SENATOR THE HON KATY GALLAGHER
Minister for Finance
Minister for the Public Service
Minister for Women
Date: Friday, 22 September 2023
GREG JENNETT, HOST: Katy Gallagher, welcome back to the program. Now governments ask Treasury and Finance to account for the Budget bottom line only twice a year, do you expect a degree of realism or accuracy when they do so?
SENATOR THE HON KATY GALLAGHER, MINISTER FOR FINANCE: Well, I think if you're talking about the issue of forecasting and projections there are models about how we get to what those numbers are, but there's also, you know, acceptance that we need to update those to reflect whether there have been any changes. And we do do that through MYEFO or through the Budget. And then, like today, with the Final Budget Outcomes you see the what the actuals are.
JENNETT: Let me not beat around the bush I suppose, the substance of the question is in six weeks their last estimate for the surplus was out by a whopping $17.9 billion. $17.9 billion in only six weeks. As an accounting exercise is that helpful or a hinderance that they can't narrow that down more than they did on the 2022-33 figure?
GALLAGHER: Well, obviously, we're pleased with how the Final Budget Outcome has occurred. I mean, we are having the biggest turnaround in the books. We've got the biggest surplus in nominal terms in —
JENNETT: In 15 years
GALLAGHER: Yeah, 15 years. $22.1 billion, it's not an end in itself. I mean, it's a good thing to get the Budget back on track. We've got all these big costs — no doubt we'll talk about them as well. But you know, the economy has performed stronger than had been expected at Budget time. That's actually a good thing. And we're reflecting that in the Final Budget Outcome.
JENNETT: So, you undershot, but did you undershoot deliberately on some of the assumptions, iron ore prices being I suppose among that?
GALLAGHER: Well in the Budget, we did make some small adjustments to the assumptions around iron ore and some of the commodity prices because, you know, to essentially have a smoother path and not — they are conservative, you know, they're in there and they're in a conservative level and the commodity market has been performing a lot higher. But we have made a minor adjustment to that, but I still think it's better to be conservative than to hope for the best. And then, you know, deliver the outcome that we have. Those figures are important I think for the long term.
JENNETT: Let's talk the long term because you have posted the first surplus in 15 years. But on the only paperwork available to us now, which is your last Budget and the Intergenerational Report, this will also be the last surplus for the next 40 years. Is that likely to remain the case?
GALLAGHER: Well, I think the message there is the Budget remains under significant stress. You know, some of the very welcome upsides to the Budget aren't expected to last for the long term. So, they are based on you know, the prices we're getting for the things we sell overseas, the pressures that underpin the Budget, some of those structural pressures remain. And that means the job of government is to continue to do what we've been doing — finding savings, reprioritise and look for ways to make room in the Budget for all the pressures that we know are coming.
JENNETT: What is the government so sanguine about this, though? There was a time, not so long ago in federal finance and politics, where a forecast of 40 years down the hole, at least, it's actually 50 if you add on the last decade, would have been greatly disturbing. Fiscal conservatism would have kicked in, ambition for balancing the books would have been and yet we don't hear any of that.
GALLAGHER: Well, you might not hear any of it. This is the world I operate in. We are constantly looking for ways to get the Budget in better shape. I don't think it is a level of just accepting that we should just accept that there will be deficits for as far as the eye can see.
JENNETT: So you don't accept it, even though it was published in the IGR?
GALLAGHER: Well, I mean, that's without any other decisions being taken. And we also have to be honest about what we expect to be the pressure, so it's important that we are putting that information out there, people can see it. But as you'll have seen in the last two Budgets, we found $40 billion worth of savings. Now, if we hadn't found those, if we didn't take some of the decisions that we've taken, if we didn't bank the revenue onto the bottom line, we wouldn't be in surplus today. I mean, if we'd taken a different set of decisions, so I mean, I think the message from us is: yes, the Budget's under pressure. We've got big costs and big investments needing to be made. Without making any other decisions this is what it looks like. But we don't just sit there and accept that we should accept that as the operating environment. We're very focused on making sure we get the Budget back into a much better footing.
JENNETT: You have made those decisions to bank these benefits, but you've done so in what I think some observers, Chris Richardson would be one, might describe as an ad hoc fashion. You haven't actually set up a binding set of rules about what to do with bonuses and higher revenue flows when they come along. He says, "the great age of budgetary windfalls is first coming to an end." So the question is, when will you come up on the binding set of rules or strategy to guide these decisions?
GALLAGHER: Well, we do have a fiscal strategy, it's published in the Budget each year, and that does set out the broad parameters for how we want to operate the Budget. So, making sure there is fiscal discipline, making sure that when we're making new spending that we're looking at how we can offset and reprioritise within that. I accept that the Budget windfall, the significant Budget windfalls that we've been seeing, that I agree with Chris on that, that we don't expect them to continue, but I also I don't accept that we don't have a plan in place. And I think you've seen it in the last two Budgets. Where we have, you know, in the 22-23 year, we found $7 billion worth of savings, now that has an impact on the surplus, you know, if we hadn't made that decision.
JENNETT: And so you're going to have to do more of that quite obviously, if you accept as Chris Richardson suggests the age of budgetary windfalls is fast coming to an end. All repair, if you’re to break that 40 year run we've already discussed of deficits in the years ahead, all of that has to come from savings?
GALLAGHER: Well, I mean, there's a range of choices available to government . Obviously, savings is part of it, re-looking at what you do. Maybe not doing some things you're doing because your priorities are elsewhere. I mean, part of my job in Finance is to make sure that we are looking to be, you know, to be as efficient as we can be. And that's going to require a long term plan and thinking about how we get there, but from Jim and my point of view, and I think we've demonstrated in two Budgets, the fiscal discipline that we show, and where there are these windfalls, we don't go around spending them that we're actually putting them back into the coffers, so that we're borrowing less, paying less interest. For example, we're expecting now $39 billion less interest because we've banked that revenue, that's a big amount of money that we don't otherwise have to find down the track.
JENNETT: Alright, well, we'll keep an eye on the Budget’s performance in the years ahead. Let's go to COVID Inquiry, I know you've made comments earlier in the day Katy Gallagher, but it is a matter of record that you spearheaded the Senate Select Committee which as recommendation 17 demanded a Royal Commission be established to examine Australia's responses to the pandemic. Why are your colleagues not now listening to your recommendations?
GALLAGHER: Well, that Senate report reported 18 months ago, a lot has happened since then. There's been a lot, there's been over 20 different reviews and inquiries. And I think the model that the government has chosen to proceed with is a good one. I mean, I've seen a lot of commentary about it today. But I think those three reviewers that independent review team, being able within their Terms of Reference to pursue the inquiry is a really great opportunity if the outcome we're wanting, which I think is the one that we want as the government and I think most Australians would share, is how to be best prepared for the next time the next pandemic arrives.
JENNETT: Nationally, which would entail a certain degree of cooperation from the states, will that happen?
GALLAGHER: Well, I guess that's a matter for the states and for the review team, really. You know, that's the independent nature of the review team means that they should determine how they conduct their inquiry. I don't accept that you just need coercive powers in order to get people to engage on this. I think most Australians, it affected our lives for so many years. Most Australians want a constructive engagement and work out how to be in best place and I think this inquiry gives us enormous opportunity to do that. We should let the inquiry start and get on with its work.
JENNETT: Alright. Just final one on Rupert Murdoch moving into retirement. In New York City, Penny Wong has said any fair-minded observer might say that News Corp papers might not exactly be cheerleaders of the Labor Party. She went on to say but that's what happens in democracy. Does the Albanese Government crave a less pugnacious News Corp in its coverage of National Affairs of Australia?
GALLAGHER: Well, I don't have any control over that at all. I think how News Corp operates and behaves is a matter for News Corp. As government we engage with media outlets across the board, and we try and give our message and have a fair go with how that message is reported.
JENNETT: You've been on the receiving end scrutiny. Death of Kimberly Kitching, settlement payment to Brittany Higgins, you're okay with all of that treatment?
GALLAGHER: Well, I accept that not every media outlet in a functional democracy is going to support the work I do or be supportive of the work I do and you know, that's just that's how we operate. Politicians understand that eyes wide open.
JENNETT: Yep, it's called scrutiny. We’re polite where we can. Katy Gallagher, thanks so much for joining us.
GALLAGHER: Thanks Greg.
Media contact: Gallagher.Media@finance.gov.au