Interview with Patricia Karvelas, RN Breakfast, ABC

PATRICIA KARVELAS:

Jim Chalmers is the Federal Treasurer, he joins us this morning. Treasurer, welcome.

JIM CHALMERS:

Thanks for having me back on your show, Patricia.

KARVELAS:

Treasurer, the mid-year economic update shows a $30 billion surge in income tax revenue since May. Is that behind your Budget being within striking distance of a surplus? How much is bracket creep doing the heavy lifting here?

CHALMERS:

Well, it’s part of the reason for the recovery in revenues but it’s not the whole reason. Obviously the strong performance of some of our exports is part of the story, a big part and the strength of our labour market is a big part of the story as well. And I think it’s really important that your viewers understand that when people talk about bracket creep in the context of the budget, what it means is that more people are working and more people are earning more – and both of those things are good things. 620,000 jobs created under the life of this Labor government, which is a record for a first-term government, combined with the fact that we’ve got wages moving after a decade of stagnation. That means more people are earning more and that has good consequences for revenue in the budget as well, but primarily it’s a good thing for the workers of Australia. More people working, more people earning more. That is a big driver of the changes to the income tax take in the budget.

KARVELAS:

In July next year of course, these stage three tax cuts become a reality after years of us talking about them. So let's just talk about the way you view those cuts – do you see the tax cuts as playing the role of providing cost‑of‑living relief? Is that in your thinking, that you see those tax cuts as being the cost‑of‑living relief to be delivered next year?

CHALMERS:

Well, obviously if people are getting tax cuts, if people are keeping more of what they earn, that will make it easier for them to make ends meet, that's one of the motivations. But there are other motivations as well. I think governments of either political persuasion, when they can afford to, should be looking to return some of this bracket creep when they can. These tax cuts, as you know, were legislated some years ago and they're in the budget, as you rightly point out, to come in in the middle of next year.  And they will provide some relief to people, they will also return some of this bracket creep, and those are two of the motivations for them.

KARVELAS:

Okay. And is that in your thinking about why you need to be hesitant about providing more cost‑of‑living relief?

CHALMERS:

We haven't been hesitant about cost‑of‑living relief. We're rolling out $23 billion ‑

KARVELAS:

I said more, not the stuff you've already announced ‑

CHALMERS:

‑ billion dollars.

KARVELAS:

‑ more was the key word.

CHALMERS:

Yeah, but I guess what I'm saying is we've shown our bona fides when it comes to providing tens of billions of dollars in cost‑of‑living relief. And what we've said at every Budget and at every update is that we always consider the pressures that people are under, the economic circumstances and the budget position, and we provide help where we can, and we will consider further cost‑of‑living relief between now and the May Budget. What I released yesterday wasn't a mini budget, it wasn't a long list of new initiatives, it was effectively an update, a stocktake of the budget position and our forecasts for the economy. But as we get closer to the May Budget, obviously we will consider whether we can afford to do more, and we'll factor in, as we always do, the economic conditions, the budget pressures, and most importantly, the pressures that people are under right around Australia, which we don't just acknowledge, we're acting on, with the cost‑of‑living relief which is already flowing.

KARVELAS:

So are you considering tax relief for people on low and median income separate to the stage three tax cuts? Will there be any adjustments?

CHALMERS:

That's not something that I'm prepared to flag or something that we have been working up. But I guess I refer you to my answer earlier on, which is that if we can do more for people, whether it's in the tax system or more broadly with some of these other initiatives which are working to put downward pressure on inflation, obviously we consider that from budget to budget. That's not unusual to factor in the economic conditions, the budget pressures, the pressures that people are under to try and do the best for people. That's the story of our first two budgets and that will be the story of our third as well.

KARVELAS:

Of course the story of the budget update is also lower infrastructure spending. Victorian Treasurer Tim Pallas has accused your government of treating Victorians with contempt, and he points to the fact that the state's share of infrastructure funding has fallen from 19.2 per cent compared with 23.5 per cent outlined in the May Budget. Are you short changing Victoria?

CHALMERS:

Of course we're not, absolutely not, and Tim knows that the infrastructure pipeline is a ten‑year pipeline. We have not cut money from that $120 billion plus ten year infrastructure pipeline, and Victoria's share of that total pipeline remains around 23 per cent over the ten year period. And so we have been up‑front for some time, the states have known for some weeks that we are re‑profiling that infrastructure spend so that we can actually build things, we can actually get this infrastructure built to the ultimate benefit of the people that we both represent. That has meant re‑profiling, reshaping this infrastructure pipeline, but it's not smaller over that ten year period, and the Victorian share is not smaller over that ten year period. A couple of other points, if I can, about this though, Patricia. I mean the states have done really well out of the Commonwealth in recent times. We've just provided a big health and hospitals boost, which we're proud to do, we've just extended the GST No Worse-off Guarantee, even in infrastructure we've just doubled Roads to Recovery funding. Everybody gets more over the ten year period of the infrastructure pipeline. As I said, the Victorian share stays around 23 per cent, but we will continue to work with the Victorians and all of the other states and territories to try and manage these pressures that are on the infrastructure pipeline, so that we can build more high-quality infrastructure to benefit our people. The last point, and thanks for your patience, Patricia ‑

KARVELAS:

I am being nice.

CHALMERS:

‑ is what I try and do when it comes to the relationship with the states, is I do not take shots at the states ‑

KARVELAS:

They've taken shots at you.

CHALMERS:

I'm not interested in a war of words and I get lots of opportunities to comment on things like the cancellation of the Commonwealth Games, or different tax measures that different state treasurers take in budgets. And I say the same thing every time, which is I recognise the pressures that state budgets are under. I ask the states and territories to recognise the ongoing pressure on the Commonwealth budget as well. I believe we make more progress when we work together rather than take shots at each other, and that will continue to be my approach, whether it's Tim, who I respect and enjoy working with, or other state and territory treasurers.

KARVELAS:

The US Federal Reserve has kept interest rates on hold for the third consecutive month. The question now is how long they'll stay high. Should Australians expect the sort of ‑ I spoke to an economist before that said, you know, a six month lag and a similar response here. How do you view it?

CHALMERS:

I'm obviously not going to comment on the future movement of interest rates here, but I think a lot of people are watching very closely what's happening in the US. Their inflation peaked higher and earlier than ours, and it has been moderating like ours has, and the Federal Reserve was on hold overnight, and their language was really quite what the economists call dovish when it comes to future movements in interest rates. Obviously Australians watch that very closely and very carefully. Inflation is still too high around the world, but it's moderating around the world. It's still too high here, but it's moderating here as well. We want it to moderate further and faster. The Reserve Bank's got their job to do, I've got my job to do, which is to run a responsible budget, roll out this cost‑of‑living relief in the right way, invest in the supply side of our economy, deal with issues like infrastructure and migration and competition policy. We are engaged in the fight against inflation across every front. We're making some welcome and encouraging progress, but we've got a bit further to go.

KARVELAS:

Okay. So I just want to move before I say good‑bye to you, Treasurer, just to the Middle East. Just finally, there's many Jewish organisations and the Israeli Ambassador who have criticised the Government's decision to vote for a UN motion calling for a ceasefire. It didn't go to Cabinet, and many senior ministers didn't even know about it. Why wasn't there a consultation about such a different position?

CHALMERS:

First of all, I don't talk about Cabinet process or discussions at Cabinet. These sorts of votes at the UN have not traditionally been matters for the Cabinet agenda. Beyond that I don't really want to get into the sorts of consultation that happens at our end or discussions that happen in our Cabinet.

KARVELAS:

When did you know this was ‑ when did you know that this position would be announced?

CHALMERS:

Well, I'm happy to say I was consulted and I was aware, and I support the decision that we took. I understand that there are a range of views about that. I see the position that we took to be consistent with the position that Penny Wong and others have outlined in recent weeks.

KARVELAS:

Not all Cabinet Ministers were consulted though, were they?

CHALMERS:

Well, I'm not aware of who else was consulted, Patricia, and again, it's not for me to talk about other Cabinet Ministers or other Cabinet processes. I'm just being up‑front with you that ‑

KARVELAS:

Yeah, I know, but it's a significant –

CHALMERS:

‑ I was aware of it in advance, and I was consulted and I support it.

KARVELAS:

Yeah, yeah. It's just a significant shift, really, in terms of the Government's position to call for an immediate ceasefire, right? So I just want to get a sense of how ‑

CHALMERS:

Well, I want to contest that, Patricia.

KARVELAS:

‑ the Government deliberated on it.

CHALMERS:

Well, I want to contest that because Penny Wong I think said on ABC TV a few weeks ago that we should be working towards a sustained ceasefire, but it can't be at any cost.

KARVELAS:

She talked about steps towards ‑ yeah, and this one is ‑ the UN motion is an immediate ceasefire.

CHALMERS:

Well, if you look at the statement that the Prime Minister released with the other Prime Ministers, it sets out our position in some detail, which is we support an immediate humanitarian pause. We saw what was possible the last time that that happened, and we support the work that is going on around the world to try and deliver a more sustained ceasefire in that part of the world. The part of the statement that I thought was really important but not that reported, the statement that the PM released with the Prime Ministers of Canada and New Zealand, was when ‑ they condemned Hamas, and that's important. They said that Israel has the right to defend itself consistent with International Law, and it said that the price of the defeat of Hamas can't be the ongoing suffering of ordinary Palestinian people. That's our position, and that position is reflected – not just in the vote that we took at the United Nations but more broadly the comments from the PM and Minister Wong and others over recent weeks. And so I see it as consistent with the position that we've set out.

KARVELAS:

Well, this is playing out, of course, in the arts and the sports field, Usman Khawaja will challenge the International Cricket Council's ruling that he cannot wear the ‘all lives are equal’ message on his shoes. Should they let him?

CHALMERS:

All lives are equal, and they should let him wear the shoes. I don't think it's an especially controversial statement and I find it unusual, frankly, that people want to dispute the lives on one side of a conflict are not worth any more or any less than the lives on the other side of a conflict. I know Usman Khawaja, he's a friend of mine, and I know him as a champion of people of all faiths. A champion of people of the Muslim faith, the Jewish faith, Hindus, Christians. The second most important thing about Usman Khawaja is that he's a wonderful, wonderful cricketer. The most important thing about Usman Khawaja is he is a wonderful, wonderful human being, and I don't just say that as a mate, I say that as someone who recognises the immense contribution that Usman Khawaja makes to our country and not just when he's batting for Australia. He is an absolute champion, and he's got a big heart. I think that they should let him wear the shoes. It's not a controversial statement, it's not an especially political statement, and I think it would be a good outcome if the relevant authorities let him wear the shoes when he walks out to bat for Australia.

KARVELAS:

Treasurer, thanks for joining us.

CHALMERS:

Thanks very much, Patricia.