SENATOR THE HON KATY GALLAGHER
Minister for Finance
Minister for the Public Service
Minister for Women
Date: Monday, 30 January 2023
PATRICIA KARVELAS, HOST: Last week's inflation rate of 7.8% might have made you uneasy, with the Reserve Bank likely to respond with another interest rate hike this week. Now, with that there are warnings more action from the central bank could tip Australia into a recession as other countries teeter on the edge of an economic downturn. It's a tricky position for the new Government hoping to fix Medicare and aged care and invest in defence. Katy Gallagher is the Finance Minister and the Women's Minister and she's our guest this morning. Happy New Year, although it's the end of January and I shouldn't be saying that anymore.
SENATOR THE HON KATY GALLAGHER, MINISTER FOR FINANCE: Thanks for having me on, PK. Happy New Year to you.
KARVELAS: Homeowners and renters, businesses, they're all bracing for an increase to the interest rate rise next week. We've been hearing a lot about the mortgage cliff when fixed rate mortgages end and owners are put onto much higher variable rates. What will that look like? When do we expect that cliff and is the Government worried?
GALLAGHER: PK, I think we're expecting about 20% of mortgage holders to come off fixed rate loans this year, so, throughout the year. So obviously, you know, we are mindful of this. We understand that, you know, these big interest rate increases we've had, you know, we inherited them. They were started before the election, they've continued after, are really impacting on households and business as well. So, you know, this is, I think we always said 2023 is going to be a challenging year, dealing with the inflation challenge really for the government is its key economic priority.
KARVELAS: There are serious concerns that further rate hikes could tip the economy into a recession. How fragile is the economy at the moment?
GALLAGHER: Well, we've got a lot of things going for us, PK, and I think you've heard the Treasurer say this over recent weeks as well. But I'm not, we're not pretending that there aren't challenges obviously, you know, we've got the war in Europe, we've got some global volatility, and we're not immune from those impacts. But we've also got very low unemployment. We've got, getting good prices for the things that we sell, and so there's a lot of good things going for us here locally as well. So yeah, 2023, there's a lot going on. You know, the government needs to remain focused. Obviously, we've got a Budget to land, we're in the middle of doing that. And some of those decisions are really key to making sure we're working with the Reserve Bank, not against it, and supporting the economy where we can.
KARVELAS: Treasurer Jim Chalmers has an essay that's been released today which shows the Government will play a more active role in business investment and encouraging organisations to fund Labor's policy agendas like housing and clean energy. How will that work on a broader scale? What is the thinking behind this?
GALLAGHER: Yeah, well, I'll urge people to have a read of the essay by Jim. You know, I think what it shows is that we've got a Treasurer that thinks and over the summer on his break, even though I was telling him to have a break, he was penning this essay. But essentially, I mean, you know, when we look at the state of the Budget, when we look at the things that we need to deal with, you know, and you prefaced some of them in your intro - when you're looking at aged care, NDIS, housing, health, all of these areas where we have a shared national interest in dealing with them, it's not just Labor policies, these are all areas where I think the community expects us to deal with them, that there is opportunity to partner with the private sector, about how we deal with some of these challenges. Partly, this is driven on the fact that there's a recognition that government can't do these things alone, and also recognition from the private sector and, increasingly so, that they would like to be involved in investing where there are social goods as a result as well. So I mean, I think it's a very forward-looking essay that sort of pens out some of the challenges but also some of the huge opportunities we have to build a better and stronger country.
KARVELAS: The Shadow Treasurer Angus Taylor says that the essay demonstrates that Jim Chalmers has distanced himself from policies like reducing budget deficits. Is that the consequence of this kind of agenda?
GALLAGHER: Well, honestly, I read Angus Taylor's piece. I mean, this guy has absolutely zero credibility. When we look at the issues and even today dealing with the arts policy, dealing with the energy crisis, dealing with the fact that Medicare is needing significant reform, the housing failures of the former government. To wander in and start spouting that they had the superior plan, measuring it against, you know, a Government now that's actually dealing with all of their failures. You know, zero credibility, I think, from Angus Taylor, considering the six months we've spent in Government fixing all the failures of large areas of government that he was responsible for. I think the Treasurer should be commended for penning out his thinking on how we can deal with some of the challenges and we're dealing with them, even in this Budget. But we need to get serious and be honest with people about the fact that we need to deal with them for the long term and look for opportunities to work together, not divide like the previous government did.
KARVELAS: You have a tough four months ahead preparing this Budget. Does the inflation rate mean that you'll be cutting spending and programs that you would have otherwise funded? What does it mean, what a consequence?
GALLAGHER: Yeah, so we're in the middle of Budget preparations now. They've been underway since really November, so once we landed the October Budget. And it is a challenging set of circumstances, there's no shortage of areas where, you know, extra funding is being sought. But we also acknowledge that we have to show spending restraint. We need to make sure that every dollar spent actually delivers an outcome. We need to look at how we bank any revenue upgrades like we did in October. We are going to be fiscally responsible. We will work hand-in-hand with the Reserve Bank in the work they're doing, not against them and that requires us to be very cautious with new spending. We need to look at how we reprioritise spending, we did that in October as well. But yes, we can't fund every good idea that is currently before the ERC and my ministerial colleagues know that.
KARVELAS: Okay, so you can't fund them all. So, what's your priority then? Will we see Medicare being the big priority in this Budget?
GALLAGHER: Well, obviously health is a huge part of the Commonwealth Budget, but you'll see cost of living relief. I mean, the Treasurer has outlined that in terms of electricity bill relief that we're working with the states on. That's got a pretty big price tag on it of one and a half billion dollars, and you'll see other areas of priority. You know, we'll see funding for aged care wages coming through, you know, that's multi-billions of dollars. So, I think what you'll see is a continued focus on cost of living relief, funding those priority areas like health and aged care, and making sure that we're getting the balance right in terms of spending restraint, banking upgrades and looking for sensible savings where we can. I mean, that work's been ongoing since I took on this portfolio and will continue right through this term.
KARVELAS: What's your response, you mentioned wages and there is a wages story out today - a response to the CFMEU's determination to push for significant wage increases for its workers given higher than forecast inflation?
GALLAGHER: Well, I mean, this is really a matter for bargaining between the unions and the employers. I mean, I don't think it's any surprise, in fact, it's very unsurprising that a union would be arguing for better wages for its workers, better pay.
KARVELAS: Do you back their call?
GALLAGHER: Well, I back for bargaining to be, you know, effective bargaining that is the employer and the unions and their employees sit down and they negotiate about what's possible. Slow wages growth has been a feature of the last decade. That's why, part of the reason why people are feeling it so hard to get by at the moment. We do want to see, you know, sustainable wage growth going forward. We're seeing the early signs of that now, I think just over 3%, but against our high inflation environment, you know, workers are still feeling the pinch and we understand that as well, which is why our Budget has to look at how we can provide that cost of living relief, whether it be medicines, childcare or electricity bill relief without adding to the inflation problem.
KARVELAS: Minister, tonight's Four Corners highlights four Sydney's schools linked to the Opus Dei group, students shamed for getting the cervical cancer vaccine and taught misinformation in place of sex education. As Minister for Women, how worried are you this is going on in these Australian schools?
GALLAGHER: Well, certainly the media reports that I've been reading have been really concerning. I think from my point of view, you know, students need to be provided with accurate information, evidence-based information when they are attending school, particularly as it relates to their health but not only their health, in all areas of learning. You know, some of the stories around the students' experiences that I've been reading over the weekend are really distressing. And so, I think it's very good that there is a review underway by the New South Wales Government and the regulator. We would welcome that. But certainly, you know, the stories about inaccurate information and the impact that has on students is very distressing.
KARVELAS: Minister, we're out of time. Thanks for joining us.
GALLAGHER: Thanks, PK.
Lisa Glenday 0403 931 209 | Gallagher.Media@finance.gov.au