Transcripts → 2024


Radio interview - RN Breakfast

Minister for Finance
Minister for Women
Minister for the Public Service
Senator for the ACT


Date: Monday, 13 May 2024

Federal Budget; economic outlook; housing; international education reform.

FRAN KELLY, HOST: It’s Budget Eve and the halls of Parliament are abuzz. Tomorrow night, Treasurer Jim Chalmers will unveil his third Budget and yet again tackling inflation is the main game. And yesterday the Treasurer assured us they’ve got this covered, releasing Treasury forecasts showing inflation should be back in the RBA target range – that’s between two and three per cent – by the end of this year, which is a lot faster, folks, than the Reserve Bank predicted after it met last week. Labor attributes this to a lot of its own policies over the past 12 months, including child care subsidies, electricity bill relief and rent assistance. Katy Gallagher is the Minister for Finance and Women and she joins us in our Parliament House studios. Katy Gallagher, welcome back to the program.


KELLY: So Minister, the government now tells us we’re likely to reach the target inflation band by the end of this year. What do you know that the RBA board doesn’t?

GALLAGHER: Well, I think the Treasury forecasts have been made mindful of all of the decisions that we’ve taken in our Budget and it’s going to be a responsible Budget, Fran. It’s going to put downward pressure on inflation, it’s part of the solution to the inflation challenge. So the Treasury forecasts outline that. Obviously, those decisions weren’t available to the RBA in issuing their forecasts.

KELLY: And so what are those decisions? Is it – I mean, I think you’ve hinted, I don’t know if you’ve formalised it yet, that the government will extend the electricity bill subsidies, power bill subsidies, they will extend rent assistance. Is that going to keep going?

GALLAGHER: Well what you’ll see in the Budget is obviously a focus on inflation. So, decisions that put downward pressure on inflation –

KELLY: Are they those decisions?.

GALLAGHER: Well, Fran, you’ll have to wait until Tuesday night. They’re in the Budget speech from the Treasurer. But we have confirmed that there will be a cost-of-living focus. Obviously the biggest part of that are the tax cuts but in addition to that, a cost-of-living package. And it will also have decisions that lay down the foundations for future growth, particularly through our Future Made In Australia plan. So, this Budget’s doing a number of things perhaps, but all Budgets are challenging in their own way. This one has been particularly challenging as we try to strike the right balance between you know, primary focus or priority focus on inflation, but also looking down time to how we manage growth and how do we invest in the economic growth of the country as well.

KELLY: I’ll come to some of that, but in terms of the cost-of-living package, you know, it’s about spending. And the economists are giving you plenty of free and fair advice. How are you going to reduce inflation when you’re kicking more money into the economy? Now, you know, you can perhaps justify it with rent assistance and power bill relief for the lowest paid, but you’ve got some big ticket spending items tomorrow night. We’ve got another $11 billion in the housing policy announced over the weekend, there’s the soaring structural cost of defence – $50 billion extra over 10 years – aged care, the NDIS. How are you going to do this, how does this work?

GALLAGHER: Yeah well I mean you go to some of the challenges that we faced finalising this Budget, and you know decisions that will have to be made in future Budgets as well, those big structural spends. Then you know we’re going to have to work on those over a longer period of time, like defence, NDIS, aged care, health –

KELLY: And by work on those, you mean tax reform to pay for them?

GALLAGHER: Well, I just think it’s ongoing work. We are – we have been dealing with them in every Budget and we will continue to do so. So, every Budget has a range of different pressures on it. And so we’ve certainly in terms of the spending and some of those pressures – they are you know increasing, they’re not decreasing. So, part of our strategy has to be about – well, one, we’ve delivered the first surplus in 15 years. That’s a big help on the inflation front. We’re shooting for another one. We’ve got savings in the Budget. We’ve got reprioritisation. You named defence, yes we’re putting more money in defence, but we’ve also asked Defence to find money within itself to reprioritise and target to areas of higher priority. Which they’ve done. There’s about $22 billion in that area where they’ve been able to do that. So I mean it’s a combination of measures really that go to putting the final Budget together. But it’s a combination of responsible Budget management where we’re looking at spending – it’s not just the quantum of the spend, it’s the composition, it’s the timing, it’s the quality of the spend – and it’s dealing with some of those issues that you know are big challenges that we’ve inherited after ten years of no decision. So, housing, housing supply. The energy transformation. These are all things that government – our government – is responding to. But we’re responding to it in a measured way through each budget that we hand down.

KELLY: I want to come back to housing, but the Holy Grail I suppose is as you say, stronger growth. And yet the growth forecasts that you just released are for lower growth in the short term, which means higher unemployment effectively, doesn’t it? So this inflation challenge will come at a cost for those who find themselves on longer job seeker queues, is that what we’re looking at?

GALLAGHER: Well, I think you know – and that’s been the discussion for the last couple of years about the narrow path. You know, how do you moderate inflation without smashing the economy –

KELLY: Well, growth is going to come down –

GALLAGHER: Well I mean, I think in terms of the growth forecast – and we’ve seen it in other economic data – people are really feeling it. And cost-of-living pressures are in every household right across the country. We do forecast – Treasury forecast a slight uptick in the unemployment rate. But our labour market has been incredibly resilient. But that goes to our point about why we’ve had to kind of manage – yes, inflation in the first part, you know the next couple of years – but also looking to the growth over at the back end. And that’s where the Future Made In Australia and some of the decisions we’ve taken there – so we haven’t taken our eye off the inflation challenge, but nor have we ignored the fact that government needs to be interested and intervening or providing leadership in the area of economic growth. And you’ll see that in the Budget as well.

KELLY: Okay, in the short time we have left let’s go through a couple of them. You mention the Future Made In Australia. It looks like that’s going to be a centrepiece of the Budget. We still don’t have anything close to a global cost on that. How much will these tax incentives, subsidies and grants within this package cost the Budget?

GALLAGHER: Well, that’ll all be outlined in the Budget, Fran. People will be able to see that tomorrow. But you know, there’s significant investment going in, because we want to seize some of the opportunities that come with this global transition to net zero. We want Australia to have a stake in it and we want the jobs and economic growth that come with it. So you will see a big focus on Future Made In Australia as part of the Budget tomorrow night.

KELLY: A big focus means big billions. And we’re trusting the government to get it right in effectively picking winners, is that what this is going to be?

GALLAGHER: Well no, and you’ll see – no, that’s not right. And you’ll see you know the whole picture of that tomorrow.

KELLY: Okay.

GALLAGHER: It’s a whole range of things and I think people will see it when it’s complete, and we can have a discussion then.

KELLY: Okay.

GALLAGHER: It’s not about government picking winners.

KELLY: Alright, we’ll look forward to that. On housing, the Prime Minister announced $11 billion of funding for social housing, which included some money for crisis accommodation for women fleeing violence. Is this $11 billion on top of the $25 billion already announced in the 17 existing housing programs?

GALLAGHER: Well, there’s a combination. There’s new money in that and –

KELLY: How much?

GALLAGHER: The housing and homelessness agreement, I think, is in the order of nine and a half billion with the states. There’s a billion dollars that we are providing to the territories, states and territories, to deal with some of the you know infrastructure challenges about releasing land for housing –

KELLY: But how much of this $11 billion we heard over the weekend is going to be new?


KELLY: One billion, six billion? Ten billion?

GALLAGHER: Well, the health – sorry, the housing and homelessness agreement, that is new because we’ve reached a new agreement with the states and territories. Then we’ve got that billion dollars for infrastructure. The billion dollars that we’re talking about for housing and a focus on women and women with children escaping domestic violence was a decision in MYEFO, but it’s been reflected after discussions with the states and territories about how to best utilise and target that money – that has been a new decision to focus it in those areas in social housing. But this is a big effort and it’s going to require the Commonwealth, states and territories, community housing providers, to you know lean in and work with us to increase supply and make sure we’re dealing with you know the significant challenges that have been built up over a long term in the housing market.

KELLY: Well that’s the issue isn’t it? We keep hearing there’s more money promised, but we keep seeing the houses being built at slower and slower rates, but that’s probably for next week –

GALLAGHER: Well we have to get a move on, that’s right.

KELLY: I should ask you before we finish, government ministers today are meeting with representatives of the university sector to announce plans to slash the number of international students coming into the country. Are you using the higher education sector to do the heavy lifting of getting Australia’s migration intake back towards normal levels? Because the government’s already told us you’re going to come close to halving the migration intake.

GALLAGHER: Well, obviously international students are an important part of our economy but we’ve also seen a very significant increase in the numbers coming to study here and I think it’s right that the government’s looking at you know a whole range of things, including integrity in the international education system. So –

KELLY: But you’re not looking at it on an integrity basis, you’re putting a cap in aren’t you?

GALLAGHER: Well, integrity is part of the work that’s being done by Ministers O’Neil, Giles, Minister O’Connor and Minister Clare. There’s a meeting this morning to talk with universities about that. But I think it’s very reasonable that the Australian Government works with the university sector to make sure that we’re managing international students in a sustainable way.

KELLY: Okay, so you’re going to put that cap in. The university sector is very reliant on fee-paying international students. We saw that during COVID, when they weren’t there. And they say that’s happened because of a long-term failure to properly fund higher education. Will there be any new higher education funding in the Budget for the unis to make up this shortfall coming from international students?

GALLAGHER: Well, the Budget will have a focus on universities and you’ve seen some of those announcements and we’ll continue to work with the sector. Obviously we need a strong and viable university system and VET system and the ministers will be meeting this morning to discuss all of those matters and more.

KELLY: Katy Gallagher, thank you very much for joining us.

GALLAGHER: Thanks a lot, Fran.