Senator the Hon. Simon Birmingham
Minister for Finance
Leader of the Government in the Senate
Senator for South Australia
Date: Wednesday, 30 March 2022
Laura Jayes: Joining me live now is the Finance Minister, Simon Birmingham. He's had a very big 48 hours. Thanks so much for your time, Minister, appreciate it. Let's get one thing out of the way. $3 billion worth of cuts. What is that all about?
Simon Birmingham: Good morning, Laura. It's great to be with you. Well, that is a demonstration that the Labor Party just aren't fit to govern if they can't even read the budget papers correctly. What they're peddling around is a reduction in a budget line of decisions taken but not yet announced. That's because those were things that we budgeted for back in the Mid-Year Economic and Fiscal Outlook that were decisions which we have subsequently announced. So they move from being in the decisions taken but not being announced budget line to actually being reflected in decisions such as, for example, we made provisions for the women's safety package $1.3 billion women's safety package that we knew we were going to invest in. We were finalising the content and the details of that. So we've provisioned for it in the responsible way to do it now shifts from that budget line to the other one. So it's a bit of a either complete stupidity from the Labor Party unable to read the budget papers or just being completely misleading in the way they presented it.
Laura Jayes: All right. Let's talk about the money that you're spending then. There's no sign of budget repair. You're putting cash into people's pockets. You've got this fuel excise freeze. And another number of other announcements, of course, will this win you an election?
Simon Birmingham: Well, Laura, let me just take you to task first in terms of no sign of budget repair. The dividends of a stronger economy that Australia is seeing, we're overwhelmingly taking most of those and putting them against having lower deficits into the future, more than $100 billion.
Laura Jayes: Sure but you've still got deficits for a decade.
Simon Birmingham: There are still deficits, but those deficits are now going to run at around half of what they were previously forecast to do as a share of the economy. Now, other governments, I've got no doubt a Labor government probably would have chosen to spend a lot more of that dividend. We've chosen overwhelmingly to bank it and to make sure that we have a stronger budget situation into the future. But we are still recovering from the big investments that were necessary during COVID-19. There are still pressures in the NDIS, in aged care and defence spending that we simply have to meet and it requires some careful decision making. We also have to make decisions about the cost of living pressures Australians are facing right now. Just as during COVID-19 we responded with temporary targeted measures to the shocks that Australians and Australian businesses were facing. We can now see shocks in terms of the spikes in global oil prices that are being faced around the world, thanks in large part to Russia's war on Ukraine. But those spikes aren't going to be with us at the extreme levels forever. So again, we're responding in temporary, targeted, responsible ways to help Australians out right now with those cost of living pressures until we see that stabilisation occur.
Laura Jayes: You're giving all this cash $8 billion worth. Isn't the RBA just going to take it away in June?
Simon Birmingham: Well, look, these are important for Australians in the here and now, not just in terms of what it means for households and their cost of living. And it's crucial, of course, to see that $0.22 a litre reduction in petrol prices, which will mean about a $15 saving for filling up the average car, the payments, the low and middle income and fixed income earners, helping them with these immediate pressures. But doing that is also important for ensuring consumer confidence remains strong, that people are very susceptible to the impacts of seeing a spike in something like petrol prices. So keeping consumer confidence strong is important. In terms of the inflationary pressures well, having petrol prices going up steeply adds very directly to inflation, taking $0.22 a litre off the price of petrol takes away from some of those inflationary pressures.
Laura Jayes: All right. Let's look at commodities. It looks like coal and iron ore in many ways, once again saved your budget backside, if I can put it that way. How does that fit into Labor's climate change narrative? Indeed, your own climate change narrative.
Simon Birmingham: So iron ore, coal commodities running at highly elevated prices have helped this financial year. No doubt about that. And they'll provide a little bit of support in the next financial year. But in this budget, as with all the previous coalition budgets, we're taking a very conservative approach to what we think the revenue streams from those commodities will be in future years. We're projecting them to trend back down by September of this year, over a six month horizon. And so that means that in terms of the improvements to the budget bottom line over next year, but then especially over the latter years of budget forecasting, there's no benefit from higher commodity prices realised in those latter years because we're not budgeting to have higher commodity prices. Overwhelmingly the benefit comes from a stronger labour market, from having more Australians in jobs, in fact having unemployment hitting 50 year lows. That's the dividend that is providing enduring benefit to the budget bottom line and ensuring that we can run those lower deficits and have debt peaking earlier and lower than otherwise forecast to be the case.
Laura Jayes: Have you done any structural reform in this budget?
Simon Birmingham: In terms of in terms of support for the nation's economy, the productivity, dividends that come from record infrastructure investment in terms of the productivity of the nation, skills investment crucial to meeting the workforce, challenges and shortages the nation sees, and the reform of apprenticeship support to give more direct support to an apprentice themselves to stay through the first two years of their apprenticeship when wages are lower, but to get additional support from government during that time, an incentive to see that apprenticeship to completion is all about helping to address the longer term skills challenges. The support for small businesses to upgrade their digital capabilities, their technological capabilities, and ensuring they can operate more effectively into the future. The extension of the patent box reforms, which are about building on our incentives for commercialisation of technologies in Australia and ensuring, as we did last year, the medical devices and technologies that it's more competitive to commercialise and to manufacture new technologies in Australia. And those medical devices where extending that now into areas of low emissions technologies and agriculture, where Australia can also yield more benefits and play an even bigger role in high tech, higher paying manufacturing.
Laura Jayes: Minister, the job story is great. I mean three in front of it for unemployment and it's almost a full employment. But your own budget papers show with inflation, wages are barely keeping up. I mean, this is an employee's market. Why aren't wages going higher?
Simon Birmingham: So the budget papers do show real wages growth from one July this year. In terms of the forecasts there, that this has been an extraordinary couple of years we've lived through. We had an absolute collapse at one point in in CPI as a result of a cost coming off of childcare and other parts of the economy during parts of the COVID intervention. Now, of course, we've seen spikes in CPI, some of it being some of those costs coming back. Others being in, of course, the factors from war in Ukraine, oil price spikes, disruption to global shipping, trade, logistics, etc. So it's been a very volatile period that we've come through. What we're forecasting for the future is after we've provided this temporary support to deal with these immediate shocks we're facing, is that real wages growth occurs, wage rises under the wage price index of three and a quarter per cent next year, rising to three and a half per cent through the forward estimates. And that's partly a function of achieving those near full employment levels. And that's the best way that we can keep putting pressure on wages is to have the strongest possible economy with the greatest possible job generation, and that is where our government having generated 1.7 million additional jobs, 1 million more additional jobs for Australian women has a proven track record.
Laura Jayes: Simon Birmingham, thanks for your time this morning. Appreciate it.
Simon Birmingham: Thanks, Laura. My pleasure.