SENATOR THE HON KATY GALLAGHER
Minister for Finance
Minister for the Public Service
Minister for Women
Date: Tuesday, 25 October 2022
MATTHEW DORAN, HOST: Katy Gallagher, welcome to Afternoon Briefing. A very busy day for you, so we do appreciate you making the time for us. You and your colleague, Jim Chalmers, have spent a lot of time over the last couple of months, really, laying the groundwork for this Budget - warning or trying to manage expectations from the public. Do you think Australians are going to be left wanting by this economic blueprint?
SENATOR THE HON KATY GALLAGHER, MINISTER FOR FINANCE: I think what they'll see is a responsible Budget that's been crafted in some pretty challenging circumstances that have been changing even since the election. So some of that global uncertainty, the inflation challenge that's got bigger, the tightening of monetary policy has, you know, been faster I think than most would have thought. And that, you know, presented us with some challenges. But I think the Australian community understand that this Budget will be about delivering the things we said we would do, trying to manage some of those cost of living pressures, and also looking to start the very hard and long work of Budget repair, which is what I've been focused upon.
DORAN: When it comes to cost of living yourself, your colleagues have been spruiking policies like the changes to the childcare system. But that's not going to come into effect until the middle of next year. There's other measures there, such as paid parental leave, again, there is going to be a delay before that comes in - other policies too. What is there that will help Australians in the next coming weeks deal with the massive pressures that are on their personal budgets at the moment?
GALLAGHER: Yeah, we fully understand that I mean, these are challenging times for anyone with the costs of living increasing, and in some areas increasing really dramatically. One of the challenges we've had putting this Budget together is looking at how we can make a difference to some of those cost of living pressures without adding to the inflation challenge. I mean, the thing we don't want to be doing is, you know, fuelling that or making the work of the Reserve Bank harder. Households are already feeling the pinch from increasing mortgage rates. And that's something that we have, you know, had to be upfront with people about. So where we're looking to make a difference on cost of living, as you say, it's childcare, it's PPL, it's investing in skills, it's cheaper medicines, which people will see - and for many that use scripts, that'll be a big difference. And it's doing the long hard work on energy policy. Again, another issue which we've inherited in a crisis state, that we're trying to unpick and manage. So, again, I think people understand this, you know, it's not easy to say - 'we know all your costs are increasing, but we've got to be sensible and show some spending restraint' - but that is actually what we need to do in this Budget.
DORAN: So it seems like yeah, there is going to be, for the bulk of your promises on cost of living, there is going to be a lag before people see those benefits?
GALLAGHER: Well, say on PPL, that will move to 20 weeks - so people will see that reasonably quickly. On cheaper medicines, we'll get the legislation through - things like that. They will see that. Childcare, again, will come in, and it's a big increase. For anyone that's got little ones in childcare they know what the costs of that and their household budgets are. But we have this short term inflation challenge. And we can't be, we can't be pretending to people that we can solve all that problem without adding to the inflation, which is the real challenge in this Budget - and certainly the short term challenge over the next couple of years.
DORAN: When it is a short term challenge, what sort of timeframe are you looking at to get inflation back into that sweet spot that the RBA continually refers to? We're looking at a situation where it could tip over the 8% mark in the next coming months, certainly on some products. The RBA likes to have a three in front of it - what's the timeframe that you think is feasible to get it back into control?
GALLAGHER: Well you'll see all those forecasts updated in the Budget, you know, but it will be largely in line, the peak, with where Treasury expected that to be in July. So in the December quarter, peaking at around seven and three quarter percent. I think the major difference will be that we expect it to hang around at a bit higher for a bit longer, but that it will taper back over the next couple of years to a more normal setting. And that's important because, you know, not only does it make a difference with people's cost of living, but it helps with our push to get wages growing as well in real wages growth. So it is definitely one of those things that we're looking at the short term and seeing come back to more normal levels through the forward estimates.
DORAN: So it is going to take some time to get inflation under control. Is it a handy, excuse is probably too strong a word, but is it a handy situation for a government in being able to craft its message to the public that you can say 'so much of it's out of our control, so much of this is because of what's happening overseas'?
GALLAGHER: Well, we're not trying to not take responsibility. I think one of the things you'll see in this Budget is we are stepping up and making decisions where we can meaningfully make a difference. Where the Federal Budget in the all of the things that are happening across the economy can make a difference. And that is, you know, investing in the productive side of the economy, not adding to inflation, delivering on our commitments. That is the place where we can meaningfully make a difference. So we don't see it as a choice of making excuses. It's about being upfront with people, saying this is where we're at, and delivering on the things we said we would do, but in a way that doesn't add to some of these challenges in the economy. On inflation, you know, I think the real challenge there is going to be on energy prices. So electricity and gas, which people of course have seen big increases in, and managing that is something that's a longer term piece of work and, of course, will continue outside the Budget.
DORAN: Some reporting around this morning looking at housing investments, what appears to be a pact of sorts between the Commonwealth and its state and territory, counterparts. Why is that the answer to solving the housing crisis that we're seeing across the country?
GALLAGHER: Well, I think it brings everyone together that's got a stake in it, certainly. So local government, states and territories and the Federal Government, together to actually look at what can reasonably be done to deal with some of these things that have been problems for some time. Like, let's make no mistake, this housing, affordable housing, supply of social, and housing for people on lower incomes, all of that has been a problem for at least the last decade. So I think really, leaning in on this, from the Commonwealth point of view, we've had a Commonwealth Government that hasn't really been prepared to be at the table, hasn't seen it as its responsibility. I think this changes again, with us taking responsibility and wanting to engage and look for solutions to make a difference.
DORAN: And just finally, the issue of stage three tax cuts. We know that they are not going to be touched, tinkered with, capped - whatever verb you want to use, in this Budget. Are you kicking the can down the road here or putting off for a political fight until potentially the May Budget?
GALLAGHER: Well, our position on stage three hasn't changed. I think what people will see in this Budget, and I think the conversation that some of the issues that are identified in this Budget will kick off, is a discussion about some of the structural pressures in the Budget. So the spending challenges, you know, we've gone through them before - NDIS, hospitals, aged care, defence and the interest bill, that's growing as the fastest growing program across the Budget, and having a discussion about that. So, again, this is the beginning. This is the first Budget of a series of Budgets, and it should be seen in that context.
DORAN: What do you think is more important - keeping an election promise or making the right decision for the economic times?
GALLAGHER: Well, I think both of those are equally important. I think people want to trust in politics. They want us to do what we said we'd do, but they also you know, want honesty about challenges when they emerge. And I think you'll see that in this Budget.
DORAN: Katy Gallagher - thank you for your time today.
GALLAGHER: Thank you.
Pat Cronan 0432 758 224 | Gallagher.Media@finance.gov.au