ASHLYNNEMCGHEE:
Treasurer, welcome to 7am.
JIMCHALMERS:
Hey, thanks for having me on.
MCGHEE:
So, I want to take you back to last Sunday night first, before the Budget, if you can remember back then. You’re in Canberra, you’re finalising your speech. You’ve done kind of a round of media interviews during the day, and then you’re off for dinner at The Lodge with the Prime Minister and the Finance Minister KatyGallagher. What was the mood like at that dinner?
CHALMERS:
Pretty casual, pretty relaxed. There were a few other colleagues there as well. But we do that relatively regularly, and Anthony is not a kind of a super formal guy. And so we have a good yak. We don’t hang out forever. We’re not those guests where people are looking at their watch at 11.30 wondering when they’ll – what kind of hints that the hosts need to drop. So we’re only there for a little while. We have dinner. We have a lovely chat. Good chat. Relaxed. And we talk about the week ahead – primarily the Budget, which at that point was almost exactly 48hours away.
MCGHEE:
Was it all locked off at that point, or were there some little tweaks going on still?
CHALMERS:
No, it’s locked off. Definitely the decisions are locked off. The printers are kind of whirring. The last thing that we have to put to bed is the speech because that gets printed last and bound last. And so the good thing about knowing you’ve got a plan for dinner is you use that as your deadline. So I literally hit send on the last version of the speech and then I leave to walk down to Anthony’s house.
MCGHEE:
So we’ll move on in a sec, but I just want to be a little nosey first: was it a champagne or red wine kind of moment – or a soft drink?
CHALMERS:
It was mostly a mineral water gig. Certainly for me. I gave the wine away and the beers away a long time ago now, 4years, maybe. So sparkling water for me and the other colleagues made their own decisions.
MCGHEE:
And so when you’re chatting about the Budget, what kind of headline topics came up? What were the big things that you were all talking about?
CHALMERS:
Well, the most important thing that took a lot of our time, or 2 most important things, were cost‑of‑living help – trying to work out how can we do the most we can and it still be responsible in the context of the Budget. So that was definitely the main near‑term priority. And then the big longer term piece was this Future Made in Australia agenda, which is really about how do we make Australia indispensable to the big global net zero transformation and how do we make sure that creates good jobs and opportunities for people in Australia.
MCGHEE:
And I’m sure you discussed it in those very words.
CHALMERS:
Mostly. Well, that’s how we thought about it. But, I’m trying to make a realistic guess here. I mean maybe hundreds of hours of discussion go into a Budget. And the big pieces – cost‑of‑living help and Future Made in Australia – were the 2 biggest, but also a big housing package, a big care economy package and a big universities package. There would have been hundreds of hours of discussions that led to that.
MCGHEE:
As we’ve just talked about, you framed this Budget in 2 really clear ways. So on one hand it’s about inflation and not adding to it. And on the other hand it’s about what the government is doing to support people who are struggling. So to go to that a little bit more, how would you describe the gap between the rich and the poor in Australia right now? Can you give us a bit of a score card of how you see things?
CHALMERS:
Obviously it’s a concerning gap, and that’s why it’s one of the big motivations behind what we did when we changed the tax cuts, for example. And anybody who’s followed the bouncing ball of the last few years of income tax policy knows that there was some tax cuts which were legislated which were going to go overwhelmingly to people on the highest incomes. And we took a political risk to say we’re going to re‑write those tax cuts so that everybody gets a tax cut, including people who were going to miss out before – which was low‑income earners – and with a much bigger emphasis on people on middle incomes and low incomes. And so we did that in January because we had to legislate it in plenty of time before the changes come in, in July.
And so that is us, I think, acknowledging that our role is to, where we can, make things a bit fairer. In my portfolio the tax system is an important way to do that. Make multinationals pay their fairer share of tax. Crack down on tax avoidance that wealthier people are more likely to be engaged in. All of those sorts of things so that we can fund things that matter to people who might be struggling. More rent assistance is in the Budget. Cheaper medicines is in the Budget. Trying to give people a better deal in the HECS student debt system is in the Budget. And all of this is really about trying to make sure that our Budgets and our economy are a bit fairer but recognising that there’s more work still to do on that front.
MCGHEE:
So just to go to one of the specifics here because I think this is the one that a lot of people are struggling to get their heads around – and that is the energy rebate that goes to every single Australian, not just those at, say, the lower or the middle end. Help us understand why the people at the top end, why you think they need it as well?
CHALMERS:
The people on the highest incomes aren’t our focus in what we’re doing here. They’re not our concern. But there’s a couple of reasons why we’ve designed it the way we have. Last time we did it in a more targeted way. We provided energy bill relief to people who are on pensions and payments, and that was really important. We’re very proud of what we were able to do there. But I think we have to recognise that even people on middle incomes, there’s a lot of people who are struggling as well, people who might have mortgages who are dealing with these higher interest rates, for example. And once you decide that you’re going to go beyond the pensions and payments system, which the energy retailers who we work with to provide the relief – because it comes off your energy bill – they have information about who’s on pensions and payments, but they don’t have information about your income.
The energy retailers do not know how much you earn or how much I earn or anyone else. And so we would have had to design a whole new system of data sharing between the Tax Office and the energy retailers. And a lot of people wouldn’t want their income information shared with their energy retailer. And so there are a whole bunch of important reasons why it wasn’t possible to kind of quickly and cheaply do a means test. So primarily, we wanted to provide the support broadly. But, secondly, there are mechanical reasons, logistical reasons, why it would have taken too long and cost too much to devise an entirely new system which would have seen energy retailers have access to your salary and wages.
MCGHEE:
It sounds like a logistical nightmare, but put that aside for a moment. Does it niggle you a bit that, you know, the top 20percent who, like, essentially they have about 6 times more disposable income than the rest of us, that they’re getting this, you know, $300 bump?
CHALMERS:
Like I said before, we didn’t design this policy with them in mind. We designed this policy with people on low and fixed incomes and middle incomes in mind, the people who are genuinely struggling. There’s a lot of help that is provided broadly in the economy, and people have got views about that, and that’s good. But also remember – and this goes to the kind of political argy‑bargy about this very question that you’re asking – when we said to the highest income earners: look, we don’t think you should get a $9,000 tax cut, we think you should get a smaller tax cut, about half of that. We’re talking there about 15 times this energy rebate. We’re talking about $4500. And so I think that sheds a bit of light on what’s really happening in the political criticism about this. You know, some of our political opponents didn’t think it was fair that we halved GinaRinehart’s tax cut. And now they’re saying: it’s outrageous – which is one‑fifteenth of the tax changes that we made. And so I think we need a little bit of perspective. People know our bona fides when it comes to helping people on middle incomes and low incomes. We showed that in the tax system. But in this instance, we’re providing the support broadly for a reason, and there’s also a logistical reason why – it would have taken longer and cost more.
MCGHEE:
So I just want to test out a couple of quick things on you, because there’s a whole lot of ideas that float around in the lead‑up to the Budget. But given the wealth disparity, I just want to check with you why these things were ruled out. So the first is free and universal access to childcare. Why rule that out right now?
CHALMERS:
We are working towards universality in the early childhood education system. You know, the Prime Minister has said before that a country like ours should have that aspiration. And in the 3 budgets I’ve handed down, one of the biggest investments I’ve made in any of those budgets is in making early childhood education cheaper. Billions and billions and billions of dollars invested in our first Budget for that. But we believe in the transformative capacity of early childhood education. So making it cheaper in the first Budget. And the other thing I did in this Budget is we provisioned for, we made room for, billions of dollars in higher wages in the care economy, whether its aged care wages or early childhood educators, because they have been underpaid for too long. And so once we get the decision out of the Fair Work Commission about pay in the care economy, we’ve made room in the Budget to make sure we can fund our part of that.
MCGHEE:
The other one I just really quickly want to touch on is more support to help people go electric in their homes and with their cars. There seems like there’s some huge benefits financially to that. Why not offer more direct incentives to households?
CHALMERS:
I take from your question about direct incentives that you’re probably aware that in an earlier Budget we’ve got a system of concessional loans to help people electrify. It’s obviously a super important objective that we get, if people want to electrify we want to make it as easy as possible. We want to get emissions down, and households have got a big role to play in that. What we have considered, what next steps we might want to do on that front and we’ve got a pretty open mind to doing more in the future, when we can do that in kind of a responsible, affordable way.
MCGHEE:
Tell me more about that. That sounds like an interesting point to pick you up on there. What are you thinking?
CHALMERS:
We don’t think it’s a bad idea, but we’ve got to make everything add up. And so, one of the big jobs of budgets that your followers and listeners would understand is that there are more good ideas than you can fit into a Budget. And so you’ve got to work out, okay, what are we going to do now, what are we going to try and do later, what are we going to try and do after that. You know, that’s not an unusual thing in all kinds of different professions. And that’s the same for us. And so we think household electrification is a very, very important objective. We’ve made some investments in that in the past. We’ve got an open mind about doing more in the future.
MCGHEE:
After the break, what a humble pineapple has to do with intergenerational inequality.
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MCGHEE:
So, Treasurer, for our sins we went back and looked at the last 15years of Budget night speeches.
CHALMERS:
That is madness! That is the maddest thing I have ever heard.
MCGHEE:
Definition of madness right there. Look, it was just a little free time entertainment. And the thing that we found interesting was that the only time that young people really get mentioned in these Budget night speeches is when it’s to get them into more apprenticeships or to let them use their superannuation to save for a house. Your Budget seems like – and certainly your speech had more of a focus on young people. So I wanted to ask you about why that in particular was important to you.
CHALMERS:
I feel like, to use what is probably a very Queensland saying, I feel like young people too often get the rough end of the pineapple. And I think that’s true in the way that the HECS debt was calculated last year. That’s why we fixed that. I think it’s true in the rental market. That’s why we’re trying to build heaps more rental properties and providing rent assistance. I think it’s true in the tax system. One of the main motivations when we re‑wrote the tax cuts was because too many young people were missing out under the old one and many, many more young people benefit from the new tax cuts. To be honest with you, I’m really pleased that you noticed that because we were very deliberate about trying to say young people often feel disproportionately these cost‑of‑living pressures, and we’ve got some opportunities here to try and do a bit better. And so that’s why younger people were a bigger part of the Budget speech than usual.
MCGHEE:
For people who already have a home, they’re really nervous about future rate rises. What can you say to them?
CHALMERS:
I go out of my way, I try really, really hard not to say anything that pretends that I’m a decider here. This is decided independently by the Reserve Bank Governor and her board. And I don’t like to make predictions or pre‑empt that. I like to take responsibility for my part of it. My part of it is to do responsible budgets that help people with the cost of living and put downward pressure on inflation because that’s one of the things that the Reserve Bank Board considers when it meets to decide the future movement of interest rates. There’s lots of views about it. I understand that. People are under pressure because of these rate rises. But it’s not especially helpful for me to tell the Governor of the Reserve Bank how to do her job, and she doesn’t tell me how to do my job. We talk frequently. We compare notes frequently. I know where she’s coming from and she knows where I’m coming from. But I don’t tell her how to do her job.
MCGHEE:
What happens if inflation doesn’t get down below 3percent by the end of the year?
CHALMERS:
Well, that’s the best estimation. That’s the best forecast of the professional economists that work in the Treasury Department in Canberra. They come up with their best estimate of where they think inflation is going to head. It’s a difficult job. Forecasts aren’t always perfect, and it’s especially difficult when times are volatile like they are now. But that’s their best estimate. And my job is not to – I don’t write those forecasts – my job is to do what I can to get inflation down as soon as I can and as quickly as I can. And on that front, it might not feel like it out in the community necessarily yet, but inflation has come down really substantially. It had a 6 in front of it when we came to office 2years ago; now it’s got a 3 in front of it. Still too high. We need it to go lower. And the Budget is going to play a role in making sure that it does.
MCGHEE:
What is it that keeps you awake at night, Treasurer?
CHALMERS:
Well, pretty much that at the moment – these cost‑of‑living pressures. I come from a community which has got its fair share of challenges and some of them are economic challenges. People are under the pump. And what I try to do as Treasurer is not kind of lock myself away. I try to be really engaged with my local community and I try to engage as much as I can more broadly. And the inescapable conclusion of all of those hundreds of conversations you have in real communities, with real people is that they’re under pressure. And as the Treasurer and as a local representative as well, obviously that weighs heavily on my mind. And that’s why we do what we can and we do as much as we can in these budgets.
MCGHEE:
So you’re a politician who’s spoken about big, bold ideas in the past. Are you proud of this Budget?
CHALMERS:
I’m really proud of this Budget. And I’m proud of it because it’s difficult sometimes. In whatever line of work you’re in, it’s difficult sometimes to devote the right amount of attention to the here and now and the – even if it’s 10 or 15years down the track. And the thing that I feel most confident about and proudest about in this Budget is the way that we’ve said there are 2 jobs in this Budget, not just one, and they’re both important. The first one is super important in the here and now, help people with these cost‑of‑living pressures. But to not neglect our intergenerational responsibilities at the same time, trying to build an economy which is making a great contribution to the net zero transformation. And to be able to do both of those things and to see it come together in what I hope other people will see as a coherent fashion, that’s what I’m proud of.
MCGHEE:
Treasurer, thanks so much for your time today.
CHALMERS:
I really appreciate the chat. Thanks very much.
