SENATOR THE HON KATY GALLAGHER
Minister for Finance
Minister for the Public Service
Minister for Women
Date: Monday, 24 October 2022
PETER STEFANOVIC, HOST: It is Budget eve, and joining us live is the Finance Minister, Katy Gallagher. Minister, good to see you - thanks for your time this morning. So growth downgraded to just 1.5% in two years' time, do you now have to cut spending more aggressively?
SENATOR THE HON KATY GALLAGHER, MINISTER FOR FINANCE: Morning Pete, thanks for having me on. Look, definitely in terms of looking at areas to find savings and make sure that every dollar we're spending through the Commonwealth Budget is going where we need it, is providing an economic dividend, is supporting families, it becomes even more important at times like this, where we've got high inflation, and we don't want to add to the inflation problem. So we've definitely got a pretty sharp eye on looking at where we can find savings in the Budget, looking where we can reprioritise money to new priorities, and we're going to have that job not just in this Budget, but in Budgets that follow.
STEFANOVIC: Okay, so where would you be looking now to make those more aggressive cuts?
GALLAGHER: Well, look for the October Budget, we've identified about $22 billion in a mix of savings and reprioritisation that occurs across government and across programs. But going forward, I think we'll have a bit more time to work through particular areas across Government. I don't really want to highlight those at the moment because I need to do the work around that, but we do have some long term work that needs to be done because the Budget is in structural deficit. We've got a lot of spending pressures and we've got challenges around inflation. So you know, we have to be very careful about how we line these things up.
STEFANOVIC: Okay, well back to that $22 billion that you just talked about there - where's that come from and where will it be redirected?
GALLAGHER: Of the $22 billion, well, there will be some that is returned to the Budget for Budget repair - that's in the order of about $10 billion. Part of that is through our infrastructure program, in reprioritising there. Part of it's through our savings that we're going to find through reducing the use of consultants and contractors. Part of it's around cleaning up some of the grants programs of the previous Government. But then reprioritisation - that's where agencies have found existing spending, and they're actually recommending that it be used in a different way and the ERC has agreed to that. And that's right across Government, Pete, like that's in no particular department, but all of them because we've said to them, don't just come to us wanting more money, we want you to be looking at how you're spending your existing money first, and whether there's opportunities there. And, you know, they found them, which is a really good outcome. I think $22 billion isn't anything to be sneezed at in the first Budget, but we've got much more work to do over the Budgets that follow.
STEFANOVIC: In the election campaign, you promised a rise in real wages this term. Is that now unlikely that people will see a rise in real wages for this term?
GALLAGHER: Well, we'll update our forecasts in the Budget. You know, obviously, in the short term, we're dealing with this, you know, very difficult inflation challenge. And I don't think anyone's expecting when you've got inflation running as high as it is at the moment, that your wages are going to be able to keep up with that. I think the difference between us and the former Government is they had a policy about keeping wages low, we really want to get wages moving, which is why, you know, we've supported the minimum wage cases, why we're looking at how we can support those cases in aged care - the wage case there. You know, so we definitely want wages to get moving and we are hopeful they will once inflation tapers off. But at the moment, the biggest challenge that we're trying to deal with in this Budget is getting inflation back to more normal levels.
STEFANOVIC: Right, being hopeful is a bit different to a pledge, though, isn't it?
GALLAGHER: Well, I think you've seen since we came in, like I said, where we can and where we've been able to, even in the public service, trying to get wages, you know, better wage outcomes there. We're doing that. We've done it in the minimum wage case, when we supported that. We're looking at aged care now to make sure we are dealing with some of these really low paid and feminised industries. But you know, we are also dealing with this very tricky inflation challenge. And you know, we have to be cautious there. We want wages to get moving. We make no secret about that. But we actually have to deal with this inflation challenge right now. That's the immediate challenge. That's the challenge that the Reserve Bank's working on and we can't add to that pressure. And that's what this budget seeks to do. It's to work alongside the bank and to have a sensible, rational and responsible Budget that will be handed down tomorrow night.
STEFANOVIC: Okay, if inflation reaches the RBA's target band of 2.5% in 2024, which is scheduled at the moment, is that one less excuse to argue against the stage three tax cuts?
GALLAGHER: Look, you know, our focus isn't on that, on the two years' time. Our focus really in this Budget has been on what we can do right now to assist people with cost of living pressures, not to add to the inflation pressures and to drive economic growth over the longer term. And that's what you'll see in this Budget. You know, that's where our focus has been. Obviously, we've got more Budgets to come. But really dealing, it's been a tricky set of circumstances, Pete, to put this Budget together. You know, Governments haven't had to deal with some of these issues for over a decade, and we're trying to put together the most responsible, sensible Budget that actually helps households deal with this inflation challenge which is hitting their hip pocket.
STEFANOVIC: Sure, I get that. But I guess my point being that you, according to those figures, you may well need stimulus by 2024?
GALLAGHER: Well, I can promise you that every Budget that Jim Chalmers hands down will be right for the economic circumstances of the time. That's the commitment we took in the election. That's the approach we've taken putting this first Budget together and you'll see that in future Budgets.
STEFANOVIC: Okay. That's the Finance Minister, Katy Gallagher. A big week for you and a busy morning. I appreciate you squaring away some time for us.
Pat Cronan 0432 758 224 | Gallagher.Media@finance.gov.au