SENATOR THE HON KATY GALLAGHER
Minister for Finance
Minister for the Public Service
Minister for Women
Date: Wednesday, 5 October 2022
PATRICIA KARVELAS, HOST: Katy Gallagher is the Finance Minister, she joins us this morning. Welcome to the program.
SENATOR THE HON KATY GALLAGHER, MINISTER FOR FINANCE: Thanks for having me on PK.
KARVELAS: The 25 basis point increase is lower than what many had predicted but the RBA warned there will be more hikes ahead. Is the push to get inflation down to that target range risking tipping the nation into recession?
GALLAGHER: Well, I think you can see from the Governor's or the Reserve Bank statement that they issued yesterday, you know, the balance that they are navigating in terms of the decisions they're taking. These are matters for the independent Reserve Bank, so we don't second guess them. But we acknowledge that these are difficult decisions that they're presented with, there's no doubt we have high and rising inflation. The statement, again, goes to the fact that they are seeing, that they are expecting that to moderate next year. And the decision they took around 25 basis points is, I think in my reading of it, to look at and take stock of the significant increases we've seen over the last six months but you know, all of that doesn't change for households really who are you know, seeing these significant increases in their mortgage repayments and we acknowledge that. Some of these pressures are really significant and finding, you know, hundreds of dollars extra a month for you mortgage is really, really tough.
KARVELAS: How exposed is Australia to recessions in the US and the UK? Yesterday the Treasurer said it's now probable some of those big economies will fall and go into those recessions. How vulnerable are we, what's the likelihood it will happen here?
GALLAGHER: Yeah, and I think the Treasurer commented on this yesterday as well. Obviously, what's happening around the world is not irrelevant to us and we are watching it very closely. We are looking at things, particularly I think the lessons learned from the UK in the recent times. I think it's you know, is front of mind for us. We don't have, you know, there's sort of no talk about that in Australia but I think we are mindful of the decision we're taking as we're putting the Budget together about what's happening in terms of the global outlook and you know, there are some significant challenges there. And we are assessing those as we are finalising the October Budget.
KARVELAS: The Budget is less than three weeks away. The Treasurer Jim Chalmers, said the task is to make the Budget more responsible, more affordable and more sustainable. Do the stage three tax cuts meet that test?
GALLAGHER: Well, the Treasurer's comments were looking across the Budget as a whole. We haven't changed our position on stage three, but I think we are being up front and the Treasurer and I have been trying to do this since coming into government about some of the challenges facing the Budget. And, you know, let's not pretend that the economic circumstances aren't changing and haven't changed since May. You know, we are in this high and rising inflation environment, we've got rising interest rates, we've got falling real wages. The global outlook is deteriorating, as you've pointed out, and then there are these other structural issues and structural pressures on the Budget. And so I think the responsibility for us as the ERC and for Jim and I is to make sure that the decisions we are taking in the Budget where we can, you know, where it's our responsibility in terms of those decisions are the ones that are responsible, affordable, sustainable, targeted, and the right decisions for the economic circumstances that we currently face. And so that's across the board, we're looking at that.
KARVELAS: So of course you say we haven't changed our position, because you haven't, you're in discussions about changing that position, right? So what you're saying to us is factually correct as far as I understand it, but can you confirm that you're in active conversations about making adjustments to those stage three tax cuts?
GALLAGHER: Well, Patricia, I'm telling you, and as you say it is factually correct, we haven't changed our position --
GALLAGHER: We are finalising a Budget where we are looking across the board at a whole range of decisions. And we are being upfront with the Australian community. I think they expect us to be upfront and I think they expect us to make the right decisions for the right reasons, mindful of the economic circumstances of the time. The ERC has been meeting every week, sometimes twice a week, at the moment we're meeting every day as we resolve some of those decisions, both about spending and the right decisions to take across the Budget. So that's what I can confirm. We are making, we are dealing with those decisions front and centre. And I think the Treasurer explained yesterday that, you know, the responsibility for us working hand in hand with the Reserve Bank is to make the right decisions for the right, for the economic reason — the right economic reasons and that's what we're doing.
KARVELAS: And if you make a determination that the stage three tax cuts as they stand are not the right economic decision, are you prepared to make that change?
GALLAGHER: Well, that's a hypothetical question. We haven't changed our position.
KARVELAS: No, but you're in discussions about it. You've all but confirmed that, so will you make the best economic decision or stick to your political promise?
GALLAGHER: Across the Budget, we will make the right decisions for the economic circumstances at the time. We have not changed our position on stage three, but we are finalising a Budget and I think the Treasurer and I have been upfront with some of the challenges and some of the changes we've been seeing in the economy that are front of mind for us and we can't ignore those and we won't ignore them because we are going to do the right thing, not just for the Budget but the right thing for the Australian people. And we're dealing with all of those pressures front and centre now — including on the spending side where we have significant structural and persistent pressure on the Budget in those areas like the NDIS, hospitals, aged care, defence and increasingly as interest rates increase the servicing of our debt, which now exceeds I think it's almost $18 billion a year and is currently bigger than what we spend on universities. So you can see some of the pressures that we're trying to deal with that our predecessors left unresolved, and we're trying to work through some of those challenges now.
KARVELAS: Do you think it would become economically irresponsible to go ahead with those promised tax cuts based on the economic advice you're currently receiving and the deterioration that you identify?
GALLAGHER: Well, I can promise you, Patricia, and I'm not trying to avoid the question. I'm absolutely, what we are saying, Jim and I are saying is that we are looking right across the Budget. We are taking into consideration the economic challenges, both here domestically, and —
KARVELAS: And what are those global challenges telling you about your ability to pay for those tax cuts? What is the advice?
GALLAGHER: Well, what we're dealing with now is the economic environment we've got right now, the decisions the Reserve Bank is taking and then some of those pressures that I've outlined on the Budget. They are the mix, across those three, they are the issues that are influencing the decisions that we will take in the lead up to the October Budget. We haven't changed our position on stage three. But we are mindful of all of those things that I've just outlined.
KARVELAS: On the front page of the Australian newspaper are Labor MPs Helen Polley, Mike Freelander and Meryl Swanson, telling that paper that the Albanese Government should deliver the tax cuts in full and there are ministers who've expressed concern that you're even contemplating this. What's your message to those that are concerned?
GALLAGHER: Well, yeah, I mean, I've seen the reports in the Aus today. Look, I don't think it's any surprise, in fact, I think it's completely unsurprising that there are a range of views in the parliament and around Australia around the stage three tax cuts. We've seen that playing out, you know, really over the last couple of years. It's no surprise there. We haven't changed our position, PK, but as I said, we are making you know, our job, the job which we are responsible for is to make the right call for the right economic reasons, and that's the guarantee that we give people, the Australian people, who have elected us to do this job about the decisions we take in the Budget.
KARVELAS: So is your message now that you will prioritise the best economic decision over the political considerations?
GALLAGHER: Well, I don't think that's a new message. I think that's the message that we've been, both in the lead up to the election and post the election, that we've said that we would make decisions based on the economic circumstances of the time. That hasn't changed. That's what I'm outlining to you today, that's what the Treasurer has been saying over the last couple of months. What has changed, I think, for us, is some of those pressures in terms of the domestic economy and the global outlook and, to be fair as Finance Minister, getting more information in government about some of the persistent structural pressures on the Budget which are not insignificant at all, and I think Australian people, if given the choice, you know, around how we meet some of those challenges would want us to make the investments in those programs that I talked about - NDIS, hospitals, aged care and defence. I think those, the jobs for me as Finance, right, fair and square within my portfolio is looking at how we make room for those, those costs which are growing considerably faster than we can afford to make the investments at the moment with a trillion dollars of debt and deficits. I mean, I'm just, I guess I'm trying to explain the Budget pressures that are before us. And those are informing the decisions that we will be taking and finalising in the Budget.
KARVELAS: Just finally on the repatriation of women and children from Syria. The Opposition Leader Peter Dutton says there will need to be a massive investment in ASIO and the Australian Federal Police in order to monitor these returning Australian citizens. He says it will cost millions to monitor a person under control orders, can we expect more money in the Budget?
GALLAGHER: Well, in terms of this, I think it really is not appropriate for us to comment further. I think on the issue that's been raised in the media, this is these decisions are informed by national security advice. We will take that advice at the appropriate time.
KARVELAS: Thank you for joining us this morning.
GALLAGHER: Thank you, PK.
*The transcript issued on Wednesday 5 October, 2022 had an inaccurate attribution of a comment from Ms Karvelas to Minister Gallagher. This has been corrected.
Media contact: Pat Cronan 0432 758 224