Interview with Michelle Grattan, The Conversation

MICHELLE GRATTAN:

Jim Chalmers, what stands out for ordinary people in this Budget is the big power price rises and we've seen electricity is going up by 20 per cent this financial year, 30 per cent next financial year. Broadly the same story for gas. I know you don't want to pre‑empt government decisions ‑ but will the government take comprehensive action on power prices and when can we expect to get decisions?

JIM CHALMERS:

Thanks, Michelle. First of all, we have taken some steps and I pay tribute to the Energy Minister, Chris Bowen, for the way that he's worked collaboratively with his state and territory counterparts because we've had some issues in energy markets really for the duration of the time that we've been in office and he's made some progress. In the Budget, we found room to fund and empower our regulators ‑ including the ACCC ‑ a bit more about our efforts to get more renewable energy into the system, which in the long term is the only way to fix some of these challenges but we are contemplating whether there's more we can do. These power prices, the way that they're increasing, they will sting and we would like to try and find a way to take some of the sting out of it but we need to be realistic about that. We need to be careful and cautious about it and we need to collaborate with states and territories to make sure that if there's anything that can be sensibly and responsibly done, obviously we'll consider that. We've got more work to do on it.

GRATTAN:

And timing?

CHALMERS:

The work is already happening and I think any responsible government that gets the kind of electricity price forecast that I've printed in the Budget this week takes that seriously and considers its options and for me personally, something like this I think makes me consider probably a broader range of options than I may have in years gone by, but beyond that, I don't really want to narrow it or pre‑empt it. It is principally the job of Chris Bowen, but we will support him, other members of the Cabinet as well, to see if we can do more.

GRATTAN:

Were you personally shocked when these numbers came through, when you were briefed on the trends?

CHALMERS:

I'm not sure about shock ‑ but certainly they are impactful numbers, of course they are and they stand out in the Budget, of course they do ‑ but when you've got a war in Ukraine which is causing havoc on the global energy markets and pushing up our own electricity prices and also when you remember that what Angus Taylor did during the election campaign, to hide the first of these big price increases, then I think people know that the price of electricity is going up substantially and that's a bigger and bigger part of our inflation challenge.

GRATTAN:

On a very different front, the Budget commits to a housing accord between governments, investors and industry to deliver one million houses over five years, starting 2024. Just how will this work and what do you see as the role of the super funds in all this?

CHALMERS:

Yes, crucial role for the super funds. What's motivating us here is really three things ‑ the vacancy rates for rental properties are extremely low, rents are high, and even when the economy is creating a heap of jobs, it's harder and harder for people to live near where the jobs are. When you consider the magnitude of that problem, the best response to that is to bring together everyone who's involved in this market to see if we can do better and so, I'm proud of the work that Julie Collins and I have been able to do. We brought super in, the states and territories and the building industry, and we've come up with this accord and superannuation is absolutely central to it because we think for relatively low cost, from a Commonwealth point‑of‑view, we can incentivise super to invest in a way in affordable housing, which gets a great return for their members, but also satisfies one of our big, national priorities which is to build more homes.

GRATTAN:

Now, you've indicated very clearly in the Budget that you think future Budgets will need to curb spending and find ways to raise more revenue. On the spending side, the NDIS is headed in a decade to cost about 100 billion a year, which is enormous. You've already got a review of the scheme, but do you think that you can get that scheme back under control, in spending without a drastic reshaping of it?

CHALMERS:

First of all, I think the broader point where you started that question is right ‑ we need some combination of fiscal restraint, spending cuts, tax changes and targeted investments to get the Budget on a more sustainable footing and we started that work in the Budget this week. We made good progress on each of those fronts. The NDIS is not the fastest growing area of government spending ‑ that's actually the cost of servicing the trillion dollars of debt that we inherited from our predecessors ‑ but it's up there. The NDIS is growing and we take that seriously. Part of that ‑ and Bill Shorten deserves a lot of credit here ‑ is cracking down on any rorting in the scheme. That's the first step, but we've also got this review from a couple of people who really know their stuff to make sure that we put people at the centre of the NDIS, that we're getting maximum value for money. We support the NDIS, we believe in that, we want to secure its future and part of doing that is making sure that it's sustainable.

GRATTAN:

Now, on the tax side, we have had a lot of debate about the stage three tax cuts, but tax experts say that the main problem actually isn't income tax, but the balance in the tax system between income taxes, company taxes on the one side and a whole range of other taxes on the other. Why are you against a comprehensive inquiry into taxation as a preliminary to doing something? You're obviously going to do something at some stage.

CHALMERS:

I'm not immediately attracted to another tax review. I've tried not to completely close off the option just because it's not unprecedented for Cabinets and Prime Ministers to have a view about this, but our inclination is not to and that's because what's different now in 2022 compared to the first term of the Rudd Government, is that we think the issues are broadly known and understood and –

GRATTAN:

We should reference this, that the first term of the Rudd government ‑

CHALMERS:

The Henry Review.

GRATTAN:

The Henry Review. And you were a staffer to the then Treasurer at the time.

CHALMERS:

Yes, that's ringing a bell, Michelle, and I think that the issues are more broadly understood now than they were then and one of the things I would like to do to help feed this conversation which isn't a tax review ‑ as I'd like to think differently about the tax expenditure statement that we release so that it's clearer, people can understand the trade offs ‑ I'd like to do the intergenerational report in a different way that shows the cost of providing services and what kind of revenue we would need to satisfy that. The wellbeing budget is part of this story as well, so I'm trying to change the way we think and talk about the Budget position and tax is part of that, but it's not the only part of it.

GRATTAN:

Now just finally, obviously framing this Budget has been a very challenging exercise. But if you had to single out the most difficult part of it, what would you say? Is it the fact that it's such an uncertain environment? Is it that you can't give more help to people who are really struggling with cost‑of‑living? Or is it something else?

CHALMERS:

I think a version of that second one that you gave as an example. I think by inclination, when times are tough, our instinct is to provide more support, but what we know is ‑ we're providing some support ‑ but if you overdo it, you risk making inflation worse. Inflation is genuinely public enemy number one. It is the dragon that we need to slay and you don't want to make it harder to do that by making indiscriminate payments. I think that's the lesson of the UK in part, and so that has been hard to show that restraint, particularly when we've had these revenue windfalls from high commodity prices, that's been difficult. I know that no Budget ever gets released with universal, unanimous support. I think in the back of people's minds, there is an understanding that if you overdo it as a government, you can push inflation up, and that pushes interest rates up, and it makes a difficult situation worse than it might otherwise be and we want to try and avoid that and that's difficult.

GRATTAN:

Jim Chalmers, thanks very much.

CHALMERS:

Thanks, Michelle.