SUBJECT/S: Morrison’s new Budget centrepiece - changing page numbers; infrastructure investment; Liberals’ Budget mess; Labor’s housing affordability plan; Turnbull Government’s gas crisis
DAVID SPEERS: Jim Chalmers, thanks very much for joining us tonight. So, the Treasurer Scott Morrison today has announced changes in the way I suppose the Budget's laid out to differ between good debt and bad debt. You've been working on these sort of ideas for a little while. What do you think about his announcement today?
JIM CHALMERS, SHADOW MINISTER FOR FINANCE: The total impact of what Scott Morrison announced today was to move one line from one table from the 66th page of the Budget this year to the 11th page of the Budget this year. That is the total impact of what he is proposing to do today - to move the net operating balance number from the 66th page to the 11th page. He's gone missing now for 17 days. He's been beavering away in silent solitude for 17 days and this is what he's come up with. He's moved a number three pages a day for 17 days. I think with a performance like today, he's colleagues will be less worried that he went missing for 17 days and more worried that he came back.
SPEERS: Well OK, but he's not just moving that number - that net operating balance number, shuffling it up towards the front of the Budget book. He also indicated that portfolio by portfolio we'd be able to see how much debt is being accrued. Is that a good idea?
CHALMERS: We'll go through the detail of that David, but really this shouldn't be his top priority. He should be trying to work out how to restore funding for Medicare; how to fix those family payment cuts. He should be ditching the $50 billion big business tax cuts. He's got a whole range of things on his to-do list. This shouldn't be at the very top of his priority list. This is the new centrepiece of the Budget apparently, these accounting changes. And is he really saying that just because the social security department has more recurrent spending than capital spending, then that will have some impact on how we go about things? I think not. You asked a moment ago, David, about our own work in this area. Of course we're looking for ways to invest more in infrastructure, particularly with the severe Budget constraints that have been imposed by the mess the Government's made of the Budget. But also because there's been a decline of something like a fifth of infrastructure investments. So obviously we're looking for better ways to invest in infrastructure.
SPEERS: Obviously what he's leading towards is a Budget that does have new borrowing for big infrastructure projects. So is that justified do you think? We're in a low interest rate environment. We need this infrastructure, whether it's inland rail, or gas pipelines. Do you agree that this is worth doing?
CHALMERS: I definitely agree we need to look at new ways to invest more in infrastructure and it's self-evident that we're in a low interest rate environment. I guess the point I'm making is there's a way to go about these things. We've put out a discussion paper. We've been consulting - I've been consulting - with experts in this field. That's the methodical and considered way to go about considering something like this. Instead, we have this great fanfare today from the Treasurer. The new centrepiece effectively changing the page numbers on the Budget. No wonder people are so disappointed in the performance of this Treasurer and this Government when it comes to the Budget.
SPEERS: To be fair, I'm not sure he's saying this is the centrepiece of the Budget, changing the page numbers... (laughs)
CHALMERS: Well for a while he was saying that housing was the centrepiece, David, and now we know that's not the centrepiece. So in the absence of anything else...
SPEERS: But he is saying there is a case for good debt, that there is worthwhile borrowing. And it sounds like you're agreeing that yes, when it comes to important infrastructure our nation needs, there is a case right now to borrow a bit more to do so even if that means we have a deeper deficit.
CHALMERS: We've already dealt with that point, but let’s remember: this is a Government which is borrowing $50 billion to give to a big business in the form of a tax cut, of which $7 billion is going to go to the four big banks alone. They're borrowing to give that tax cut. That's money that would otherwise be used to pay down debt. Is the Treasurer saying that that's good debt, to give away that sort of money when it will have negligible impact on employment? If he wants to have a conversation about good debt and bad debt, that begins with their performance on debt. This year, net debt alone has blown out by $100 billion for this financial year and they're giving away money to big business, they're giving away money to millionaires - favouring the top end of town as they always do - and they're raising debt to pay for those things. So if he wants a conversation about good debt and bad debt, let's have it.
SPEERS: Now, the housing front, you mentioned that. The other signal from Scott Morrison today was they're not going to touch capital gains tax. Labor's plan is on negative gearing, but also on capital gains tax to halve that from 50 to 25 per cent - the discount on capital gains tax. Scott Morrison's point is this would hurt investment in buildings, warehouses, businesses. Has he got a point?
CHALMERS: You know and I know David that Scott Morrison has been trying to change the capital gains tax arrangements internally in the Government and he's been rolled again. He's going through the usual process where he has a strong view, then he loses the argument, then he has a sook about it, and then he tries to pretend that he never had that view in the first place. Yes it looks like they've confirmed today that capital gains tax arrangements won't be changed in the Budget. We think that any policy on housing affordability which doesn't make important and considered changes to capital gains and negative gearing has a hole in the middle of it. We've had our policy out there for a number of years now for people to evaluate. You wouldn't really know what's going on on that side of the Parliament when it comes to these sort of tax arrangements - they've been all over the shop.
SPEERS: He was getting stuck into your plan again and pointing out that you cut the capital gains tax discount it doesn't just affect the housing market, it can affect investment in all sorts of things. That's true isn't it?
CHALMERS: He's been running that argument for some time now and simultaneously with his own efforts to change the capital gains tax arrangements, so I think judge that as you will. Our policy is out there, we've defended every aspect of it for two years and it's an important change. It's important for housing affordability because it helps give first-home owners a toe-hold in the market.
SPEERS: But the point the Government's been making about your whole housing policy, which is the negative gearing change and the capital gains tax change - sure, it might have an impact in Sydney and Melbourne that some might like, but what about in markets like Perth and Darwin, where house prices have been falling? What's it going to do in those markets? This is, as the Government has put it, a sledgehammer approach that's going to hit those already depressed markets too.
CHALMERS: I completely reject their argument on this basis: our changes are considered; they're grandfathered, so that they're prospective rather than retrospective. And if you take just for one example, the policy that was announced on Friday last week about the borrowing of self-managed superannuation funds, the overwhelming number of investments made by those self-managed super funds happen in the two big markets of Sydney and Melbourne and the same is true as well of foreign investment in residential real estate. So we think that our changes are well-targeted, because most of the activity is happening in those two most overheated markets.
SPEERS: But your negative gearing changes, and your capital gains tax changes, would affect the markets of Perth and Darwin too, wouldn't they? They would mean that investors are no longer attracted to existing housing stock in Perth and Darwin. That must have an impact on those house prices.
CHALMERS: You have to make policies on a national basis, David, there's no getting around that. But I think when you look at our package in its entirety - capital gains, negative gearing and the other additional measures which have been well received after they were announced last Friday, I think it's a considered package, it eases into it because it's prospective, and lots of those elements apply in far greater magnitude to the big overheated markets than some of those markets that you mentioned.
SPEERS: You can't sit here and say that the markets in Perth and Darwin won't be driven down further by your policy.
CHALMERS: All of the modelling that's out there, David, the independent modelling, assumes right around the country that there will still be increases in house prices, but they'll be sustainable increases, more sustainable increases, which give people a chance to get a toe-hold in the market...
SPEERS: Nationally. Nationally.
CHALMERS: So I don't accept the characterisation by the Government or the characterisation that you're putting now.
SPEERS: OK, but I'm just asking you specifically about markets like Perth and Darwin. They'll be hit hard.
CHALMERS: I don't accept that. No.
SPEERS: And do you have any modelling to suggest otherwise?
CHALMERS: The independent modelling, which I just said, which is out there, assumes price rises around the country but at a more moderate pace; a more sustainable level. That's a good thing. And the additional measures that we've announced deliberately and carefully apply more to the big overheated markets than the markets you've identified.
SPEERS: Let me finally, Jim Chalmers, turn to the gas market, the announcement today from the Prime Minister of new ministerial powers to intervene and restrict exports when necessary. I see Bill Shorten has said this is a weak response. Exactly what would Labor do?
CHALMERS: This is a temporary, half-hearted, half-arsed response to what is a national crisis over energy which involves, of course, the gas sector. The Government has been all over the shop all day. It started by promising that prices for gas would halve. They walked away from that by lunchtime. The relevant minister was on your program a couple of hours ago unable to answer even basic questions about how this will operate. This is showing all the signs of the usual trajectory of a Turnbull Government announcement from fanfare to fizzer in record time. What we're saying is that we need a national interest test for the approval of gas plants. We need an emissions intensity scheme so that investors have the certainty that they need to know the rule they will be investing under over the medium and long term. So we look at any sensible proposals which are put on the table around the gas market and the energy market more broadly, but we've put our own concrete ideas on the table. It's time for some leadership. That leadership has been absent from the Prime Minister.
SPEERS: But just on the national interest test on new gas projects, what would that mean? What sort of test would be applied?
CHALMERS: It would mean that companies would have to take into account our own domestic needs when it comes to the output of that plant when it's operational. That's not the whole answer of course. There's nothing in this area which on its own will solve what is a very substantial problem; part of the energy crisis in this country. But we think that's one sensible measure.
SPEERS: But is it saying that any project has to reserve a certain amount for the domestic market?
CHALMERS: It has to prove that it has the capacity, yes, to service the domestic market as well as the export market. We think that is an important, common sense thing.
SPEERS: What does that mean - prove it has the capacity to reserve a certain amount? Why not just so you've got to reserve x amount for the Australian market.
CHALMERS: Yeah, indeed. That's what the policy proposal is all about, making sure they can service the domestic market. We've put that on the table, not just that though...
SPEERS: So you're saying you've got to reserve a certain percentage for the Australian market in any new project?
CHALMERS: Yes, as part of the process for the approval, for that gas project, for that gas plant, you need to show how much you are prepared to service the domestic market. The big difference is in the proposal the Government's put on the table today is they have no way to compel the companies, or haven't got the agreement of the companies, they haven't been able to explain how they'll be able to deliver this policy objective.
SPEERS: And the percentage would differ from project to project how much they would have to pump into the Australian market?
CHALMERS: The onus would be on the companies and the approval process would be geared towards us being able to consider how much domestic gas they would be able to supply if the plant goes ahead.
SPEERS: And it won't affect existing projects?
CHALMERS: This is a proposal for new projects. But if there's a way to do additional measures, we've said all along that we're prepared to consider additional measures as well. The Australian Workers' Union has had a proposal out there for example on gas reservation. In Western Australia the Liberal Government and now Labor Government has a policy on gas reservation. All of these things are worth exploring in a considered way.
SPEERS: So you're still open to that idea of actually hitting the existing operators with a gas reservation policy?
CHALMERS: We need to be conscious of protecting existing investments, but we've said all along that nobody has a perfect solution to this issue and if people have a proposal which works and they want to put it on the table, we've always got an open mind. We've put our own suggestions on the table around the national interests test, around the broader emissions intensity scheme and we think that the Government should be prepared to work with us to get to a solution on something which is a very acute problem in this economy.
SPEERS: Shadow Finance Minister Jim Chalmers, appreciate your time this evening. Thank you.
CHALMERS: Thank you, David.