CANBERRA, ACT, May 10 -- The Treasurer of Australia issued the following transcript:
Note
Subjects: federal Budget, tax policy, housing, Farrer by-election
Andrew Clenell:
All right, the big moment here. Joining me on the program is the Treasurer, Jim Chalmers. Jim Chalmers, thanks for joining me on this Mother's Day.
Jim Chalmers:
Thanks, Andrew. Good to see you.
Clennell:
Now, it's my clear understanding you will be dropping negative gearing for existing properties going forward and you will be dropping the capital gains tax discount for transactions going forward. Do you concede that's an egregious broken election promise?
Chalmers:
First of all, Andrew, I'm not going to pre‑empt the specifics of any policies that we may or may not be announcing on Tuesday night. Obviously, I'm aware of all of the speculation and we've made it clear that from our point of view, even though the challenges in our housing market begin with housing supply, they don't end there. The status quo in housing and in tax is unfair and unacceptable. Any responsible government like ours will respond to that.
Now, when it comes to comments that we have made in the past, I do acknowledge that during the election campaign the focus was almost exclusively on supply, plus the 5percent deposits. I think our comments and commitments at the time reflected that. But we also need to understand, and I'm increasingly of the view, that we need to go beyond supply. Supply is the main game and it's the first priority, but it's not the only priority when it comes to making this housing market fairer. We don't have enough homes. Too many people are locked out of housing and we need to address both of those concerns at once.
Clennell:
But you conned us, didn't you? I mean, you've always wanted to end negative gearing.
Chalmers:
I think there were good reasons to focus almost exclusively on supply. That's been my priority as Treasurer, building more homes. Even today, Andrew, we're announcing $2billion for small scale infrastructure to build 65,000 more homes, to build the power and water and local road infrastructure to get more projects over the line. That's part of a $47billion investment that this government is making in housing. A big focus of the Budget on Tuesday night will be housing. A big focus will be more homes, but also trying to get more people to get a toehold in a really difficult housing market.
Now, as I said in my answer to your previous question, Andrew, obviously the comments that we made at election time did reflect that overwhelming focus on supply. Supply is still the main thing. There are other issues in the housing market too, and we need to deal with those as well.
Clennell:
You won 94 seats without telling us you were putting extra taxes on us. You might have won 84 if you told Australians. So, did you personally harbour an ambition to do this? Was it always your view as Treasurer you wanted to get this done this term, these changes to negative gearing and capital gains?
Chalmers:
My goal at the election, Andrew, was to build more homes and we're doing that. We've got building commencements up, I think, more than 26percent in the most recent data. That was our commitment at the election campaign and we've been following through with that.
I think the best way to understand the last 12months or so, Andrew, is if you think about that first year after the election was about a year of delivery. The Budget on Tuesday night will signal, I think, a year of more ambitious reform, which recognises that the status quo in housing and tax is broken, it is unfair, it is unacceptable. A lot of the work and all of the comments that we have made in the past has reflected that overwhelming focus on supply, as the Prime Minister said. But there are additional steps that need to be taken to make the housing market fairer as well.
You would know, Andrew, you're tapped into the community like we are, and you would know that a lot of people have legitimate, I think understandable, concerns about the inability of future generations to get a toehold in the housing market and therefore to get a toehold in the economy. We have flagged for some time there'll be tax reform in the Budget. The specifics of that you'll have to wait until Tuesday night for. But it reflects, I think, a view that I have increasingly held now after the election, that supply is the main game. It's a very important focus and priority, the primary focus of the government. But there are additional steps that need to be taken as well.
Clennell:
I mean, this is the biggest breach of electoral trust since Julia Gillard's 'No carbon tax under a government I lead' promise. After that, Julia Gillard's numbers, as you know, went south in a big way. Are you ready for that sort of backlash or do you think you can avoid it?
Chalmers:
My view, Andrew, is if a government comes to a different view, then the onus is on the government, senior ministers like myself, in explaining why the government's come to a different view. In my case personally, it has become increasingly clear that all of our efforts on housing supply are very important. Still the most important thing when it comes to dealing with issues in the housing market but there other issues as well. That has become increasingly clear to us over time. If we change our position on some of these policies on Tuesday night Andrew, the commitment that I give you and I give the Australian people more broadly is if we come to a different view, we will explain why.
But people know there is an appetite in this government for ambitious tax reform. Part of that is recognising that the status quo in housing and tax and the intersection of those 2 things is effectively broken because there aren't enough homes in our local communities. That's what our investment is all about. There are too many people that are locked out. And you don't need to be a young person, I think, to share that concern. I have it raised with me all of the time, as you probably do too, Andrew, from parents and grandparents.
Clennell:
Of course.
Chalmers:
This is one of the defining anxieties that people have about the way that our economy operates and what it means for our society more broadly-
Clennell:
But it is about supply though-
Chalmers:
- it is about the inability of young people to get a toehold in the housing market. Overwhelmingly about supply, as I've said.
Clennell:
Yeah. I'm not convinced the negative gearing changes will change things on that front. But you know, I can be convinced because I know you're doing it and I assume the Greens will pass it. But listen, about 7percent of first-home-buyers actually buy an investment property. So, my hometown of Sydney, you can't afford a home here if you're a young person anymore and you decide to make your first property and investment flat elsewhere therefore. Might be Brisbane, might be Gold Coast, might be Orange. So, aren't you making life harder for those people to make their way onto the property ladder with these changes? Do you concede that? Because at the moment, people who have an investment property under your changes will still be able to get the tax break. Young people who want to buy an investment property won't be able to get the tax break. So, aren't you actually entrenching intergenerational inequity?
Chalmers:
Well over time, Andrew, fewer and fewer young people have been able to afford to get a toehold in the housing market in either respect. You're referring to a very small sliver of a number which has been going down. Owner-occupiers as a share of the housing market have been going down over time. Over recent decades, there has been a decoupling between wages and house prices ever since the capital gains tax change was made a quarter of a century ago. Those are facts, I'm not pre‑empting announcements on Tuesday night.
But the housing market is not working for young people. I think that's at the core of your question. It's certainly at the core of some of our considerations here, is that housing is overwhelmingly the priority. You and I agree on that. That's why we're investing $47billion. It's why it's a good thing but not enough that commencements have come up 26percent in the most recent data. They were falling badly when we came to office. That's progress, but not enough progress. Supply is still the main game, but some of these other issues about the inability of young people to get a toehold in the housing market, they are very, very important issues and we don't want to dismiss or deny them.
Clennell:
Is there any modelling you've done on how much these changes will bring house prices down by?
Chalmers:
Well, again, Andrew, I'm not going to get into the specifics of a policy which may or may not be announced on Tuesday night. I do acknowledge I'm not naive about these things. I acknowledge there's been a lot of speculation. Some of that will be right, some of it will be wrong, we won't have long to wait to find out the details.
Clennell:
Well, I know you're doing it on negative gearing. Let's just assume. I know you're doing it on negative gearing for existing properties, that you're axing it and you're grandfathering it. Have you done any modelling on how much that will bring house prices down by?
Chalmers:
If we've come to a different view on those questions, Andrew, I look forward to telling you all about it on Tuesday night. And if that change has been made, of course there will be reasons outlined for it. I'm not pre‑empting‑
Clennell:
Including modelling?
Chalmers:
-whether you're confident that you know all about it or not, Andrew. I don't doubt you, but also, I do remember it's not my first rodeo when it comes to these budgets, nor is it yours and you know that. Often a lot of the speculation is right, but often a lot of it is wrong as well. The point I'm making is the Budget will be out in a couple of nights' time. If the government's come to a different view on some of these sorts of questions you're asking me about, we will explain why and of course-
Clennell:
Is there modelling?
Chalmers:
-there would be analysis to back that up.
Clennell:
Ok, that's what I was after. Thank you. Now, obviously this would distort the market if you set it at a future date, so I've speculated it will come into effect on Budget night, the changes, when you make your speech. Can you confirm that?
Chalmers:
Well, you're right to describe it as speculation, Andrew, and it's a bit like the answer I've given you to the earlier question. If the government's come to a different view, we'll explain why. All the details will be put out on Tuesday night. But I am trying to convey to you, Andrew, and to your viewers that the government's focus is on building more homes. An extra $2billion today. We've kind of skated lightly over that in this interview, Andrew, but it's really, really important to build this small scale infrastructure to get more projects over the line, and it's a really important part of some very large investments in an otherwise tight and responsible budget.
Clennell:
Does it come into effect budget night? Can you confirm the changes will come into effect budget night? Because you wouldn't want to distort the property market, would you?
Chalmers:
I'm not going to give a whole bunch of details on policies that haven't been announced, Andrew, no.
Clennell:
Okay. On the capital gains tax changes, I'll keep going here. Do you concede that what's been floated will have a real impact on people's willingness to invest in start‑ups in this country? Because up until now you get the 50percent discount and if you've got a start up, you start with zero bucks, the business is worth. In fact, that's the case with small businesses too. What's being speculated is that you're just going to take that away. Aren't you concerned about the effect on business and the economy if you make that change?
Chalmers:
Well, first of all, I think what people will see in the Budget on Tuesday is a lot of effort, including new policies, to support start‑ups and venture capital. We see them as a really crucial part of the economy and increasingly so, including some of the changes I flagged to the performance test in superannuation on Friday are about making it easier, or at least eliminating some of that deterrence, when it comes to investing in startups and venture capital. I think the sector knows I engage directly on a number of different fronts in those sectors. I'm a big believer and a big supporter in venture capital and start‑ups. Of course, in addition to the company tax policy, which is all about investment and innovation, there's a focus on start‑ups and venture capital in that.
But beyond that, when it comes to any other changes that have been speculated about, of course I take seriously the potential impacts on different parts of our economy. I'm a Treasurer that engages with the business community. I take some pride in that and where concerns are raised with us in a legitimate way, we do our best to respond to them. So, without preempting any announcements in Tuesday night's Budget, there is a focus on start‑ups and on venture capital, a positive one. We are big believers and big supporters and people should expect to see that recognised.
Clennell:
What about young people buying shares in the hope of buying a property? I mean, up until now they get the capital gains tax discount. You're about to take that away from them. So, how does that help with intergenerational inequity?
Chalmers:
Well, again, Andrew, at the risk of repeating myself, I'm not going to go into the details or implications of policies that haven't been announced. I think you probably do understand that, even though you're asking me a couple of different ways to do that. What I will say is, when it comes to the tax package in the Budget, there will be a tax package and it will have some difficult but necessary reforms. It is overwhelmingly not about collecting heaps more revenue over the budget period. It's about more reform. Not about more revenue, it's about more reform which recognises that our tax system is not doing the best job that it can to recognise the efforts of workers in relation to the efforts of people who earn their income from investment.
Clennell:
Is it revenue neutral? Is the tax package revenue neutral?
Chalmers:
You'll see on Tuesday.
Clennell:
All right, well, my assumption is you're doing tax cuts, like 2028 tax cuts or something like that. I know there's been this tax offset around, but my assumption is that the way to get this through politically for you is to promise more tax cuts. Is that a correct assumption or is that over the top?
Chalmers:
I think be careful with those kinds of assumptions. First of all, people shouldn't expect in a very tight, very responsible budget defined by spending restraint, they shouldn't expect there to be big near‑term cash splashes in the budget because we take this inflation challenge seriously.
Clennell:
What about longer-term?
Chalmers:
On taxes, we're already cutting income taxes. We've got another tax cut coming in on the 1st of July, another one in July next year. We're funding the petrol tax cut. We've got an instant deduction which provides a bit more tax relief as well. So, we are already doing that.
The third important point, Andrew, very important point, is people shouldn't expect that the tax package that is in the Budget on Tuesday night raises heaps of new revenue over the 4years of the budget period. People shouldn't anticipate that. It's about more reform, not about heaps more revenue. I've made that clear on a couple of different occasions now. I see speculated from time to time that tax reform would raise tens and tens of billions of dollars which can be immediately returned as big income tax cuts. That's not really the reality of what people should expect to see on Tuesday night in the tax package. It will be focussed on reform, less focused on raising heaps mor revenue.
Clennell:
But are there longer‑term tax cuts? Are they longer-term tax cuts? I don't expect anything in the medium term either that would affect inflation or short term that would affect inflation. But what about in the out years? Are you promising because you're levying all these taxes? Sorry, go on.
Chalmers:
What I'm trying to tell you is that there are already tax cuts built into the Budget and there's a new instant deduction which provides ongoing relief, a bit of extra relief in the tax system. There's the fuel tax cut as well. So, the government is already cutting taxes and people shouldn't expect any tax reforms in the package on Tuesday night to raise anything like the kinds of revenue which has been speculated about when people have talked about very big ongoing tax cuts.
Clennell:
Now I asked you this last year. When do you think there will be a surplus again in this country for the federal government?
Chalmers:
It won't be in the next 4years, but we will get the budget deficits down. People would have noticed in the mid‑year update, despite all the good work of the government, despite the very substantial progress we've made, we had deficits in the mid 30billions. So, we will get those deficits down a bit in the Budget on Tuesday night because we will be saving more than we spend.
We've got $64billion of savings in the Budget. That's more than the usual amount. There's more than the usual amount of reform in the face of more than the usual amount of global uncertainty. A really, really responsible budget where we will bank all of the upward revisions to revenue where they occur. There'll be some downward revisions to revenue as well. But we will bank all the upward revisions. We'll make these responsible savings because we take this inflation challenge very seriously and we know that people are under pressure.
Clennell:
Now we've been told you've got to go, but I know you want to answer this one, so I'll ask it. Can I ask for a reaction to the by‑election result in the seat of Farrer? Barnaby Joyce says he's coming for Western Sydney. What do you make of that? And has the One Nation surge in support helped inform your budget?
Chalmers:
It wasn't a by‑election, it was a bloodbath for the Coalition. Angus Taylor went big on division and lost really badly. It should come as a surprise to nobody, after how badly he failed as Shadow Treasurer, that he's now failing as leader. And it would surprise me if the clock wasn't already ticking on his leadership.
What it showed is the Coalition can't beat One Nation and so they'll have to join them. It's very hard to imagine a future Coalition government without One Nation in it, which would be a 3 ring circus of right wing parties. Labor is now the last one standing when it comes to the sensible centre of Australian politics. But we're not standing still. We do recognise that people have got legitimate concerns and anxieties in the economy and in our society more broadly.
The Budget won't be a political strategy, it'll be an economic plan. But it will respond to some of these, I think, legitimate and understandable issues that people have with the way that the economy is working or not working. We will respond to that in the Budget in the usual considered and methodical way.
Clennell:
Treasurer Jim Chalmers, very much appreciate your time. Thanks so much.
Chalmers:
Thanks, Andrew, as always.
Disclaimer: Curated by HT Syndication.
