Sky News PM Agenda

27 September 2017




SUBJECT/S: Gas crisis; Final Budget Outcome; emissions reduction target


DAVID SPEERS: For more on this and the Budget outcome that we discussed with the Treasurer as well - we saw yesterday a slightly better than expected result for last financial year - I spoke to the Shadow Finance Minister, Jim Chalmers. Jim Chalmers, thanks very much for your time this afternoon. So first on the breakthrough the Government's secured on the gas market, Santos, Shell and Origin have all agreed to meet the shortfall that was identified this week for next year by the Australian Energy Market Operator. Do you welcome this outcome?


JIM CHALMERS, SHADOW MINISTER FOR FINANCE: I think for a lot of Australians, who have been sick and tired of the sort of half measures and media stunts and cups of tea with energy bosses, they need a bit more than assurances from the companies that they'll do the right thing. Our view is that the export control trigger should have been pulled on the 1st of September. It certainly should have been pulled today. That would give people a legal guarantee that the domestic market will be properly serviced. Instead we get these 'assurances'. I think people will be a bit sceptical about that until they see it.


SPEERS: So does that mean Labor is sceptical and doesn't trust the gas companies?


CHALMERS: We just think it would make more sense to get a legal guarantee rather than an assurance from the companies.


SPEERS: But why is that?


CHALMERS: Well because the Prime Minister has had again and again the energy companies in for a cup of tea and a Tim Tam and sought some kind of assurances. They've given some assurances today. That might be better than nothing, but it's well short of the legal guarantee that would be provided if the Prime Minister did what he should have done on the 1st of September, which is to pull the trigger on those export controls. That would give people a bit of legal certainty, whether you're a household or a manufacturer or a generator, it's certainty that people need and that would come with the guarantee.


SPEERS: Clearly that indicates that you don't trust the gas companies. They have to be legally forced to provide this gas.


CHALMERS: That would be better in our view, to have some kind of legal guarantee.


SPEERS: Labor went to the last election promising this gas reservation policy. How would it have worked? How would it work if you were in Government? The current Government says the process they've followed here is they've had to identify through AEMO what the shortfall is, then sit down with the gas companies and they've now agreed to fill that shortfall. That seems to be a logical sequence. How would Labor's approach differ?


CHALMERS: I've just outlined how it would differ in the here and now. We would pull that export control trigger. That's the main difference.


SPEERS: But you'd need to identify how much gas you'd need first, wouldn't you?


CHALMERS: Of course, and you rely on the experts for that, and that's been part of the process for today to identify that shortfall.


SPEERS: That they found out this week.


CHALMERS: I beg your pardon?


SPEERS: So they found out that number this week from AEMO. Would Labor have really pulled the trigger before finding out how much gas was needed?


CHALMERS: We would have pulled the trigger on the 1st of September. This is an ongoing process that the experts provide us with an assessment of the shortfall. That's a good thing. We've been talking about these issues, as you say, since about 2015 I think. We've had a range of proposals on the table, but you asked for the key difference. The key difference is the Prime Minister seeks an assurance over a cup of tea. We think that's OK as far as it goes, but we think that it would be stronger and preferable to have a legal guarantee and that's provided by the trigger.


SPEERS: Let me turn to the Final Budget Outcome that we saw yesterday for last financial year. There is an improvement - $4.4 billion. I saw you yesterday put it down to luck. It is in part though due to a stronger economy, isn't it?


CHALMERS: There's some increases in tax receipts for example, some company profits and the flow on impacts on the Budget. But when you look at the spending side, the main drivers of the marginal and expected improvement in the Budget were that they couldn't roll out the NDIS as fast as they hoped, they couldn't get infrastructure money out the door as fast as they'd promised, they couldn't get the water grants out the door as fast as they'd promised. That's hardly superior economic management. The point I was making yesterday and the point I'll make today is we've got these characters patting themselves on the back for a Final Budget Outcome which showed in their own numbers that the deficit between their first Budget and now for 2016-17 has more than tripled. It went from $10.6 billion in Joe Hockey's first Budget to $33 billion now and that's not cause for celebration.


SPEERS: As you would know from experience too, a collapse in resource prices - iron ore and so on - can really knock around forecasts. Labor's hardly in a position to crow about that.


CHALMERS: The point I'm making is that at $10.6 billion, the deficit that they predicted for the year just finished, that was a 'debt and deficit disaster' and it was the end of the world as we know it. Now that the deficit is $33 billion, you've got Morrison and Cormann out there patting themselves on the back. I'm just pointing out that they're failing the test that they set for themselves. That's not even a comparison with Labor, it's a comparison with what they promised and what they said their reason for being was. Instead, we've got an extra $147 billion in net debt from when they came to office and I just don't think that's cause for celebration. I don't think they should be patting each other on the back for that.


SPEERS: You mentioned the spending side of the Budget. And look, you're right, there's various state payments on infrastructure and remote housing and a slower rollout of the NDIS that have contributed to this. Nonetheless, spending's come down to about 25 per cent of GDP, lowest it's been in about four years. Is it low enough? Would you like to see spending therefore be lower than that?


CHALMERS: We want to fix the Budget in a fair way. Part of that means getting spending down, but not in a way that asks the most vulnerable people to carry the can.


SPEERS: What does that mean? Lower than 25 per cent of GDP?


CHALMERS: It's far too early for us to say what our equivalent number would be in office. It's 25 per cent now. The Treasurer has said again that that's some kind of triumph. It's still higher than the long run average.


SPEERS: So it should be lower?


CHALMERS: The reason I'm delighted you ask me David is that it's still higher than the last three full years of the Labor Government. They go on and on about spending being out of control under Labor.


SPEERS: Well, that's true.


CHALMERS: It's higher now as a proportion of the economy. And that's an important point that was missed yesterday.


SPEERS: But from where we sit now, Jim Chalmers, correct me if I'm wrong, but Labor would actually have a higher spending figure as a proportion of the economy, given your plans on Gonski, on foreign aid, on health and so on and so on. Sure, you've got high taxes to pay for some of this, but in terms of the rate of spending, which you've identified here as an issue, it is higher than the long run average, would Labor do any better?


CHALMERS: The point I started to make before you jumped in a moment ago, David, is there's three things you have to think about the Budget - spending, as you say, tax, as you say, and also growing the economy in a way that's sustainable and fair and inclusive. You've got to look at all three of those things together and you've got to make sure that those settings suit the times. So it would be foolish of me right now to commit to a certain number of spending. The point I'm making is that Morrison wants you to believe that 25 per cent of GDP's a good level of spending. That somehow it's historically low. It's higher than the average, it's higher than under Labor the last three full years. That's the point I'm making.


SPEERS: OK, I get that you can't lock in Budget numbers now, but in fairness, you can't have a go at the Government for that spending rate when policies that you have already announced would mean a higher level of spending.


CHALMERS: I think it's entirely appropriate for us to point out where the Government purports to be some sort of superior economic manager, having spending at 25 per cent, that that's higher than the average. I really don't think that's unreasonable.


SPEERS: It would be higher under Labor, that's my point.


CHALMERS: That remains to be seen. But you need to think of taxes, spending and economic growth all together. They're all part of the same equation. I've just pulled out the one that Scott Morrison pulled out yesterday.


SPEERS: I'm not saying it's the wrong approach, I'm just highlighting spending and taxes would be higher under Labor on your announced policies.


CHALMERS: That remains to be seen, David, because we're not at the point of implementing a policy. There are a lot of announcements on all sides of the Budget to be made between now and the next election.


SPEERS: But you have announced that you'd have a higher company tax rate, higher income tax rate, higher rates on negative gearing, capital gains tax, trusts. They're all announced.


CHALMERS: Indeed. And that will have implications for tax as a proportion of the economy. The spending decisions that we make to spend and save will have impacts on spending on the share of the economy, that's obvious.


SPEERS: And that's what I'm saying, it's obvious that it would be higher. Spending and taxation would be higher under Labor.


CHALMERS: That point that you're making, David, assumes that the election is today, or that the Labor Government is tomorrow, and there's a lot of water to run under the bridge between now and then.


SPEERS: You're right, you may make some and now doubt you will make some big announcement between now and the election, but I'm just saying, where we sit right now, from what we know of what you've decided and announced, spending and tax would be higher in the Budget.


CHALMERS: We've made announcements on tax, so you know the differences on tax. We wouldn't give a $65 billion gift to multinationals and the four big banks for example. That's true. We wouldn't be giving that tax cut to the banks. We wouldn't be giving a tax cut to people earning over $180,000. All of those things have been announced. Your question is, would they be higher or lower under Labor than under the Coalition in Government. Well that remains to be seen. We've still got a long way to go between now and that being settled.


SPEERS: Final one, I know Kieran asked you about this earlier in the week, the emissions reduction target. Labor's committed to a 45 per cent reduction in emissions by 2030. Is there any thinking about what that might mean in terms of a cost to the economy?


CHALMERS: You're right that that is our policy, David, and we think in the near term we should be agreeing on a Clean Energy Target, but that is our long run policy. We've announced that before. I think too often people see investment in renewable energy, getting the renewable energy mix right, as only some sort of cost to the economy. I think most investors certainly see renewable energy as an upside to the economy in the medium and long term. That's how we see it. We've got to get the mix right. That begins with a Clean Energy Target, but it also means incentives for investing in renewable energy in the medium term too.


SPEERS: So if the Government can come up with a Clean Energy Target that Labor likes, is that emissions reduction target achievable without any additional cost to the economy than the Government's emissions reduction target? Yours is a lot bigger, right, than their target to reduce emissions. I'm just wondering whichever way you do, clean energy target or however you do it, does it necessarily come with a higher cost?


CHALMERS: Not necessarily, no. And in fact, I think in the medium term and the longer term, it brings tremendous benefits to the economy and I think we're wrong to only think about it in terms of cost. You asked about if the Turnbull Government came to the table with a Clean Energy Target proposal, we've said over and over again that we'll sit down and talk with them about it. The only thing that's preventing that is a Prime Minister who can't lead and a desperately divided party room. If they sort those two things out and come to the table, we'll deal with that in a constructive way.


SPEERS: Shadow Finance Minister Jim Chalmers, good to talk to you. Thanks so much for joining us this afternoon.


CHALMERS: Thank you, David.