Transcripts → 2022


Television Interview - Sky News, Business Weekend

Minister for Finance
Minister for the Public Service
Minister for Women


Date: Sunday, 16 October 2022

Global economic outlook, October Budget, Energy prices.

ROSS GREENWOOD, HOST: Against that backdrop, the Government is framing its first Federal Budget. And it has lessons from the British Government, which caused a market landslide by cutting taxes to stimulate its economy. At the same time, the Bank of England was raising interest rates to try and slow it. It shows the actions of government are closely watched and acted upon by the markets. Well, Finance Minister Katy Gallagher joins me now. Thanks for your time, minister. What did you learn from that British experience where clearly the government's actions worsened it’s economic outlook.

SENATOR KATY GALLAGHER, MINISTER FOR FINANCE: Thanks, Ross, for having me on. Well, I think it confirmed the importance behind having fiscal and monetary policy working together. I mean, obviously, we've got some challenges across the economy; high inflation, rising interest rates, wages not keeping pace, you know, real wage growth going backwards. So, there's some issues in the economy that we are mindful of, we want to work alongside monetary policy to make sure that the decisions we're taking in this budget are based on the economic circumstances of the time and are in the right interests, not only of the economy, but the Australian people as well.

GREENWOOD: So broadly, if we define this is, is it an austerity budget, or is it a budget which is seeking to grow the Australian economy? Because one that seeks to grow the Australian economy, of course, could potentially stimulate more inflation?

GALLAGHER: Yes, so our commitment is really - there's three main areas in this budget, there's implementing our election commitments which were focused on making a difference in cost of living but, cost of living which pays off it with an economic dividend. It is looking at how we can manage some of the pressures that we're seeing, and also dealing with waste and rorts across the Budget. I would add, the only other thing we're having to deal with to some degree is some of the previous governments, you know, well, decisions are spending that they were doing that was ongoing, but didn't have an ongoing provision in the Budget. So we're dealing with some of those as well.

GREENWOOD: Give me an example of that, though…

GALLAGHER: Well, look, for example, there's 200 health programs that we've come across during our audit of spending that we've been doing across the government, where, you know, provision was made for one or two years, but not in an ongoing sense. So there's some IT projects, I can give you one in Treasury; Modernising Business Registers that doesn't have enough funding to go forward, so it's only partly paid for. Those types of things, which we're having to come and pick up the other side of. We need to go forward with those programs, obviously, but they, they have a fiscal impact. So that's certainly been part of the work that we've been doing since coming into government, but we're very mindful of not adding to inflationary pressures, which is why our investments in skills, in child care, you know, they are about helping people with cost of living relief, but not contributing to inflation and paying off in with an economic dividend down the track.

GREENWOOD: Okay, so there's one issue that came up this week, and that was the boss of Alinta Energy, talking about increases in electricity bills of 35%. That's only in Victoria and in other states, it could be even higher next year. So how do you therefore give cost of living relief in that area without also stoking inflation?

GALLAGHER: Well, I think, what we're seeing in the energy markets, in electricity, we've been dealing with this in gas, since we came into government too, is getting on with the commitments we've made about the energy transition. Like, that's the transformation that's occurring across the economy becomes even more important with the circumstances we face. So look, some of these rising pressures or price increases are occurring because of the situation with Russia and Ukraine. There's obviously some domestic issues here after a decade of failure to deliver an energy policy, and we're suffering from that. So certainly, from our point of view, and this is hard work, and the government is absolutely focused on it. We know these costs are hitting households, but that Rewiring the Nation, Powering the Regions, our Powering Australia Plan becomes even more urgent. So We're absolutely committed to being a part of that, to working in partnership with business because we can't do it on our own, to make sure we we’re seizing the opportunities that come with this and where we can, putting those downward pressures on energy prices going forward.

GREENWOOD: But no direct relief for low income households, middle income households who might suffer as a result of a 35% increase in electricity prices.

GALLAGHER: Well, Ross, this is a matter that is getting a lot of focus across government. So what is happening in the energy sector, whether it be electricity, renewables, whether it be through gas, and some of the price increases we're seeing there. So it's there's no doubt there is more work to be done here and we are taking the advice of experts about how we manage some of these challenges. Absolutely, and we are extremely mindful of the pressure on households. But in this budget, as I said, it's about implementing some of our election commitments and getting, in relation to energy, getting started on the Powering Australia Plan, which is really about making sure our energy systems are up to standard after a wasted decade.

GREENWOOD: Okay, so Deloitte, we spoke with them. They say there's an extra $114 billion coming into the Federal Budget over the next four years. Is that money you need to rely on to roll out the programs for childcare, for the energy transition, and also for skills training?

GALLAGHER: Well, we have seen in the final months of the last financial year that those higher commodity prices are flowing into increased revenue into the Budget. There is an expectation that some of that will continue, certainly over the next year. And that is welcome. I mean, our budget is in substantial deficit, we've got a trillion dollars of debt, our interest bill on that debt is increasing in the order of billions of dollars every year with interest rates increasing. So the Budget is under stress, there's no doubt about it. So extra revenue coming in is welcome. In the short term, it will certainly assist the Budget but the structural problems in the Budget, whether it be NDIS, hospitals, aged care, defence, servicing our debt, they are the big long term problems that we have to find room in the Budget to manage. And that is a structural problem. That's not – well, won't be fixed in the next week or so but it's a much longer term piece of work and we're focused on that. So budget repair will have to be a part of every single budget for the foreseeable future.

GREENWOOD: And is that where you get to that point that there is no, and this is what Jim Chalmers has also indicated, that there is no surplus, at least in the in the forthcoming period, because of a) the impost of these measures, but then long term, the fact that income might be a bit constrained as a result of any economic downturn.

GALLAGHER: Yeah, that's right. I don't think any of us should expect that some of the increased revenues are going to continue at the rate that they've been coming in. I think that's a given. And secondly, we can guarantee that those spending pressures in those five areas that I just outlined will continue and between those two is the structural problem in the Budget. So that requires us to be constantly looking at how are we spending money, is it quality spending? Is it driving economic growth? Is there an economic dividend? Is there areas where we can stop spending or redirect spending, and that's the work we've started to do. You'll see some of that in this Budget, not all of it, because it's work that will continue, but we've had a reasonable crack at it in the last couple of months to make sure that we are, where we can, shifting money. You know, reallocating, or where we can making genuine savings.

GREENWOOD: Katy Gallagher, Finance Minister, always good to chat to you. Many thanks for your time today.

GALLAGHER: Thanks so much for having me on, Ross.


Media Contact(s)

Media contact: Pat Cronan 0432 758 224