SENATOR THE HON KATY GALLAGHER
Minister for Finance
Minister for the Public Service
Minister for Women
Date: Wednesday, 7 June 2023
MADELEINE MORRIS, HOST: Finance Minister Katy Gallagher joins us now from Canberra. Great to have you this morning minister.
SENATOR THE HON KATY GALLAGHER, MINISTER FOR FINANCE: Morning Mads, thanks for having me on.
MORRIS: Are you concerned the RBA is hurtling Australia towards a recession?
GALLAGHER: Well, the RBA has got a clear job to do, and their job is to get through monetary policy, get inflation back towards the target range. They are responsible for those decisions. They're an independent body that makes those decisions. And you know, they've got a tough job to do, I don't pretend it's anything otherwise, but the government's job is to look at what we can do with fiscal policy, with our Budget, with how we can help people, particularly with some of these cost-of-living pressures, whilst not adding to the job of the Reserve Bank and making their job harder. So totally understand that, you know, this rate increase yesterday is going to really hit millions of households hard, and those households are already under the pump. They've been feeling it over the last 12 months. So, the government has to look at what we can do reasonably and affordably to make you know, cost of living pressures easier but without adding to the job that the Reserve Bank has to do.
MORRIS: Yeah, look, it is a very narrow path as they keep on saying but I mean, when you have conversations, how much is that 'R' word actually at the top of your agenda now? Do you think that we, thanks to this latest rate rise, are now more likely to be in a recession?
GALLAGHER: Well, that's not the Treasury forecasts. And that's not the forecast of the independent reserve bank. They talk about a narrow path, obviously, and that's a matter for them, but that's not what we released in our forecasts in our Budget. That's not the Treasury advice to us. But we do and have forecasts as slowing in the economy. We've been expecting that since we released our Budget, I think in October, we had already always predicted that the next 18 months were going to be pretty hard and you know, I don't think that view has changed. But, you know, we've got a lot of good things going for us still, you know, here in Australia that separates us from some of that global uncertainty, you know, and we've got an unemployment rate still with a three in front of it. We're getting good prices for the things that we sell. And from our point of view, we've got a good and strong agenda going forward about what we can do to assist with the productivity challenge, but also take some of those cost-of-living pressures off households over the next 12 months.
MORRIS: Yeah, those cost-of-living measures though they're not going to hit for another couple of months. So, households are just going to have to brace really, aren't they? For what comes down the line for just a couple more months?
GALLAGHER: Well, I mean, in the Budget, we had to, you know, carefully calibrate that Budget, so as I'd said, we've you know, that cost of living package is targeted to where it can do the most good, but also doesn't add to the inflation pressure, but we do have some cost of living measures that will come in on the first of July. So, some of our investments in early childhood education, so childcare fees for example will come in, cheaper medicines has already come in. So, where we can do that, we have been looking at how we can do it and when we can do it, but again, you know, our Budget was really carefully calibrated so that we are dealing with this inflation challenge, not making it worse. And that's why we bank so much of the upward revisions to revenue. You know, we're forecasting a surplus, those things help in an inflationary environment.
MORRIS: It was the RBA governor said that broadly, your Budget was inflation neutral. Given what we are seeing now with this surprising to a lot of people lift this month. Should you have been tougher on that Budget? Should you have been worked harder in that Budget on reducing inflation?
GALLAGHER: Well, we did work really hard, Mads. I mean, we had to calibrate it, obviously to the economic circumstances of the time. We were, and hearing from constituents and people right across the country about some of the pressures around cost of living. So that's why we targeted that package. The investments into skills and childcare and in areas like that, was about setting ourselves up for the future. And then the restraint side, $40 billion in savings in the last two Budgets we haven't seen that for quite some time, plus banking all of that, you know, the majority, vast majority, over 80% of the upward revision in revenue, to make sure we're repairing the Budget and getting the Budget in better shape. That was all about making sure we are dealing with this inflation challenge. And I think the comments from the Reserve Bank, the Treasury Secretary, and the market itself proves that we got that balance right.
MORRIS: Productivity is now the key issue here. You got that big productivity commission report back in March. How many of the numerous quite sweeping recommendations from that are you actually already implementing?
GALLAGHER: Well, I think there's a lot of them that we are, and you know, this is a substantial report, it's a five yearly report, the last five yearly report there was no recommendations pursued. So, we've got this report now. I think if you look at the areas of skills and training, if you look at the area of technology, if you look at the area of energy transition, all of those areas are areas that we are actively pursuing. And we want to see productivity get going. We've had the worst decade; I think in productivity growth in the last 60 years in the previous decade. So, there's a lot of work to do. We can't turn that around in one year.
MORRIS: Sorry to interrupt. Some of the big challenges, though, that they always identify are the tax system and really no major changes there.
GALLAGHER: Well, we have outlined some changes in this Budget, our changes around superannuation for high balance accounts.
MORRIS: It's pretty minimal.
GALLAGHER: Well, it all makes a difference. And you know, we are carefully calibrating our decisions. We are repairing the Budget in a measured way. We are thinking through issues about how we put the Budget on a more sustainable footing. But this is responsible government at work, these are things you do carefully, you look at them, you consult and then you proceed and that's what you saw when we focused on super high balance accounts. It's our multinational tax reform. It's our tax compliance measures. We've got to make sure that all of the dollars that should be coming to the Budget, so that we can provide services are being provided, and you know, we'll continue to put together Budgets that respond to the economic circumstances at the time. I think people of Australia expect us to do that.
MORRIS: Okay, Katy Gallagher, thanks for joining us on News Breakfast.
GALLAGHER: Thanks very much.
Lisa Glenday 0403 931 209 | Gallagher.Media@finance.gov.au