - is it fair to say right now that you don't know when prices might come down?

CHALMERS:

We know that they will moderate in time and we know that we give ourselves the best chance to do that by investing in new sources of cleaner and cheaper energy, which is the government's priority.

SPEERS:

But do you need to remodel your plans because right now you're unable to say when prices might fall?

CHALMERS:

We are always recalibrating our expectations for electricity price rises - the reason that we're having this conversation now, David, if I may say so is because we did that on Tuesday night. And we had a choice to make to be upfront about what's happening in these energy markets or not, we chose to be upfront, we think it's crucial that we do that so that we can shine a light on the important work that now needs to happen and part of that work is investing in new sources of cleaner and cheaper, renewable energy and that's the government's priority.

SPEERS:

Let me ask you on the tax front, the Budget says the petroleum resource rent tax will raise just $2.6 billion this financial year, it's a little bit improved on the year before, but only about $200 million and then your revenue from the PRRT falls over the next year, the next year, the next year. The gas companies, they do pay company tax as well but when you look at the total they're paying in tax, is it enough? Is it fair?

CHALMERS:

You're right to point out that the PRRT take is a little bit up this year, and a little bit up next year and then trails away. Part of that is the assumptions that Treasury makes about commodity prices, that's been a feature of Budgets before the change of government as well. I do understand that there is a substantial part of the community that would prefer that that PRRT take was higher.

SPEERS:

What do you think?

CHALMERS:

We haven't been working up an option to do that - to change the PRRT arrangements - but the Treasury has been commissioned by my predecessor and by his predecessor to do some of this work around the taxing point in the PRRT. There's been a couple of reviews, the second one hasn't finished yet. The Treasury has restarted that work and I'll obviously take their recommendations really seriously. We do want to make sure that Australians get a good return for their resources, we need to balance that against the investment that's been made into the sector. When I get that advice from Treasury, I'll engage with it in a meaningful way and I'll obviously listen to it.

SPEERS:

But when you look at the numbers in your Budget as Treasurer, do you think the gas companies are paying enough?

CHALMERS:

I think inevitably Treasurers would like the revenue stream to be strong and the spending to be restrained and we have seen, I think as you acknowledged in your first question on this topic, company taxes are up quite substantially, that's a good thing and we've let that flow through to the Budget. The PRRT, there's a modest increase. I'll wait and see what the Treasury advises us on the conclusion of the review that my two predecessors put in place.

SPEERS:

Just on revenue generally, you did indicate during the week that any change to the GST is not something you're interested in, what about other taxes like negative gearing, capital gains tax, franking credits - are you going to take a fresh look at those or are you still scarred from the 2019 experience?

CHALMERS:

Well, first of all, on the GST, that's grown strongly and that's an important source of revenue for the states. Every cent of the GST, as you know, flows through to the states, it's been growing strongly, it's an important part of their revenue base and that's a good thing. Some of those other issues that you mentioned, we haven't been reconsidering those.

SPEERS:

Are you going to now?

CHALMERS:

I wouldn't have thought so - we take seriously what we've said about those areas.

SPEERS:

So they're off the table too?

CHALMERS:

I don't use that language, David. What I've said to you, I think on a number of occasions is that we need a conversation about how we make the Budget more sustainable and what we're able to show on Tuesday night is that you can move sensibly on spending restraint, on trimming spending -

SPEERS:

But you've still got a big structural deficit, and one that's growing, I mean, even your net policy decisions increase that structural deficit according to the Budget on page 115, it's there, it's black and white. So do you look at these taxes, I know they're politically problematic, but are they worth a fresh look?

CHALMERS:

I think we need a fresh look at the Budget in its entirety because what we've got is a structural problem in the Budget as you rightly identify but before we get to that, and again, this interacts a bit with the discussion before - we've been in government for five months, David, we've already found $22 billion in savings, 28 and a half billion dollars in Budget improvements overall, we've kept real spending growth flat across the forward estimates, we've got the debt down over the forward estimates, we've let 99 per cent of the temporary revenue surge from higher commodity prices flow through the Budget - that is good progress and what we've shown in doing that, and this is what relates to what comes next, is we've shown that you can move sensibly on all fronts - restraint, trimming spending, sensible tax reform, you can make the Budget more sustainable, and that will be the task of the two or three Budgets remaining in this parliamentary term as well.

SPEERS:

Your budget forecast the NDIS will cost around $100 billion a year in 10 years' time. Is that affordable?

CHALMERS:

It's a bigger and bigger part of the Budget and what I say to -

SPEERS:

Is it affordable, though?

CHALMERS:

We need to make sure we're getting value for money in the first instance. The cost of it is growing quite fast as you rightly identified, it's not the fastest growing area of spending in the Budget - that is the cost of servicing the debt - but it is growing substantially and the reason why Minister Bill Shorten has got this important review of the NDIS in place, or one of the reasons, is we need to work out how do we maintain a focus on Australians with a disability and their families? How do we put them front and centre and at the same time, make sure that spending on the NDIS is sustainable? An important part of that is making sure that we get value for money for every dollar that we spend in what is a really important, really really important service -

SPEERS:

I wanted to ask you this, because you've laid out the Budget, the costs of how much this is going to cost the NDIS but we don't see the benefits laid out there. And when Labor set this up, we were told the economic benefits would outweigh the cost. Is that still the case? Is that being measured?

CHALMERS:

It is and so the NDIA, the agency that runs the NDIS have produced a number of stats which show they're at positive economic impact of the scheme. For example, I think, from memory, something like there's a 29 per cent improvement in people who are not looking for work or not in work. There's, I think, a 24 per cent improvement in employment of parents, of people who are involved in the scheme, there's a whole range of economic benefits, they're important but first and foremost, we want to provide this service to Australians with a disability and their families, it's really crucial that we do that, part of ensuring that is to make sure that the scheme is sustainable and that's why the work that Minister Shorten is doing is so important.

SPEERS:

And I want to ask you finally about child care. You're boosting the child care subsidies as you promised, this is going to substantially boost demand for child care as well. The missing piece of the puzzle seems to be where the workers come from to provide that child care. There's already a serious shortage of early childhood educators, qualified early childhood educators. They don't earn much more than someone at McDonald’s or Bunnings, you're now going to have an even greater demand for these workers. Where are they coming from? What's your plan for that?

CHALMERS:

I think the care economy, like a lot of industries in our economy more broadly has got skill shortages and they will get worse without attention and that's why so many of the things that we're doing in this Budget, so many of the conclusions from the Jobs and Skills Summit, are about this collision of priorities and pressures in our labour market. And I think the care economy, child care aged care, NDIS are where some of these challenges are most acute. It's why we've reserved part of the 20,000 university places for early childhood educators, it's why we supported an increase to the minimum wage and more than 100,000 -

SPEERS:

Would you now support a case before the Fair Work Commission for child care workers?

CHALMERS:

First and foremost, we're doing that in the area of aged care, The Fair Work Commission determines –

SPEERS:

For child care?

CHALMERS:

The Fair Work Commission determines the sequencing of these sorts of things and aged care is next. We've made a responsible provision for part of that aged care case in the contingency reserve of the Budget and we've already supported a pay rise for early childhood educators who've got a 4.6 per cent pay rise as part of that minimum wage decision which was what we supported as the first outcome of the new Labor Cabinet. And so obviously, we've got to deal with skills and labour shortages, that's why TAFE, that's why migration, it's why universities are so important - we've got to attract more people into the sector, that's why wage rises are important, we're acting on all of those fronts simultaneously.

SPEERS:

Treasurer Jim Chalmers, we'll have to leave it there. Thanks for joining us.

CHALMERS:

Thanks, David.