E&OE TRANSCRIPT
PODCAST INTERVIEW
THE CONVERSATION
WEDNESDAY, 3 APRIL 2019
 
SUBJECT/S: 2019-20 Budget

MICHELLE GRATTAN: It's the day after the Budget and as usual, Government and Opposition are down in the weeds of the measures, arguing the fine points. It's always like this, but this year there's a special twist, with an announcement of the election date coming very soon. There's also been a surprise today - the Government unexpectedly extended its planned special energy payment to those on Newstart, apparently to guarantee the legislation's quick passage through the Parliament. In today's podcast, we're joined by Shadow Finance Minister Jim Chalmers for Labor's take on the Budget, which is obviously a very critical one, and to talk about its own plans. Jim Chalmers, you said in your statement with Chris Bowen last night that the Budget tax measures were unfair to people on incomes under $40,000, and you said Labor would fix this up. Were you referring to your earlier tax cuts, or will you be offering more for these low-income people?
 
JIM CHALMERS, SHADOW MINISTER FOR FINANCE: We're looking for ways to make it fairer for people who earn up to $40,000. We're looking for ways to offer more for the two million or so Australians who were largely left behind in the Budget last night. I think in a lot of the commentary, and a lot of the coverage, what has been missed is that yes the Government has copied our tax policy for people between $40,000 and $125,000 or so, but there's a missing bit at the bottom. And we are the Labor Party. We think that people on low incomes deserve tax relief. They're more likely to spend it in the economy, so it's good for the economy, and so we're looking at what we might be able to do there.
 
GRATTAN: So this would be tax cuts, it wouldn't be some other way of compensating them?
 
CHALMERS: We're working our way through it, but it would be through the tax system, yes. It would most likely be around the low and middle income tax offset, which the Government introduced, which they've dialled up now to match effectively Labor's proposals from the last Budget. We're working through that now, we'll have more to say about it.
 
GRATTAN: Do you think that Labor, which has matched the immediate tax cuts, has neutralised the battle over income tax, just as it did in 2007?
 
CHALMERS: I think certainly for the group the Government is talking about most in their hard sell of this election Budget, they will get the same under us as under the Liberal Party. So for that specific group, it probably has been neutralised. But we would like to have an argument over tax in this election. If you look at the totality of what the Government has proposed over two Budgets, the lion's share of the tax relief goes to people in Australia on the highest incomes. They're even proposing, as hard as it is to believe, that somebody on $200,000 gets an $11,000 tax cut, while someone on $35,000 gets a tiny, tiny fraction of that. So we won't cop that. We'd love to have a discussion, an argument, in the election about competing tax priorities. Because it does go to what kind of society we want to build. What we want to see is tax relief for people on low and middle incomes, and we want to see money invested in their hospitals and schools and TAFEs and universities to start to undo some of the damage of the last six years of cuts and chaos. 
 
GRATTAN: Is putting so much into income tax cuts justified in economic terms though? Should we be having bigger surpluses in case of bad times or on the other hand do we need some stimulus in the economy based on what the Reserve Bank has been saying about consumption?
 
CHALMERS: I think that's an interesting question. What we're always on the look out for is bang for buck. You get the most bang for buck in terms of supporting the economy, and as you know Michelle, the growth in the economy has been slowing. So you get the most bang for your buck when you give tax relief to people on low and middle incomes, because they're more likely to spend it in the shops of this country and to boost consumption, which has been flagging for the last little while. Our view is that giving the biggest tax cuts to the people who need them least, who are least likely to spend them at the very top end of the income scale, that won't do much to support growth in the economy. When it comes to surpluses, we have said that we will take to the election a stronger set of books than the Government's. That's not a typical position for a Labor Opposition to take, but Chris Bowen and I, the expenditure review committee, right through the Shadow Cabinet and beyond, we want to take a stronger position to the Budget, because we do accept that there could be international headwinds that we might face. There could be the need to make sure that we have the money to respond to those, and so we think you can get the best possible balance and combination - tax relief for low and middle income earners, and bigger surpluses at the election.
 
GRATTAN: In 2016 of course you took a slightly weaker bottom line to the election, not much but somewhat. Do you think that cost you votes?
 
CHALMERS: I wouldn't want to make a judgement about that period. I think certainly the Australian people hold Labor to a higher standard, I believe, when it comes to Budget management. I think there is recognition in the Australian community that we did a terrific job supporting the Australian economy during the Global Financial Crisis, but one of the consequences of that was that the big downturn in the global economy smashed the Australian Budget. We pay a political price for that, even though people support what we did at the time. So I do think we have a big responsibility, people hold us to a higher standard, and we do have to demonstrate, as well as we can, that we will be responsible managers of the nation's budgets. And I'm hoping that this is a big part of the election campaign to come, because we have a very good story to tell. 
 
GRATTAN: You mentioned slowing growth before, and the Treasurer was quite sombre I think about the economic outlook. What is your assessment of that outlook?
 
CHALMERS: The Government's own Budget downgraded growth, the Budget downgraded wages, it downgraded consumption, and consumption is the majority of our economy. So the Government's own figures were quite bleak when it comes to the next little while in the Australian domestic economy. There are parts of it that worry us too. Consumption has been weak, household savings have been weak, household debt's been bad, wages have been stagnant, growth's been slowing. So all of these things are big challenges. And whoever wins the election in May, they will inherit those challenges, they will also inherit a Budget in deficit. So there's a big task ahead for whoever emerges after the next five or six weeks to try to get the economy back on track, to try to get it growing properly in a sustainable and inclusive way, to get the Budget back on track. We're hoping that we get that opportunity.
 
GRATTAN: Chris Bowen said the other day that if you were elected, it would in fact be in the third quarter a Budget or mini-Budget, which we're all looking forward to in the event of a Labor Government - two Budgets a year, it's got to be a bonus, hasn't it? But how much rewriting of the Budget would there have to be in these circumstances, now you've seen the document that's been presented?
 
CHALMERS: There are a couple of parts to that. And yes, Chris and I have been discussing for some time the need to do what will effectively be a Budget in the third quarter of the year. One aspect of it is to make sure that we are implementing our campaign commitments, or our commitments that we made over the last three years, making sure that we tally them up and present them to the Australian people via the Parliament. That's one aspect of it. The other aspect of it is to make sure that we get the forecasts right. There is a lot of concern, not just in the Labor Party, but in the broader economic community, that the Government has consistently and repeatedly overstated wages growth in Australia. And that's one of the reasons they keep getting it wrong, because they have heroic assumptions about wages that don't play out in the end. So that will be a job for the Treasury and the Parliamentary Budget Office and Chris Bowen and others, to make sure that we get the Budget right whenever it is in August or September.
 
GRATTAN: And would this mini-Budget be the first occasion on which the forecasting of figures would be handed over to the Parliamentary Budget Office, or would it still be done by the Treasury?
 
CHALMERS: As you know Michelle, it's Chris's intention to get the Parliamentary Budget Office involved. We'd have to make sure that can happen on the timetable we've set out. It's really a matter for Chris in the end and his office and the Treasury if he becomes the Treasurer. But certainly that's our intention to do that. How quickly we can stack that up is to be determined.
 
GRATTAN: I would have thought that in terms of the figures in this Budget, you could rely on them reasonably not to have been massaged because, after all, Treasury and Finance are going to produce their own independent figures in the election campaign. So you wouldn't expect much of a gap, would you?
 
CHALMERS: There's a couple of ways to look at that, and we're sort of getting into the weeds a little bit. The other way to look at that is the Government hands down a Budget and two or three weeks later, there'll be a so-called PEFO - a Pre-Election Fiscal Outlook - and the Treasury and Finance will do their best to hem as closely as they can to the forecasts that have been in the Budget. That's the other way to look at it.
 
GRATTAN: That's a very cynical way, it's supposed to be independent. And we do remember actually in Labor's time the head of Treasury and head of Finance coming out and criticising Labor's figures. So we'd expect them to be independent, wouldn't we?
 
CHALMERS: I'm not for a moment questioning their independence, I've got a mountain of respect for both of those institutions. I've worked very closely with both of them over the years as you know. I guess the point I'm making is that when the pre-election outlook is very, very close to the Budget, you don't anticipate there being big changes in the forecasts.
 
GRATTAN: Just finally, Labor goes into this election in a strong position. But I just wonder whether you're sandbagged enough against the scare campaigns that are going to intensify over negative gearing, over what the Liberals call your retirement tax, and now over your climate policy, which they call a carbon tax.
 
CHALMERS: There will be a breathless scare campaign on all of those issues that you raise. Also on asylum seekers. It will become increasingly ridiculous. Watching Angus Taylor and Melissa Price the other day talk about climate change was embarrassing for them, and we do expect more of that. It may be that that has some kind of resonance in the community. It may be that things tighten up substantially. On our side, we take nothing for granted. We have never been complacent about the outcome of this election. We've been in the front before, as you would probably know almost better than any Australian. Labor's been ahead before and missed out and fallen short. They don't give the Melbourne Cup to the horse that's leading at the final turn, and we are acutely conscious of that. We have a heap of work to do. And even if the election is in five or six weeks’ time, we will work our tails off between now and then to tell our story, which is our story about restoring the fair go in this country, starting to address the damage of the last six years of cuts and chaos, investing in schools and hospitals and TAFEs and universities, and giving low- and middle-income earners a fair go in this country. Our story is more powerful than theirs. It will be more powerful than their scare campaign if we get it right, and that's our focus.
 
GRATTAN: Jim Chalmers, thanks very much for talking with us today, and that's all from our post-Budget podcast. Thanks to my producer, Eliza Berlage. We'll be back with another interview very soon. 
 
ENDS