Press conference, Blue Room, Canberra
JIM CHALMERS:
This budget update and this government is all about responsible economic management. Responsible economic management – it’s what puts downward pressure on inflation and eases the cost of living. And because of our efforts, we are getting the Budget in much better nick and making more room for our priorities, and that's what these numbers that we are releasing today show. Our strategy over the past 18 months has delivered an historic turnaround in the Budget position, but we know that there is still much more work to do. Our government's economic plan is – at its core, about three things – easing cost‑of‑living pressures, repairing the Budget, and investing in the foundations of growth in our economy. We understand that Australians are doing it tough and our economy is slowing and that's why we are rolling out tens of billions of dollars in cost‑of‑living relief, it's why we are fixing the Budget, and why we are making welcome and encouraging progress in this fight against inflation. Last year we delivered the first surplus in 15 years. this year, a much, much smaller deficit, and you're seeing less debt and smaller deficits over the four years of the forward estimates as well. And because of our efforts, we have less debt than any major advanced economy.
The mid‑year update that we're releasing today shows that the government has returned 92 per cent of upward revisions to revenues since the May Budget and 88 per cent of revenue upgrades since we came to office. We have also identified almost $10 billion in savings, which means almost $50 billion in savings over the life of our government, and I know Katy will want to elaborate on that in a moment. If you combine that with some modest tax changes, we've identified $11.6 billion in budget improvements which total $72.7 billion since we came to office. So a big part of what we are banking today are the upward revisions to revenue, but there are also decisions in this MYEFO to substantially improve the budget position, including when it comes to savings and reprioritisations in the Budget.
Because of our efforts, we have almost wiped out this year's deficit. We are now forecasting a much smaller deficit of $1.1 billion in 23‑24. This is an improvement of $12.8 billion compared to the Budget, and it is a $55.4 billion turnaround compared to what we inherited for this year. We are not yet forecasting a second surplus, but we are within striking distance. We have given ourselves a chance but we aren't there yet, and we've been deliberately cautious and deliberately conservative. We've seen in recent times, under our predecessors, what happens when you overpromise and underdeliver. We've been determined to take a different approach to this; cautious and conservative when it comes to revenue upgrades because of the uncertainty and the volatility in the global economy and also, in our own domestic economy.
Over the five years to 26‑27, the underlying cash balance is improving by a cumulative $211.4 billion relative to what was expected at election time. Gross debt as a share of GDP is expected to peak lower at 35.4 per cent in 27‑28, before declining to 32.1 per cent by the end of the medium term. We are expecting to avoid $145 billion in interest costs and debt is projected to be $450 billion lower by the end of the medium term because of decisions that we've taken, whether it's banking or saving or in other parts of the Budget. So through our spending restraint and by banking upward revisions to revenue, our economic and fiscal strategy is working alongside monetary policy to ease inflationary pressures in our economy.
We know that Australians are under the pump, we know there's no shortage of challenges when it comes to the economy, global and domestic, and the Budget itself. GDP growth is forecast to moderate in the near term and unemployment is expected to tick up. These are the inevitable consequences of higher interest rates, moderating but high inflation, and global economic uncertainty. Inflation is moderating but it's still too high. Global oil prices drove a near‑term uptick in the inflation forecast, but Treasury still expects inflation to return to its target on the same time frame as it expected at Budget time.
Despite these challenges, we are making welcome and encouraging progress when it comes to the economy. Our unemployment is near historic lows, we've seen the longest consecutive run below 4 per cent since monthly records began. The participation rate is at record highs. More than 620,000 jobs have been created since we came to office, which is a record for a first‑term government, and our employment growth is faster than all the major advanced economies. Wages growth has picked up to its fastest annual rate since 2009. We've seen two consecutive quarters of real wages growth and annual real wage growth is expected to return in early 2024.
So the government has four big priorities, as we finish 2023 – easing the pressure on Australians, strengthening Medicare, building a future made in Australia, and securing our place in a world of churn and change. Every one of those things is advanced by the responsible economic management which is at the very core of this mid‑year budget update that you have before you now. Responsible economic management is a defining feature of this Budget update and it's a defining feature of our government as well and we're making progress as you can see in the documents that we are releasing.
I want to thank Katy Gallagher, in particular, but also all of the ERC colleagues and the Cabinet and the government more broadly. There's a lot of collective effort that goes into delivering such a big improvement in the Budget position. So I appreciate Katy's work in particular. We're going to hear from her now. Then I wanted to cover off on two more issues and then take your questions. Thanks, Katy.
KATY GALLAGHER:
Thanks very much, Jim. Well the MYEFO document we're releasing today continues our focus on quality spending and looking for savings and reprioritising within existing budgets. In our first Budget in October we started this work, we continued it in May, and you will see – and you do see more of it in MYEFO. There are savings and reprioritising across government and I would like to acknowledge and thank ministers in particular who have worked with us on achieving this. They understand the importance of getting the Budget in much better shape and ensuring that we use resources efficiently and by accepting this approach. It's an important part of our fiscal strategy and the priority we place as responsible economic managers.
In today's MYEFO, we found savings and reprioritisation of $9.8 billion. This takes the total saves and reprioritisations to just under $50 billion since we came to government. Of that $50 billion, billions are found in this financial year, which of course helps in our fight against inflation. Our approach also allows us to ensure that we are able to resource urgent legacy and terminating spending, which continues in this MYEFO as we work through the budgeting approach of the former government, allocating resources to where they are needed most and being honest and up‑front about the extent of that investment that's required. Of the net spend in this MYEFO of $5.2 billion [$5.3 billion], about 99 per cent of that relates to unavoidable, urgent, or dealing with legacy issues – so things like closing the pandemic event visa, our continued response to COVID‑19, our response to red fireants, visa backlogs, Services Australia customer support, the Robodebt response as well, and you can see those outlined in the measures.
And although this is not a mini‑Budget, we have focused also on continuing our progress towards women's economic equality. So this update and sees the rollout – the full rollout – of gender responsive budgeting and I would like to thank the Office for Women and the public service for stepping up and responding to this government priority. There is extra resourcing for the additional changes to the paid parental leave scheme which were recommended by the Women's Economic Equality Task Force. There's extra resourcing for some women's safety measures, and further work being done on the Parents Next program. There is also the funding for the Play Our Way women's sports program which is about ensuring women have access to facilities that encourages their engagement with sport.
So the short summary is fiscally responsible, finding savings, reprioritising where we can, resourcing those urgent areas, and making room as we continue to respond to those big spending pressures like the interest payments on our debt, NDIS, Defence, health, and aged care. Thanks, Jim.
CHALMERS:
Thanks, Katy. Two other issues quickly and then happy to take your questions. First of all, Tropical Cyclone Jasper expected to make landfall in the next few hours in North and Far North Queensland. I checked in on my sister, who lives in Cairns, this morning, and in a typical Queensland understated way she said it was getting a ‘bit breezy’. Queenslanders are very tough people, particularly in the north and the far north. I think the whole country has the people of North and Far North Queensland in their thoughts today as they batten the hatches for what will be another severe weather event in a part of the world, which has its share of severe weather events. So to all of those terrific Queenslanders battening the hatches up north today, the rest of the country's thoughts are with you.
Our Minister, Murray Watt, is working closely with the Queensland authorities and obviously, the federal authorities are engaged as well. ‘Muzz’ will keep you all updated about developments as they emerge but the State Government, the Commonwealth Government, are working very closely together to make sure that the people of North Queensland and Far North Queensland get the support that they need and deserve.
Our advice to the people in the affected areas is to stay across developments, whether that's online or on the radio. Make sure that you are following advice so that people can do the best to keep you safe. There are a number of shelters which have opened, which people are obviously welcome to access. But make the right decisions based on the right advice, keep you and your loved ones safe. The Commonwealth Government and the State Government will be there for you during and after what is expected to be some really nasty weather up north.
Last point I wanted to make was about the new incoming premier of Queensland. We really look forward to working with Steven Miles, his new deputy, Cameron Dick, his team including Shannon Fentiman, the new and renewed Queensland Labor team. We will work closely with them as we work closely with the governments of all of the States and Territories. But I wanted to congratulate Steven. He's someone I know really well and Cameron and Shannon and all of the team. Some really good people doing the best for the wonderful people of Queensland. We will work closely with them when the new arrangements are formalised on Friday or sometime after. Happy to take your questions.
JOURNALIST:
Treasurer, the inflation expectations – you've mentioned that Treasury hasn't updated its expectations, how does that gel with the RBA saying they think that it will take slightly longer to get back to that target band?
CHALMERS:
The forecasts that you see in the mid‑year update are consistent with what I've been saying for the last couple of weeks, which is that the volatility in oil prices in recent months meant a small uptick in the forecast in the near term, but no change to Treasury's expectations for when inflation will return to the target band in 2025. And so the forecasts that you have before you are consistent with that. The Governor of the Reserve Bank has explained in some detail their own expectations for inflation. They are not substantially different. But I will leave you in her hands to describe the way that recent developments impact on their expectations for inflation.
JOURNALIST:
You say that you want this to be about responsible economic management. But do you think that it's really responsible to continue with the stage three tax cuts in our current economic climate?
CHALMERS:
Our position on the stage three tax cuts hasn't changed for all of the reasons that we've been through in this room and elsewhere over recent months. Our priorities, when it comes to tax reform, are elsewhere in this document, and in recent months as well. We've also found, I think, a really effective way to provide cost‑of‑living relief to people on low and middle incomes. Whether it is increases to income support, changes related to out‑of‑pocket health costs, rent assistance, early childhood education, $23 billion of cost‑of‑living help across 10 different areas, which is targeted to making life a little bit easier to people who are doing it tough, and what unites your question with Katina's a moment ago, is one of the really encouraging things about our cost‑of‑living help is the ABS tells us it is making a positive difference to inflation. Whether it's rent, electricity bills, early childhood education, the ABS has made it very clear that our cost‑of‑living relief is taking some of the edge of these cost‑of‑living pressures rather than adding to inflation and that's what we designed it to do.
JOURNALIST:
Thanks, Treasurer. Just after the September quarter inflation, you said that Treasury thought that there was no material change in the inflation outlook before the RBA meeting. This document shows it going from 3.25 to 3.75 in this financial year. So can you just explain that for us?
CHALMERS:
Yeah, I've explained this in Katina's question and also probably half a dozen times since we first made those comments. There is no material change to Treasury's expectation of when inflation returns to the target band. I refer you to the speech I gave at the Melbourne Institute not that long ago where I stepped through this as well. What matters is the – how long it takes to get back within target, as you know, there has been no material change to Treasury's expectations on that front and that's what I was referring to. Mark.
JOURNALIST:
Thanks, Treasurer. About 2.5 million Australians renew their passports every year, how is jacking up the cost of passport by 15 per cent going to ease the cost of living?
CHALMERS:
Well, the funds from this one‑off increase are all about making sure that we can resource our passport systems and make them modern and fit for purpose, especially at a time when there are ongoing threats to people's security, and their identity. And so what is a relatively modest change to passport fees, a 15 per cent change from 1 July 2024, will mean that the new cost of an ordinary Australian adult passport is still less than $40 a year over that 10‑year period that a lot of people get passports for. So a modest change which recognises we need to resource the system in a world where people's security, including identity security, is increasingly at risk.
JOURNALIST:
Treasurer, I wanted to get your thoughts on how confident the Australian public should be on Treasury forecasts [inaudible] and obviously they have underestimated the commodity price surge that we've had. How confident should the Australian public be?
CHALMERS:
First of all, we are deliberately, and the Treasury is deliberately cautious and conservative when it comes to forecasting revenue and there's a good reason for that. That's because our predecessors were frankly humiliated when they overpromised and underdelivered on the budget. They spent more time flogging merchandise like "back in black" mugs than delivering the responsible economic management that the country needed. So we are cautious and conservative. The Treasury is cautious and conservative when it comes to commodity prices. It wasn't that long ago that some of the prices for key commodities were actually below the glide path that was anticipated in the May Budget, and so this can go both ways. And one of the reasons why we're being cautious about the budget position for this year is because in a world where the economy is slowing and there's a lot of international uncertainty, predicting revenue, which is difficult at the best of times, is even more so in volatile times. And so the Treasury does the best they can with the information that is available to them. Part of that is taking a deliberately cautious and conservative approach to revenue because it can go in either direction.
JOURNALIST:
I have a question for the Finance Minister. You talked about the $9.8 billion in savings and reprioritisations. Can tell us a little more about that split and how much in savings and what measures in particular generated those savings?
GALLAGHER:
Yeah, sure. So the majority of them come in this – well, if I talk just about the 9.8, because obviously the 50 is over those last three updates. But 7.4 relates to the infrastructure investment program. So that's reprioritising and reprofiling some of those projects, which is the work Catherine King's been doing about trying to get that program in better shape. It was again, unsurprisingly, projects promised by the former government without any funding attached. So it was oversubscribed, unrealistic time frames. So that relates to a large chunk of that but it goes right across government. What we're telling ministers is if there's another pressure that's coming, we want you to be looking within your departments to be seeing where you can shift resources because we're are not in the mindset where we're just going to be able to continue to add in spending on things that pop up. So I'm happy to sort of take you through it, but it's right across departments we've been asking that. So whether it's in environment, employment services, in education, there's some in health, some in agriculture, some of them are quite small but I'm a pretty focused finance minister, I will take pretty much anything that comes to the table if it's there and if we want a shifting from doing that into other spending priorities. But, yeah, so I'm happy to go through it at length if people want to or provide you with a list but we have an expectation that it's across government. This is everybody's responsibility. It is getting harder. We found $50 billion but we're going to continue on this approach.
JOURNALIST:
Just hoping to clarify the new hospital deal with the states and the NDIS foundational support in MYEFO. Isn't the budget position much worse if you haven't included those commitments?
CHALMERS:
Happy for me to take that? We have accounted for developments at National Cabinet in the mid‑year budget update. In some cases where it's a relatively straightforward change in the medium term, like the GST No Worse Off guarantee, there's a specific line item. In some areas where there were negotiations happening right up to the day and they're perhaps a little bit more complex, we've provisioned for and accounted for the kinds of developments that we saw at National Cabinet without there being a specific line item against them. You will recall that National Cabinet was last week, we try and lock down the documents, not five minutes before we release them. And so the spending at National Cabinet is accounted for in the mid‑year update. Where possible, we've given a specific line item, where it hasn't been possible because of timing we've accounted for it without providing that specific line item. But it is all accounted for and provisioned for in what you see today.
JOURNALIST:
You mentioned the pandemic event visa. Why does it cost $1.5 billion to cancel that?
CHALMERS:
Because fewer people means less revenue for the government. That's part of the reason. A big part of the reason and that's not a small cost. Ending the pandemic event visa was a really important change to try and rein in some of this growth in net overseas migration. But it means foregoing revenue and we're up for that, but we recognise that $1.5 billion to do so means a substantial hit to the budget.
JOURNALIST:
Treasurer, real wage growth is forecast at 0.75 per cent this financial year, that's now been revised down to 0.25 per cent. Should that impact taxpayers’ confidence that the measures are working for them?
CHALMERS:
First of all, that just reflects the near‑term uptick in the inflation forecast. As you know, the real wages calculation involves wages growth and inflation, and for the same reasons as the answer to Katina's question, there's been an uptick in the near‑term in the inflation forecast and that has impacted on the real wages forecast. But when it comes to real wages, remember that around the time of the election last year, real wages were falling 3.4 per cent and there has been a substantial improvement since then. We've actually just seen two consecutive quarters of real wages growth which is good progress. We still expect to see annual wages growth in a sustained way next year, that hasn't changed in the Treasury forecasts. Any of those near‑term changes are more a reflection of the inflation part of the story than the wages part of the story.
JOURNALIST:
We saw the forecast from the May Budget for migration quite a bit off. How confident are you that Treasury's forecasting that correctly now? And quite apart from the changes announced in the migration strategy, is Treasury changing the way it forecasts migration in any way to try and get that more exact?
CHALMERS:
Well, they're doing the best they can in an area that has been pretty volatile. And by far the biggest reason why we saw an increase in net overseas migration last year was international students. They came back much faster than anybody anticipated. Clare O'Neil and the other colleagues did a good job of explaining that, I thought, earlier in the week. So we had the peak in net overseas migration last year. We expect it to more or less half by next year. Obviously, there is an element of volatility in demand‑driven programs, but the really important thing to conclude from the migration strategy released earlier in the week is that because of our migration strategy and the steps that Clare O'Neil and others are taking, we expect 180,000 fewer migrants over the course of the forward estimates and that, I think, is important progress, which recognises that the net overseas migration came back faster than anybody was anticipating. It still had a lower population outcome compared to what was expected before COVID in the last few years, but we recognise that we could do more in the demand‑driven parts components of net overseas migration so that there's more integrity and so that we are clamping down on where there is an obvious need to do so.
JOURNALIST:
Thanks, Treasurer. There are millions of Australians who are struggling with the cost of living right now. They weren't on welfare, they don't have a child‑care‑aged child, they don't have an illness that needs a lot of scripts. They were excluded from the majority of the measures in May. There are none in MYEFO. Can you guarantee that those households who are really struggling, particularly with mortgage repayments, will have some relief and why should they have to wait for May if that is the case?
CHALMERS:
Well, first of all, I think our cost‑of‑living relief, $23 billion, across a range of areas is deliberately designed to impact on different parts of the community and it is relatively broad when it comes to things like bulk‑billing. Anyone with a kid under 16, all of the other measures that you've talked about are spread across the economy. You're right that we have said that this is not a mini‑Budget, this update is effectively a stock take rather than a long list of brand new measures and we will consider the budget conditions and the economic conditions between now and the May Budget to see whether we will provide more cost‑of‑living help. But I say to every Australian under cost‑of‑living pressure right now, one of the best ways that we can get downward pressure on inflation, which is smashing household budgets, is to provide the kind of responsible economic management, which is a feature of this budget update, and that has been recognised by experts like the IMF, the OECD, the ratings agencies, the RBA Governor and others. Our budget strategy is putting downward pressure on inflation. It's inflation which is hurting people right around Australia. The sooner we can get on top of it the better and this budget position, and this responsible economic management is part of that effort.
JOURNALIST:
Wages growth should outstrip inflation to the first quarter next year and then all the way through the forward it's still higher. Plenty of Australians have come with you on this journey with the pressure that things will get easier. Does that mean, given they will now be able to purchase more with each pay packet, things will start getting easier from here?
CHALMERS:
Well, a big part of our object here is getting real wages growing again and we've seen some of the fastest wages growth in more than a decade in recent figures and inflation is moderating but it's still too high. So we want to get wages growing again, we want to get inflation down as soon as we can, and if we do both of those things, then people will start to get a better return for all of the hard work they do on behalf of their loved ones. One of the sort of missions of the Labor Party is to make sure that people who work hard can provide for their loved ones and put food on the table. And that has been hard in the context of higher inflation and a decade of wage stagnation, and we've been working for Australia and working around the clock to try and turn both of those things around. We want people to be rewarded for their efforts. We've got wages growing again, we've got inflation moderating, we want to see both of those things become a permanent feature of our economy. I'm sorry that I haven't met you before, I don't know your name.
JOURNALIST:
Brandon.
CHALMERS:
Thanks, Brandon.
JOURNALIST:
A question for the Minister for Finance. The R&D tax incentive is forecast to cost an additional $2.1 billion over the next four years. Are you able to give an idea of the relative impact of investment in AI and machine learning and more broadly, is this level of growth seen as sustainable or is the government considering changes?
CHALMERS:
I'm happy to take that. One of the reasons why Ed Husic, the Minister, is so focused on AI as to why some – and the reason why some of our budget initiatives in May were to recognise that technological change is accelerating and we need to make sure that our country is positioned to be beneficiaries of that rather than victims of that. And so we are developing an AI strategy, I think Minister Husic was talking about that earlier this week, and part of that means making sure that we get maximum economic advantage out of technological change. We need to get much better in adapting and adopting technology. It's a huge part of modernising our economy and maximising our advantages and that's why Minister Husic is so focused on it. We haven't announced any changes or any new data about the impact of the R&D tax incentive. But we are looking more broadly to make sure that we've got the arrangements right in Ed's portfolio to make the most of tech change.
JOURNALIST:
Senator Gallagher, about $8.8 million in infrastructure has been pushed out beyond the forwards in the MYEFO. Does this reflect the totality of negotiations with states or is there still more that we would expect to see in the Budget next year and beyond as a result of negotiations that are currently going on between Infrastructure Minister and her stakeholders?
GALLAGHER:
Well, in terms of the decisions that are reflected in here, they are the result of those negotiations which are being ongoing for months. I expect those will continue. Pressures in infrastructure requests and project planning discussions continue between the Commonwealth and state and territories. But this certainly reflects that big response that we had had to the review that was done of the IIP and the work that Catherine King has been doing with her state and territory colleagues since.
JOURNALIST:
Treasurer, you've spoken about how the government's cost‑of‑living relief has helped inflation and that at the moment inflation has picked up because of higher oil prices. Is cutting the fuel excise something the government has examined and would that have a neutral impact on inflation? Would it help inflation come down? How do those two things go together?
CHALMERS:
First of all, the spike in oil prices, which was a consequence of decision taken on the other side of the world by the major suppliers, that's what fed a substantial part of the September quarter inflation figures. Global oil prices and petrol prices at the bowser have come off a bit since then and that will be reflected in the data down the track. What we've said in here is what a major thing driving the uptick in inflation in the near term has been global oil. That's easing a little bit but it's still volatile, still unpredictable, particularly with all of this geostrategic uncertainty including in the Middle East. When it comes to fuel excise, there have been wild swings in prices that people have been paying at the bowser. In my neck of the woods, almost $2.40, you go all the way down to $1.90 and that's only in the course of a few months. And that, I think, gives you a sense of, even if you made a change like the one that you are talking about, that could be easily impacted in either direction. And so our focus is elsewhere when it comes to cost‑of‑living relief. You rightly said in your question that the cost‑of‑living relief that we are providing the ABS says it's making a meaningful difference. It took half a percentage point off inflation in the most recent numbers. That's just our policy impact. Big difference to electricity and childcare and a bit of a difference to rent as well. Those are the areas that we've been focused on.
JOURNALIST:
The government's made a virtue of the fact that you’re banking the higher revenue, but can you explain to Australians why you won't be spending some of that on providing them cost‑of‑living relief now, given inflation is expected to remain higher over this financial year?
CHALMERS:
Because an important part of this fight against inflation is making sure that we're running a really tight ship when it comes to the budget. There are a number of ways that governments can have an influence on inflation, and we're engaged on this fight in every front. The Reserve Bank does its work when it comes to monetary policy opinion our job is to make sure that our cost‑of‑living help is part of the solution rather than part of the problem – we're doing that. Our job is to get the budget in much better nick – we're doing that. Our job is to invest in the supply side of the economy, energy, skills, and the like – we're doing that. Our job is to invest in housing supply – we're doing that. Big numbers associated with our housing policy. Our job is to get the competition settings right so there's downward pressure on price. We've got the review looking into that. Our job is to manage the infrastructure pipeline so it's not adding to inflation – we're doing that. Our job is to manage the migration settings so that that's the best for the economic conditions. We're doing that as well. So we're engaged on this fight against inflation on every front and a really important part of that is making sure that the budget is in as good a nick as it can be. Not at the expense of cost‑of‑living help but at the same time as we roll out billions of dollars in in help. We're going to go this way.
JOURNALIST:
Treasurer, while you were working with Wayne Swan in the Rudd‑Gillard governments, there was constant complaint about the high‑taxing Howard government. Under the budget update you hit 23.7 per cent of tax to GDP, which is the highest since the last Howard‑Costello budget. Is it fair to say that you are high‑taxing government and that's why the budget's improving?
CHALMERS:
Obviously I wouldn't agree with that, Shane, but there are a number of elements to it. I mean, first of all, don't forget that tax to GDP this year is 23.7, it's 23.3 at the end of the forwards. Tax to GDP was 23.9 per cent or higher four consecutive years under Howard and it peaks at 24.2, as you allude to in your question. And so the tax take was much higher under Prime Minister Howard and Treasurer Costello than what we're expecting this year or the final year of the forward estimates. That's one part of the answer to your question. The other thing is one of the reasons why the budget position has improved is because more people are earning more, and that's a good thing in our economy. We want more people earning more. That's why so much of our economic strategy is about getting wages moving again and getting people into good, secure, decent, well‑paid jobs. That's an objective that the nation can embrace, more people earning more, and that's reflected in some of the revenue numbers.
And so what matters when you get an upward revision to revenue like we've had, you have choices and our choice is to provide that cost‑of‑living help, invest until future of the economy, but also bank a substantial amount of these upward revisions so that we can avoid debt interest costs, we can get the budget in better nick, we can make more room for our priorities, we can build buffers against international uncertainty, that has been our strategy. But the tax take is largely driven by more people earning more and that's a good thing.
JOURNALIST:
Treasurer, many economists believe that migrants are one of the things that kept Australia out of recession – our high immigration rate. What does 180,000 fewer migrants mean for Australia's economy?
CHALMERS:
Well, we think we're striking the right balance here on this migration strategy. Obviously, migrants for a really long time now have been an important part of our economy and our society and we shouldn't forget that in this appropriate conversation about migration settings, we shouldn't forget the important role of migrants in our communities and in our economy. And right now, whether it's international students or tourists, they are making a big contribution to our economy and to our budget. But we need to manage that program in our national economic interest. It spiked last year, it's expected to halve next year. We need to make sure that that migration program is serving our national economic interest, that's what the migration strategy is all about. It involves weighing up a whole bunch of considerations – the skills we need in the economy, the other factors, the way that we can manage pressure on our population more broadly. So that's what the migration strategy does. It balances all of those factors. Obviously migration has been a source of strength in our economy, not just the last couple of years, but for a much longer period. But we will manage it in our national economic interests, that's what the strategy's about.
JOURNALIST:
Treasurer, I know you talk about being cautious, but commodity prices are going gangbusters and you're forecasting effectively balance for a long deficit for this year. What would it take not to deliver a surplus this financial year? I know you just sandbagging so you can stand up in May, which may be your pre‑election budget, to say look how well we've done.
CHALMERS:
Look, I've been really up‑front with you and said that one of the reasons we're not forecasting a surplus this year is because we are cautious, we are careful, and there's a lot of volatility in the economy and that plays out sometimes in commodity prices. But we are not yet forecasting that second surplus for good reason, but we are within striking distance. We've got more work to do.
What we demonstrated in the last financial year by delivering that first surplus in 15 years, is that we can play a meaningful role in this fight against inflation and our budget settings are part of that. We will continue to work between now and the May Budget to get the budget in as good a shape as we can, consistent with our other obligations and priorities. But for the time being, we're not forecasting that second surplus for good reason, but we are within striking distance.
JOURNALIST:
Treasurer, since the May Budget, the RBA's pushed back its forecast and inflation will return to target in December 2025, but Treasury's forecasts are unchanged and earlier than the RBAs. Just sort of following on from Katina's question, what's driving the Treasury's optimism on the inflation front compared to RBA?
CHALMERS:
Well, Treasury can explain their forecasts and the opportunities that you get to do that, and the Reserve Bank can do that similarly. There is not a big difference in the way that the two institutions consider our inflation challenge and as you rightly point out, Treasury expects to get back to band in the middle of 2025. This forecasting inflation is obviously an imprecise science and, for example, in recent months, people have made all kinds of comments more broadly in the market about the shape of inflation in the near term and that gives you a sense of how volatile it can be. Oil prices most recently, but rents have been part of the story as well. And so both institutions will continue to do the best that they can. They can explain to you in detail the source of their forecasts but as I said in response to Katina's question, despite the pressure from oil prices in recent months, Treasury still expects to get back to band on the same time frame.
JOURNALIST:
There's new spending on AUKUS, the NDIS, and aged care, but the multi‑decade cost of nuclear submarines was only calculated a few months ago and the NDIS is supposed to have a cost growth cap. So what does it say about the plausibility of the cost trajectory of these mega programs that they're already costing more?
CHALMERS:
I think as Katy said before, those are two of the big five pressures on our budget. Interest costs is now number one because of higher interest rates on the debt that we inherited, number two is the NDIS, and the next three are some combination of Defence and aged care and healthcare. And so these are big pressures on the budget and not just in recent times but for some time. When it comes to the target for NDIS spending, that doesn't start for a little while yet. There have been some near‑term measures as well which are having an impact. But if your question is spending on the NDIS still growing strongly, yes, it is. It is. Top two of the pressures that we are confronting, and our job, and I commend Minister Shorten and also the Prime Minister, and the premiers and chief ministers, is to recognise that if we want to do the best we can for people in the NDIS, and that's our objective, then we've got to make sure that we can afford it and that's what all this work is about.
JOURNALIST:
Treasurer, you talk about more people earning more but also bracket creep has played a role in the tax collection scheme [inaudible]?
CHALMERS:
Well, there will be changes to the brackets in July, as you allude to in your question. And I think it's a good thing that more people are earning more, not just good for the Budget but good for workers. We want people to get a bigger reward for their efforts so they can provide for their loved ones. That's been a big story of our time in office, getting wages moving again after a decade of stagnation. That has implications for the tax take, which you see in the budget papers before you. Thank you very much.
GALLAGHER:
Thank you.
