SENATOR THE HON KATY GALLAGHER
Minister for Finance
Minister for the Public Service
Minister for Women
Date: Wednesday, 10 May 2023
PAUL ALLEN, HOST: Finance Minister, thank you so much for joining us. First of all, congratulations, first surplus in 15 years, so it's an historic moment. You’ve had to be very careful here in terms of addressing cost of living pressure. For example, there's some support for energy bills there. $1.5 billion to be matched by states and territories. But at the same time a dollar not spent on energy, is probably a dollar spent somewhere else. How can you be confident that these measures aren't going to push up inflation?
SENATOR THE HON KATY GALLAGHER, MINISTER FOR FINANCE: Thanks for having me on. Look, dealing with the inflation challenge has been front and center in our budget considerations. Clearly, we don't want to make the inflation problem worse. We're very mindful of that in the decisions, but we had to arrange up a whole range of balancing priorities to be honest in this Budget, and the Budget is I guess hundreds if not thousands of decisions that seek to manage the inflation challenge, does what we can, where we can on cost of living, to invest in opportunities in the future and repair the Budget at the same time, and I think that's what the Budget the Treasurer handed down last night did. We do have big improvements in the Budget bottom line, but that's because we've banked a lot of the upward revisions in revenue. We think that helps in dealing with the inflation challenge, and I guess where we have made investments, we've made them in a targeted, calibrated way and we've done it over a four-year period.
ALLEN: So, inflation seems to have peaked at seven per cent according to the Budget. Falling to six by the June quarter, and then three and a quarter per cent the following year, but of course we have seen history has shown us that a spanner can get thrown into the works. What are the risks that you anticipate around inflation?
GALLAGHER: Well, all of these are forecast as expected, these align closely with what the bank is considering as well. And they have released their updated forecasts. And I think you're right I mean, a Budget has to respond to the economic circumstances of the time, we make those decisions based on the best advice to us from the Treasury and others. They outline what they think the economic outlook’s going to be over the forward estimates, and we calibrate decisions now, if there's changes to that, as we've seen in recent years, you know, you have to amend your decision making but based on the information we have, and the decisions we've taken in this Budget, we're very confident and the clear advice from Treasury is that our decisions are not adding to inflation. In fact, on the energy price package, which is largely the caps and the direct support for households and businesses, that has a deflationary impact on inflation.
ALLEN: Is there a subtext to this Budget as well, in terms of sending a message to the Reserve Bank of Australia: okay, that's enough, you can call it on rates now?
GALLAGHER: Well, we leave the bank to make its own decisions, they are independent and the review into the Reserve Bank made it clear that we should be strengthening that independence, not challenging it. So, this is really, I think a Budget made by government on decisions that we have control over. The Reserve Bank will make decisions themselves. But we've been mindful that and certainly the forecasts show that the impact of those interest rate increases amongst other things are going to slow our GDP in the near term. And so, we can see they are impacting on households, household consumption will be affected. So yeah, I think we've been mindful of their work. We're making sure that our work doesn't add a problem for them.
ALLEN: In terms of cost-of-living pressure relief. There's also something here for renters and of course, housing, the rental crisis is front and centre here in Australia at the moment. But the rental relief is $31 a fortnight, so a little more than $15 a week. Is it that really going to make a difference when you consider how expensive Sydney for example has become. And who is not to say that next week, landlords just jack up the rents by that amount and absorb it all?
GALLAGHER: So again, I think when we're looking at what we've been trying to do in this budget has been, you know, landing a whole range of balancing priorities. We know that people are doing it tough with rent, but you can't see the rent in isolation of some of the other increases in the cost-of-living payments. I would say, I hope landlords don't take this opportunity, they see the state of the rental prices in this country and that they're mindful of that. And we think it'll add some additional support. We're not going to pretend that it's going to do everything for people who get Commonwealth Rent Assistance, but it's the biggest increase in forty years. We think it was affordable, something that that Budget could, you know, could take and we see it in conjunction with some of those other policies like Medicare and like cheaper medicines, for example, which we also invested in.
ALLEN: Your Government's been very realistic, almost conservative about saying, ‘hey, this surplus is probably a one off, deficits coming’ and there are some big expenses coming as well like the National Disability Insurance Scheme, nuclear submarines, but what's being done on the revenue side to bring in more revenue?
GALLAGHER: Well, this Budget has a couple of areas where we have increased revenue, so on the PRRT, on multinational tax and in higher balance super accounts. So, we think these will make a meaningful difference particularly over the medium term. For super, for example, doesn't assist so much in the forward estimates, but it does continue to grow outside the forward estimates. So, we've done what we can there but you know, this was one Budget and at one point in time, we've looked at how we can show spending restraint, assist the Budget with Budget repair, make some of those investments in cost of living and look at some of the opportunities for growth, particularly in the energy transition. But it is one Budget, the work is never finished.
ALLEN: Just finally, the Budget's also quite upbeat on the outlook for China. How important is China's recovery to Australia avoiding recession?
GALLAGHER: Well, it's our major trading partner so you know, what happens in China certainly impacts here on our economy. And we've seen that in recent years when we've had some of those trade barriers put in place, the impact it has, particularly on individual industries. But you know, we're hopeful, we certainly govern in our national interests, but we think dialogue with China is good and trying to remove some of those trade barriers has been front of the work that the Trade Minister and the Foreign Minister have been doing in the last 12 months. And we'll continue that.
ALLEN: Katy Gallagher, Finance Minister for Australia, thank you so much for joining us.
Media contact: Lisa Glenday 0403 931 209 | Gallagher.Media@finance.gov.au