Transcripts → 2022


TV Interview - Bloomberg

Minister for Finance
Minister for the Public Service
Minister for Women


Date: Wednesday, 26 October 2022

The Budget; global economic outlook.

PAUL ALLEN, HOST: I am joined by Katy Gallagher, the Finance Minister for Australia on the day after the Budget was handed down. And Minister, thank you so much for joining us. And we just heard from the Treasurer, Jim Chalmers there, also Angus Taylor, the Shadow Treasurer, describing some of the macro conditions that the whole world is facing, really, in terms of rising inflation, the war in Ukraine, what's the best approach here? Do you make cuts or, do you reform taxation?

SENATOR THE HON KATY GALLAGHER, MINISTER FOR FINANCE: Well, you're right to point out the global uncertainty that exists. I mean, we are putting, or we did put together, this Budget in highly uncertain times, against the backdrop of rising inflation, or rising interest rates here and around the world. Issues in China, obviously, issues in Ukraine with the war and the Russian invasion. So it has been sort of an uncertain time, I think, where we found our spot was about putting together the most responsible Budget we could to reflect those times. So where I think there's no shortage of spending ideas and people coming forward with ideas about what they'd like. It's a very responsible Budget that seeks to show some spending restraint in light of this inflation challenge. I think going forward, you know, the Budget is in structural deficit, we inherited it in that way. And we're going to have to have a discussion about how we meet those spending challenges against, you know, a Budget in structural deficit.

ALLEN: I want to return to the debt and deficit question in a moment. But you did manage to retain some key promises, particularly around paid parental leave, childcare payment expansion, as well. But also, you kept the tax cuts from the previous Morrison administration. I couldn't help but notice that election promise didn't get mentioned in the Budget speeches, is it one you're not particularly proud of keeping those tax cuts, is that something you would rather not have done?

GALLAGHER: Well, we are reflecting the Budget as it exists. So that's why you won't see it mentioned, it's built into those forward estimates. It doesn't come in for another two years. Our focus really, in light of some of the global uncertainty we've just talked about, was focusing on what we needed to do right now over the short term. And you can see that in the first two years, where we really are staging our spending investments, looking at returning the upside that we've got from commodity prices, returning that to the Budget and starting that work of Budget repair. But I think, you know, there's no doubt we're going to have to have a discussion about all parts of the Budget and how we meet the challenges of meeting debt, dealing with the deficit and the spending challenges and pressures that are coming our way.

ALLEN: Yeah, and to return to that topic of debt. It's going to surpass a trillion Australian dollars by 2026. The interest bill alone 1.2% of GDP, something's going to have to be done here in terms of revenue, taxation, reform surely.

GALLAGHER: Well, I think it's, you know, it's on both sides, really, we have to look at the receipt side of the Budget, we also have to look at the spending side. We found $22 billion in savings and redirection of spending. I think there's more work to be done there, that's firmly on my desk, is how we continue to make sure we are, every dollar spent is going where it's needed. But yeah, it's a broader conversation. I think what we've tried to do, you know, is not pretend to the Australian people that the Budget's in great shape, and we can meet all these costs that are coming, people expect to have aged care and disability and hospitals funded. And they should expect that, but we're not going to pretend that they aren't going to put increased pressure on the Budget in a Budget that's in structural deficit, and we need to have that conversation with the Australian people. I reckon they're up for it.

ALLEN: Wages growth is something you've been pointing to, 3.75% forecast for the coming fiscal year. It's really been becalmed for a number of years now. But it's only been 2.6% in the second quarter. Why the optimism? Why do you see it jumping so sharply so soon?

GALLAGHER: Well, we are seeing wages moving for the first time, obviously, that's interconnected with, you know, some of the labour shortages, the demand for workers that we're seeing. And certainly we've got a Government that's about getting wages moving, obviously, you know, we're not going to see wages exceed inflation at the moment, and that's where it's hitting people's hip pockets again. So there's more work to be done there. We've had a decade of stagnant wages. So people are going backwards. We've got this sort of cost of living pressure that's come now. And we're seeing that reflected through the Budget papers. But over time, and within the forward estimates, we expect people to start getting reasonable pay increases. At the moment, you know, they've got a Government that wants to see that. You know, it's probably not what we expected when we won Government because the economic challenges have escalated and faster than we would have expected. But we're heading in the right direction and there's more work to do.

ALLEN: In a little over an hour's time we will get inflation figures for the third quarter, and your budget forecasts inflation hitting 7.75% by the end of the year. But we've had a pleasant surprise this Budget in terms of the deficit, in terms of rising commodity prices. Do you think we could have a pleasant surprise in terms of inflation as well, as central banks around the world tighten and we have a growing risk of recession in Europe and the US?

GALLAGHER: Yeah well, that remains to be seen, you know, obviously, the best Treasury forecasts are reflected in the Budget, we are expecting it to peak in the December quarter, we are expecting it to hang around a bit longer because of those sharp increases in electricity, in particular, in energy prices, before heading back down again. So that's the best advice Treasury gives to us and we're hopeful it heads in that way. Obviously, the electricity prices and energy prices in general is going to require further attention from the Government.

GALLAGHER: Alright, Katy Gallagher, Finance Minister for Australia. Thank you so much for joining us.


Media Contact(s)

Pat Cronan 0432 758 224 |