SENATOR THE HON KATY GALLAGHER
Minister for Finance
Minister for the Public Service
Minister for Women
Date: Wednesday, 2 November 2022
PATRICIA KARVELAS, HOST: Whether you own a home, rent, or run a business, you've no doubt been affected by increasing interest rates. Yesterday's seventh consecutive hike means things will only get harder for some households. And while many were left disappointed by the Budget’s lack of support payments, the Treasurer warns doing so would have added half a percentage point to inflation. But reform seems to be on the horizon with the Prime Minister committing to serious budget repair and fixing the broken bargaining system to help stagnant wages. The Finance Minister, Katy Gallagher is our guest this morning. Minister, welcome to RN Breakfast.
SENATOR KATY GALLAGHER, MINISTER FOR FINANCE: Thanks for having me on, PK.
KARVELAS: This is the seventh straight increase in rates and the Reserve Bank is now forecasting inflation to reach 8% by the end of the year. That's exacerbated, of course, by floods and the energy crisis, the war in Ukraine. How much worse can this economic situation get for householders?
GALLAGHER: The government understands it's a really challenging set of circumstances that households are facing right now. You know, this inflation and getting inflation back to normal, or more normal ranges, is the absolute priority because that in the longer term is going to be the biggest assistance we can provide to households. And that's, I think, you know, we're seeing it not only from mortgage holders, but in other cost of living increases as well. And so households are really feeling the pinch, but dealing with this inflation challenge has to be our priority. And that's why the Budget, you know, we shaped last week was focused on this, and it's why the Reserve Bank continues to make the decisions they do.
KARVELAS: Is there a threshold where rates and inflation hit a certain point that the Government says, right, it's now time to step in and provide some immediate relief for people who can't afford - these are not sort of discretionary items. This is the grocery store, turning on the heater. Basic things?
GALLAGHER: Well, the Government will always be looking at what's the right thing to do by households, absolutely. And, you know, it's on our agenda every time the ERC meets. I know, the subject of constant discussion is how do we manage some of these challenges. And, again, you saw that in the Budget where we made the deliberate decision, where we could to invest in a cost of living package that took pressure off households and delivered an economic dividend, but didn't add to the inflation challenge. So that was in, you know, childcare, PPL, cheaper medicines, looking at what we can do in the housing area and trying to get wages moving again. And I think it shows just how important those decisions were, you know, when you look and read the Governor's speech last night about how difficult dealing with this inflation challenge is, but how important it is that, you know, and the government recognises that, which is why we're aligning fiscal policy with monetary policy. But sure, you know, we will always look at what more we can be doing if it's useful and meaningful and doesn't add to this inflation problem.
KARVELAS: Okay. But is…
GALLAGHER: I’d also say, I’d also say, PK…
KARVELAS: Yep, no, no go ahead.
GALLAGHER: In the Budget, there was a substantial increase into payments for people on pensions and JobSeeker, Age Pension, Family Assistance - that was in the order of $33 billion. And that will provide, I mean, it's built in the Budget that way so that when costs go up, that the indexation recognises that and it can help through that system flow onto payments. So that people will see that in their payments as well.
KARVELAS: Is regulatory intervention to lower energy prices, the only option you have to ease the cost of living without pushing up inflation?
GALLAGHER: Well, again, I would say and I'll come to energy, I'd say some of the investments we made in the Budget were about targeting cost of living without adding to inflation. I just touched on those increases to social security payments, which, you know, are the biggest increases we've seen in light of the fact that inflation is a higher than we've seen in recent times. And then we're dealing with the challenges in the energy market. And I think the Treasurer has been clear, you can come at it a couple of different ways. I think the problem is easy to identify the solution is harder. So looking at the regulatory arrangements is our is our first inclination and that work is underway now.
KARVELAS: And how quickly will that happen because there is a massive sense of urgency around this. Is this something that will be announced within weeks?
GALLAGHER: Sure, well, that work is underway. I can't give you a timeframe on the completion of that, but I know that my ministerial colleagues, there's a number of them involved that are meeting regularly, including across the public service, to look at what the best response, mindful of the circumstances we're living in is, because we are aware this is not just another big impost on households. It's also a big issue for industry, for business or manufacturers as well.
KARVELAS: In its statement, the Reserve Bank says it wants to avoid a wage price spiral. Do you think there's a risk of that? Are you putting pressure on wages through your policies, and there might be a risk of a wage price spiral?
GALLAGHER: Well, the Bank, obviously will keep looking at that and they say that in their statement, and in the in their remarks of the Governors last night. We're not seeing that. The Budget does not, does not in its forecasts, does not predict that.
KARVELAS: So what’s the Reserve Bank Governor talking about then?
GALLAGHER: Well, I think the Governor - well the Governor can speak for himself, but my reading of it was these are the things we'll be keeping an eye on. He was pointing out that there is a fair bit of uncertainty around, there's a narrow path here that they're trying to navigate. But that, you know, these are the things that they will continue to focus on. They’ll focus on, you know, whether businesses are passing prices on, they're going to focus on what’s happening on wages, they're going to obviously focus on what's happening across the world. So, I mean, that's them doing their job. But I would also point to the fact that in our budget, we're forecasting, reasonably modest wages growth over the forward estimates. And in fact, it doesn't get ahead of inflation until later in 2024. So that's not what we're seeing and when we're looking at things contributing to inflation, wages aren't part of that. And that's different to what we're seeing in other places like America. So we need to, you know, I think we've seen some movement, and we're seeing wages pick up a little bit, but they're not, I think, in the in the realm they've been in other economies.
KARVELAS: Now, the industrial relations bill is becoming quite contentious. The Senate crossbench has been clear they want more time to look at the bill. Why not allow them more time to look at the bill in the interest of democracy and proper scrutiny so there are no unintended consequences.
GALLAGHER: So there's a committee process underway. And that's important, I think, I have no doubt the minister continues to talk with the Senate crossbench about how to navigate this bill through but I think what the Government is saying is this is a priority for us. We would like to get wages moving again, and improve the industrial relations framework. These were key election commitments we made and I don't think it's any surprise that the Government would want to see these sensible amendments passed by the end of the year. Ultimately, you know, the Senate will have a view on this, PK. And we know we need to convince the crossbench, at least one of them, hopefully more, that they that supporting this bill by the end of the year is a good thing.
KARVELAS: But business is telling us that the provisions in your bill go well beyond low paid sectors and due to the common interest test could apply to any business. And only those with fewer than 15 employees can opt out. Are you willing to look at that provision in the bill, given business is saying that this is going to be this is going to drag lots of businesses into potentially, multi-employer negotiations?
GALLAGHER: Yeah. My understanding is there are some safeguards in the bill, so that tests would have to be met to provide that safeguard to those things.
KARVELAS: But they’re saying those tests aren’t strong enough?
GALLAGHER: Yeah. So I understand that those are the more controversial components of the bill, I have no doubt that they will be looked at through the Senate inquiry, as they should be. And, you know, we will continue to work with the crossbench. I don't think it's any surprise that industrial relations reform is, you know, tricky in parts. It's been the history in this country. So that's not really surprising. But I think what we've been trying to do is bring people together as much as we can. Now you're probably not going to get 100% consensus in this area and there's more work to do. But I think, you know, engagement with the crossbench, engagement with business, which is what we've been doing, since the election is the right path and I know the minister doing that.
KARVELAS: Are you worried about a funded campaign against your government? Clearly, there are lots of published warnings from business that they are prepared to do this.
GALLAGHER: Yeah. Look, I mean, I don't think it's surprising that there are people who aren't supportive of this legislation and if they want to put some money behind a campaign to elevate their arguments, that's their business. I think for government, it's really about what is the right thing to do? How do we make sure that we're finding that balance and that we're getting the bargaining system, working for working people, which is the problem that we are trying to deal with here. And particularly with my Minister for Women's hat on, some of the issues that we've seen in those industries that are dominated by women, where bargaining has failed, and industrial relations protections haven't provided the environment that those workforces need to have a secure, well paid job.
KARVELAS: But you say, you know, you're not surprised. You didn't take this particular proposal to the election so some are saying there's no sort of mandate for this change, that it's come as a surprise. Do you think that such a campaign could hurt your government?
GALLAGHER: Well, again, I think the approach, the approach - I look at it a different way. Like, again, we can't control what people who don't agree with a particular part of the bill are going to do. So then it is, how do you work with them, how do you justify the approach you're taking, and for us on multi-employer bargaining, it's the fact that the bargaining system is broken, and that we are trying to make it applicable for the circumstances and the labour market that we have here right now and dealing with that. And now if I kind of think that the impact of the campaign against the changes is less important than trying to focus on what the right thing to do is, and we know that in this area, bargaining is not working and something needs to happen. And I think there's some agreement about that and we've got more work to do until this legislation gets debated in the Senate. And we remain of the view that it would be good to get this done by the end of the year.
KARVELAS: Minister I am about to speak to Kate Jenkins, the Sex Discrimination Commissioner. So just one question on one element of the Respect@Work recommendations poised to pass the parliament. What's your response to concerns raised by lawyers? We spoke to Josh Bornstein on the program, that a provision forcing both parties to pay their own costs, regardless of who wins will actually discourage victims from pursuing justice through the courts. Are you considering the amendment that that is proposed by Monique Ryan?
GALLAGHER: Well, I haven't been involved in the negotiations around that. But my understanding is we are following the recommendations of the Respect@Work report, and perhaps, you know, Commissioner Jenkins can explain it in more detail. But my understanding is we are implementing all recommendations of that report, but we remain open to sensible discussions. where that's appropriate.
KARVELAS: Minister, thanks for joining us this morning.
GALLAGHER: Thanks a lot
Pat Cronan 0432 758 224 | Gallagher.Media@finance.gov.au