SENATOR THE HON KATY GALLAGHER
Minister for Finance
Minister for Women
Minister for the Public Service
Date: Wednesday, 5 April 2023
PATRICIA KARVELAS, HOST: There might be a few sighs of relief this morning after the Reserve Bank yesterday decided to put the interest rate on hold. But with inflation still just under 7%, the financial pain and pressure on households and the Government isn't going away anytime soon. Katy Gallagher is the Finance Minister and joins us this morning. Minister, welcome back to the program.
SENATOR THE HON KATY GALLAGHER, MINISTER FOR FINANCE: Thanks for having me on again, Patricia.
KARVELAS: The RBA is pausing to see what happens when hundreds of thousands of borrowers come off fixed rate mortgages. What kind of economic hit are you expecting from that?
GALLAGHER: Well, I think the Board made clear in their statement yesterday, their decision to hold interest rates steady was to provide additional time to assess the impact of the increases we've seen over the past 10 months, and also to assess the economic outlook. So we know that there are a number of mortgage holders, I think it's about one in five, that will face coming off those fixed terms and into variable rates throughout the course of this year. And we know that that's going to be pretty challenging for those households. So I think the pause will give a bit of reprieve to those that have been experiencing those increases, but we also accept and we completely understand that Australians are doing it really tough right now. They're still under the pump. And we need to be focused on that in the Budget that we're putting together.
KARVELAS: Well, I'm going to go to that Budget in a moment, we're starting to see an increase in bankruptcies, particularly in the housing construction sector, are you still forecasting a jump in unemployment and will it be greater than Treasury forecasts last year?
GALLAGHER: Well, we will update those forecasts in the Budget. So we're, you know, that's less than five weeks away now. And so those forecasts will be updated. But we were in the October Budget forecasting an increase in unemployment. And we were very clear, I think we have been for some time, the Treasurer and I and others certainly have that, you know, we are facing some challenging set of economic circumstances. And that's why, again, the decisions we're taking, you know, right now, as we put our heads together on the Budget are really important to getting that balance right of addressing cost of living relief where we can, repairing the Budget where we can, and making sure that we're not adding to the inflation problem. It remains the major challenge in the economy today.
KARVELAS: We are just over a month away from that Budget you've talked about. Economists are predicting things will get worse as the weight of 10 consecutive rate rises settles in. You know, there might be a reprieve, but that doesn't mean that that weight isn't still there as you've conceded. The Treasurer has warned there won't be as much support as people need. So what should Australians be expecting? Are you constructing some cost of living relief in this Budget in a way that's not inflationary for particularly people who are doing it particularly tough — low income earners?
GALLAGHER: Well, we certainly, I think we've said from the get go, that our Budget will always look at how we can, you know, assist most vulnerable Australians, but also provide cost of living relief across the board. And I think you'll see a balance of that in the Budget. I mean, on the one hand, we've got, our child care changes will kick in this financial year, we've had the medicines being lowered, we've also got the energy rebates coming in, that's about one and a half billion, they'll be in the Budget that will provide some relief to households.
KARVELAS: That's what we already know about. Will there be more than what we already know about?
GALLAGHER: Well, we're currently working through all of those decisions now, PK, but I don't think it's any secret that we are, you know, focusing on decisions about addressing specific pressures on particular groups, we are looking at that. I don't think that's any secret, but it is a challenge. I mean, I —
KARVELAS: Which particular groups have you identified that you think do need this level of support?
GALLAGHER: Well, there are no shortage of ideas coming forward from relevant ministers.
KARVELAS: You must be at the stage of prioritising where you think, look, we have inflation as a problem, but these people are struggling too much.
GALLAGHER: Yeah. You know, the ministers are being pretty clear about areas that they see pressure. I think most people would realise we're being you know, certainly – what would I say – there's essentially representations being made about women and addressing women, single parents, some of those other programs that we've talked about before with that have come through the Women's Economic Equality Taskforce. So there are certainly representations to Government in all of those areas, and we're working through those as you would expect. But I would also say, I mean the pressures on the Budget are accelerating. They're not declining. And it is right across the board as we work through, part of the real pressure in this Budget and I think I've talked to you before, Patricia, about this is dealing with some of those fiscal cliffs that we're finding across departments where they're either under resourced, unable to deliver programs or the programs that are ending and people expect them to keep going the next day. And we're having to work through all of those as well. So, I mean, Budgets are essentially weighing up a whole range of balancing priorities. There's what we have to do, there's all of those urgent matters. There's these issues that we're finding about terminating programs, there's new pressures coming forward, things people would like to see. And, you know, I guess the end result will be the Budget that the Treasurer hands down and we will be balancing up all of those different pressures.
KARVELAS: There's no more obvious place to go than the unemployment benefit, especially if unemployment is going to start rising as well, which is, you think, an inevitability because of what we're seeing in the crunch in the economy. Does the unemployment benefit need that lift now, Minister?
GALLAGHER: Well, this is another area where we're getting significant representations and it's current, you know, it's before the ERC. Obviously, the Economic Inclusion Advisory Board has provided a report, we will work through the recommendations of that report through the Budget process.
KARVELAS: Are you sympathetic to that idea that it needs to be raised and that it can't be put off?
GALLAGHER: Well, as Finance Minister, I get to see, I guess a broad, the right across the board. I'm sympathetic to a lot of measures and requests for funding that come forward right across the board. There is no shortage of them, PK. The question for me as Finance Minister, is how do we prioritise. How do we meet some of that and still put together a Budget that's fiscally responsible? So it's not just in social security payments. It's in national security, it's in health, it's in meeting some of the pressures in the NDIS, it's keeping the lights on in departments. There's a whole range of very worthy and I'm sympathetic to them, probably more sympathetic than a Finance Minister should be sometimes. But you know, we have to, I guess, we have to take decisions that balance all of that out.
KARVELAS: So you're telling me that you're a bleeding heart Finance Minister? Is that what you're admitting here?
GALLAGHER: Well, I have a heart, I have a — there's a hard edge to me — but yeah, I understand the need for Government to fund and invest in programs for the benefit of society. But we can't do everything that is coming at us right now. That's the reality, because what's coming at us is so great, that the Budget couldn't sustain it. And the Budget is in pretty average shape, as you know. And so some of these decisions we're taking are about what can we do right now to assist people. And you know, some of it has to be staged, essentially, we can't do everything all at once, and we can’t undo 10 years of damage in one economic update.
KARVELAS: Treasury Secretary Steven Kennedy says the Government should support mothers and people on welfare to work more and pay for that by reducing tax breaks for investors. Are you sympathetic to that call?
GALLAGHER: Yeah, I mean, I haven't seen, I think Steven Kennedy gave a speech along those lines. I don't think it's any secret with my Minister for Women's hat on, we want to have a look at how we can really drive women's economic equality. And the primary source of advice to me on that is through my Women's Economic Equality Taskforce —
KARVELAS: But he's provided a model: reducing tax breaks for investors, he said, that's how you do it. Is that, obviously that would take some boldness from you from your Government to do that in this Budget. Are you prepared to do it?
GALLAGHER: Well, I am not responsible for what Steven Kennedy says. I am getting advice on measures and priorities and principles around how to support women's economic equality. That's coming to me through the WEET and I will be taking that to the ERC for consideration.
KARVELAS: The Newspoll result today shows the majority of Australians and a majority of states support the Voice to Parliament. Today, the Coalition, well the sorry the Liberal Party specifically, meets in its party room. The Australian newspaper is reporting that Peter Dutton will suggest a no vote. Simon Birmingham joined us earlier and says he supports a free vote, a conscience vote. But you need bipartisanship, don't you Minister, for this to have maximum success? Are you willing to change the wording that you've agreed on?
GALLAGHER: Well, we of course have always put out the hand to the Opposition to try and gain their support through this. We do accept that bipartisan support is the optimal pathway to a successful referendum. But it seems to me that the Opposition have been looking searching for problems. And, you know, are in all states of bother about their position on this, but our position and I would hope that there would be some in the Liberal Party room that would recognise the position, or the question that's been asked to the Australian people, is around recognition and consultation for First Nations Australians. It's that simple. It's and I think there's elements in the Liberal Party that are trying to complicate that and make it about other things. And I would hope that there are some genuine discussions in their party room with a view to doing the right thing by history, which is, you know, to support this as a very sensible, reasonable and generous offer to walk with First Nations people on the path that they laid out through the Uluru Statement.
KARVELAS: Minister, we're out of time. Thank you.
GALLAGHER: Thanks very much, PK.