CANBERRA, ACT, April 20 -- The Treasurer of Australia issued the following transcript:
Note
Subjects: Washington trip, Middle East conflict, May Budget, NDIS reform, $1,000 instant tax deduction draft legislation, superannuation performance test, tax reform, fuel excise, AOFM and Future Fund, National Reconstruction Fund, unemployment
Jim Chalmers:
I just got back from meetings with the G20 colleagues and counterparts and we're now into the home stretch of the Budget preparations. The engagements in D.C. were a really important opportunity to be part of G20 discussions led by US Treasury Secretary, Scott Bessent, and also to engage bilaterally with a number of our key partners - South Korea, Japan, China, Singapore, Indonesia, the UK and informally New Zealand - to make sure that we are properly calibrating this Budget to the international conditions that we all confront. A big focus on fuel and forecasts. A big focus on engaging with our key partners and suppliers on the fuel front, but also an opportunity to confer with a whole range of colleagues about their expectations and our expectations for the global economy as we put this difficult Budget together.
If you think about the last few days, it's been a pretty wild ride when it comes to developments in the war in the Middle East. We had some very welcome progress, some very welcome developments only a few days ago, but obviously we've seen some of that progress unwound, potentially quite significantly. It does feel like 2 steps forward and one step back when it comes to these developments. If there's one prevailing vibe that comes from the international colleagues it's really, I think, a sense of frustration about how long this war in the Middle East has been playing out and what that means for the global economy and for everyone's domestic economies as well.
If you look at the big jump in the oil price today, that's really just another sign of the really quite extraordinary volatility that we are dealing with right now. From an economic point of view, the end of the war can't come soon enough. But even if and when the ceasefire sticks, even when the war ends, even when the strait is properly reopened, we don't expect things to go back to normal straight away. The consequences of this war in the Middle East are already serious, and there is still a risk that they become severe.
And so all of this means that there is more than the usual amount of uncertainty 3weeks out from the Budget. We have learned not to get too carried away with each piece of news from the Middle East, whether it's good or bad. We work through a whole range of contingencies in a considered and methodical way. We make sure that we have options and we act decisively where we need to, including when it comes to the good work of the PM and others in securing more fuel supply for our country.
This Budget will be a responsible budget. It will be focused on resilience and reform. There'll be tax reform, there'll be a productivity push, and there will be savings. Cutting compliance costs is a big focus of the government and a big focus of the Budget as well. It won't have every single idea that's been pitched to us over the last 12months or so, but it will be ambitious in its breadth and in its depth as well. Now, obviously, it won't be exactly what we had planned over the summer. It would be strange if it was given how much has happened, particularly when it comes to these global developments. The savings package won't be exactly the same as what we would have been contemplating over the summer, but it will be a substantial savings package. When it comes to changes to revenue, I wanted to be really clear in saying that we don't currently expect the sort of revenue bump that you have seen speculated about, and many of you have written about. In fact, if we take the impacts of this war in the Middle East on the revenue side, it's possible if we were finalising those forecasts today that in some years the revenue impacts would be negative rather than positive. So even in a world where there is positive changes to revenue in this Budget, I would caution you against relying too heavily on some of the assumptions that have been published. The reason for that is because often they don't capture the downside of this war in the Middle East - consequences for growth and employment, for example - and when we put the Budget together, we have to factor all of that in.
We've got lots still to finalise in the Budget. We will give ourselves some flexibility, but some big pieces are landing already. You saw last week at the Press Club the announcement of the Defence package, the national security package at the National Press Club. I wanted to thank and pay tribute to Richard Marles and Pat Conroy and the Defence team for the work that went into ensuring that even as we lift investment in Defence, that we do that in a way where we're seeking maximum value for money.
Also, later this week, Mark Butler will be at the Press Club speaking about reform of the NDIS. And, again, I wanted to thank and pay tribute to Mark but also Jenny McAllister, Katy Gallagher and others and before them, Amanda and Bill, for the work that has gone into NDIS reform since we came to office. Our highest priority in the NDIS is providing a high standard of support and care, and that means we need to be able to pay for it. When we came to office, the NDIS was out of control and it had strayed a long way from its original intended purpose. It was growing around 22percent when we got to office. We got that down to around 10. That's good progress, but there is more work to do if we are to make the NDIS sustainable and that's reflected in the good discussions that Mark, the PM, Jenny and others have been having with the state counterparts in particular. The NDIS is growing too fast for Australians to afford. It's about $49billion this year. By the end of the forward estimates - not that far away - it's about $62billion. That's in '28-29. So, the colleagues have done heaps of work with our support. We're not going to front‑run the speech that Mark will give on Wednesday. He will provide more than the usual amount of detail in advance of the Budget, but we think it's important given we are huge believers in the NDIS and massive supporters of the care that it provides Australians who need it. We need to make sure that it is sustainable, and that's what our efforts are all about.
This has been a really big part of our pre‑budget deliberations. It is easily the most important part of the savings package that we will present on Budget night. There have been many, many hours of deliberations and, again, I thank the colleagues for that. I also wanted to signal to you that earlier this morning, I invited my state and territory counterparts to a discussion of the NDIS tomorrow afternoon so that we can hear from Mark and discuss some of the directions that he will be talking about on Wednesday at the Press Club as well. We've all got a stake in this. We've all got an interest in making sure that we provide that high standard of care in a way that we can afford, in a sustainable way, so that the important work of the NDIS and all the people who work in the NDIS and benefit from the NDIS and are supported by the NDIS are done so in a way that we can continue to afford.
The next thing is that today I'm releasing the draft legislation for the $1,000 instant deduction in the tax system. This will cut back on paperwork, it will save time and money, and it will provide a bit of tax relief as well. It will benefit 6.2million workers when they lodge a tax return next year. The benefit is up to $470 in the tax return, and it's about $205 on average. It's a good symbol of what we are trying to do more broadly - cutting income taxes, cutting red tape and helping out where we can.
The next thing is I wanted to indicate to you that soon, in the coming days or weeks, I will be releasing some updated thinking on the superannuation performance test. We have been trying to progress this work for some time, as you know. I want to be really clear that I have absolutely no interest in watering down or ditching the performance test. I see it as a really crucial part of the superannuation system. There are also barriers to some types of investment, and we have indicated a willingness privately and publicly with the funds and publicly with all of you to reform the performance test if we can do that in a way that doesn't diminish the high standards and in a way that doesn't diminish super funds' responsibilities to members. There is no consensus here on the best way forward in the discussions that we've been having with the sector for some time. We would prefer a consensus, if one is possible, but at the very least the paper that I'll be releasing with Daniel Mulino soonish will give you an updated sense of our thinking here in the hope that we can try and get some people around one of the options presented in the paper.
Really, across the board, we've done a lot of work in the preparation of this Budget. There is still a bit of work still to do. We're looking forward to getting it done and looking forward to telling you all about it 3weeks from tomorrow.
Happy to take some questions. We'll go to Katina, next to you, Rosie.
Journalist:
Thanks, Treasurer. On your thinking around capital gains tax, you've obviously got some options being looked at. What guarantees can you give to people who own investment properties today that the financial planning they did when they made that decision, that that won't need to change?
Chalmers:
My message for them would be the same message for Australians more broadly and that is that we're obviously considering a whole range of changes in the tax system, but we haven't changed those policies. We haven't taken any decisions on those policies, whether it's the specific ones you mentioned, there's more work to do on our options for tax reform in this Budget. We have been really upfront for some time now in saying that we do think that there is intergenerational unfairness in the tax system and in the housing market. I think the housing market is where some of those intergenerational issues are most obvious. We are working through a range of options to see if we can deal with them or address them in a responsible way.
I think after the Economic Reform Roundtable when I stood here and spoke with you all, we indicated a willingness to work through these options. We're still doing that. And we'll have the opportunity to tell everyone all about it on Budget night.
Journalist:
Treasurer, has Treasury been able to lock down the modelling for inflation yet? And what's your vibe having just visited the United States? Is it that 5percent inflation inevitable now?
Chalmers:
Treasury hasn't yet finished the forecasts for the Budget. That's not especially unusual. What's unusual is this extraordinary amount of volatility. If you think about the start of the weekend, the oil price was around $90; today, in the mid 90s. It gives you a sense of how hard it is to pin down some of these forecasts, including the inflation forecast. They'll do the best that they can. They're currently working through a range of scenarios. You've seen the private sector market economists have got a range of views about how they think this inflationary challenge from the war in the Middle East will play out. We've got a bit more work to do until we finalise those forecasts.
Journalist:
Treasurer, can you explain what these severe consequences might look like that you reflected on just before? Are you talking about a recession? And on the NDIS, what's your message to the states when, for example, your home state of Queensland won't sign up to Thriving Kids, the key policy to make the program more sustainable?
Chalmers:
What was your first one again, Rosie?
Journalist:
Just in terms of the more severe consequences of this war, is that a recession?
Chalmers:
Thanks. Well, obviously, the big risks here are to inflation and to growth. The key factors which will determine whether we get a bit more inflation or a lot more inflation, a bit less growth or a lot less growth, will be how long the war continues, how long it takes to reopen the strait in an enduring way, and how long it takes for the global economy to get back to something which looks a little bit more like normal. There's an extraordinary amount of uncertainty in all of that because it relies on decisions taken in Washington and Tehran and elsewhere. The Australian economy is in lots of ways hostage to those developments and those decisions. And so, more than the usual amount of uncertainty.
Now, as you'd expect us to do, as you'd expect Treasury to do in their usual diligent and professional way, is to think about a range of scenarios, and that's what they're doing now. We published some of those scenarios a couple of weeks ago to give you a sense of how we come at these sorts of deliberations and contingencies. In the course of the next week or 2, we'll settle those forecasts. I've also asked them to make sure that when we publish the Budget that there is some discussion of the downside scenarios where this plays out even worse than what we're currently anticipating.
Journalist:
Treasurer, you're meeting tomorrow with state treasurers about the NDIS. There's some complaints from some of the states that the Thriving Kids program is a cost shift. There's a view that there was a cost shift originally when the state services went into the NDIS and were funded by the Commonwealth. Your view on that and that resistance from the states? But also the really difficult issue of kids with autism who are on the NDIS and what sort of support they would get shifting on to the Thriving Kids program?
Chalmers:
Thanks, Mark, and thanks for the opportunity to remind me of Rosie's other question. I didn't mean to avoid your second question, Rosie. We work with the states and territories in good faith, and there are big sums associated with any of these policies. So, we understand that these conversations can be difficult with the states and territories when there are big sums involved and where we're dealing with a cohort of Australians that we desperately want and need to support. I don't try and engage in these discussions publicly. I'll have an opportunity to talk with my state and territory counterparts by video tomorrow afternoon, where we can work through some of these issues. You're right to identify that one as one of the more substantial issues - access to the system. And, again, I thank Mark and Jenny for the way that they have been able to include people in the way that we have been coming at this challenge. No doubt Mark will have more to say about that on Wednesday when he fronts you all at the National Press Club.
These are difficult issues, and they're not just difficult because there's a lot of dollars attached to them. They're difficult because we all come at this with a lot of goodwill. You know, we all want to do the right thing here. I'm a huge believer in the NDIS, and it's one of the reasons that we can be proud of how we support each other in Australia. But in order to make sure that it is sustainable into the future, we have to deal with some of these escalating costs. Even the biggest supporters of the NDIS would acknowledge that the growth in spending on the NDIS is beyond what Australians can afford. That's what motivates our efforts, but the primary motivation in our efforts is continuing to provide that high standard that people need and deserve.
Journalist:
Thanks, Treasurer. You mentioned that the savings package in the Budget will be different to what you were planning before. Can you just give us a bit more of an idea about how and why that will change? And in terms of the initial responses to the war - fuel excise, underwriting fuel cargos and subsidies for refineries - do you have a sense yet of how much that will cost the Budget?
Chalmers:
Well, the excise cut we think is in the middle 2billions. We'll present that in the Budget. It will be one of the bigger new spending items in the Budget, no doubt at that cost. And we will make sure that we reconcile all of the other decisions that have been taken.
Now, when it comes to the savings package, inevitably when you've got such a significant oil shock running through the global and domestic economies, when so much has changed since we started thinking about this Budget straight after MYEFO over the summer, every budget is carefully calibrated to the economic conditions. Now, there's more than the usual amount of volatility. So, it would be really strange if the Budget that we hand down in May was identical to how we were sketching it out in January or February, but especially when there's a major conflict causing havoc in the global economy in the interim.
That's really what I mean about that. It won't be identical to what we were considering earlier in the year, but it will be ambitious. The savings package won't be exactly the same as we might have been thinking a few months ago, but it will still be substantial. And when we're calibrating to the conditions and weighing up the circumstances that we confront, obviously inflation is a very substantial challenge, particularly when it comes to the impact of the oil shock reverberating through our economy. But there are also implications for growth. We have to strike the right balance. I'm confident that we can strike the right balance in the Budget, but I'm not complacent about it because, as I said earlier, we are hostage to developments.
Journalist:
Two of the Australian Government's financial institutions - the Australian Office of Financial Management and the Future Fund - they've both had a large degree of staff turnover and there have been questions about the leadership of both. I know there's a review into the AOFM. Do you have confidence in the leadership and the running of those 2 operations? Feel free to answer separately on each.
Chalmers:
Well, they are 2 very separate sets of issues and you're right to identify in your question, John, that there is a process around the concerns that were raised at the AOFM. For obvious reasons I don't want to engage in a running commentary of that. But typically when issues are raised with us we respond in an appropriate way. I have seen but haven't read in detail some of those reports in your paper today about the Future Fund. No doubt the Fund is taking them seriously, as will the government.
Journalist:
Thanks, Treasurer. We had Tim Ayres in this room a short time ago in sort of announcing new NRF policies. I just wonder can you reflect on when you announced the National Reconstruction Fund many years ago, it was supposed to be, you know, a return on investment for taxpayers, the 5‑year bond rate plus 2 or 3percent. You've now sort of carved out $5billion for net-zero-initiatives, it will be loss‑making once the debt interest is taken into account, then you've got a billion dollars put aside for the resilience, which again, will be loss‑making because it's a zeropercent return. I mean, how do you justify this pivot away from a body that was supposed to be about building and investing and creating capital and making a return for taxpayers with now 40percent of it making a loss for taxpayers?
Chalmers:
Well, our policies evolve with the conditions, and it would be strange if they didn't. Clearly, we're looking for the best, most cost‑effective ways to deal with what is really the fifth major economic shock in the last couple of decades. When we respond to big developments like this - in this case, an oil shock - often the first port of call is to see where existing mechanisms can be more effectively deployed. That's what we're seeing when it comes to some of those funds. Rather than begin from scratch, as we sometimes have to do, often we try and work through existing structures and that's what's happening there. Again, it would be kind of strange if we didn't go there first to look where we could respond most appropriately.
When it comes to our funds more broadly, there are a range of funds. Different expectations of return, different purposes, and the like. I think it's entirely appropriate when we're going through a shock of this magnitude and of this nature that we work closely with Minister Ayres and others to deploy our existing structures the best we can.
Journalist:
Treasurer, on back to fuel excise cuts, petrol and diesel prices wholesale and retail are down across the country at the moment. Just wondering if your Budget will include an extension of the 3‑month cut to the excise? And what's your thinking about the role that rising petrol prices play as a price signal, given that supply is forecast to be pretty tight coming into the country in future months?
Chalmers:
A couple of things about that. First of all, you would understand, Mike, but it's not always reflected in the way that we think about these things that the diesel market and the petrol market are based on 2 very different benchmarks. They don't move in precisely the same direction at all the times. And so what we've seen over the last couple of weeks is really good progress on petrol prices not reflected necessarily in the diesel price. But the good news about that is in the last little while we have seen the diesel market improve on the prices front as well.
Just by way of example, in Sydney the current petrol price is $2.02. That's down 55cents on the last day of March, but it's up 13cents on the last day of February. That gives you a sense. We had a very substantial spike, partly because of our 32cents a litre excise cut that's come off quite substantially. It's a similar story in other capitals. If you look at the same market, the Sydney market for diesel, currently $2.91. It was $3.21 on the last day of March, so down 30cents. That's our excise cut playing a helpful role. But up $1.16 since the last day of February. So, extraordinary volatility in these markets, as you know. Two very different markets. But now we're seeing some of the sorts of savings in both markets, which were the motivation for our temporary excise cut.
Obviously, we keep all those policies under review. It will be temporary in one way or another. The end date is currently the end of the financial year. Not just that policy, but right across the board we keep everything under review. When it comes to the price signals, as I said, we've still seen even with the helpful role being played by those excise cuts we're still seeing price signals in the market. We have taken some of the sting out of that, but we haven't in both cases been able to totally remove that price signal. And so, really in some sense we're getting both things that you'd want to see - some price signal but also some relief.
Journalist:
Treasurer, the IMF's report that you saw, they actually modelled 3 different scenarios, including a deep recession, global recession. I'm just wondering if you're getting Treasury to reveal in the Budget some of the outcomes? Will that, in fact, go to the Budget bottom line? You went through '08‑'09 where it was an updated budget outcome, and you saw the budget deteriorate quickly.
Chalmers:
That rings a bell, Shane, yeah. That rings a bell.
Journalist:
Has that crossed your mind as releasing different alternatives on how the Budget might look from the fallout from the war?
Chalmers:
Look, there'll be one set of bottom lines, but we are in discussions right now about how we describe a downside scenario, a situation that plays out worse than the central case. Whether that's in commentary or some other way in the Budget papers, we've been talking with the Treasury about that right now, including in the last hour or so. We'll do our best to give people a bit of a sense about the range of possibilities, but we won't be presenting more than one budget bottom line.
Journalist:
Thanks, Treasurer. Lexie from the ABC. You were in the room with the US Treasury Secretary just a few days ago. Did you directly raise your concern on behalf of Australia with the way the US continues to not give a timeline on this war in the Middle East? And if you did, how did he reply?
Chalmers:
Well, not precisely in those terms. But my contribution-which I think I circulated so that people had visibility of it-and consistent with the contribution of a number of others, is the very firm view that from an economic point of view the end of the war can't come soon enough. I said a moment ago that there was around the table a bit of an element of frustration about how long things were dragging out and the impact on all of our economies. So, not raised in precisely the way that you've put it to me, but certainly raised that the best thing that we can see from a global economic perspective is a ceasefire which sticks, an enduring end to the war, and proper freedom of navigation in the strait of Hormuz. Once we get those 3 things we can begin what will unfortunately probably be a long‑ish process of getting the global economy show back on the road. A version of that is what I contributed to the discussions on a couple of occasions. That was pretty consistent with the contributions of others.
Journalist:
Treasurer, when the NDIS was unveiled I think in this room, if I'm not wrong, it was designed for those who are permanently and severely disabled. Do you believe that eligibility has been the core problem when it comes to NDIS?
Chalmers:
Look, I want to leave you in Mark's hands for the specifics of that. But I do believe, I think as anyone who follows the evolution of this scheme believes, is that the NDIS that we have today is not entirely consistent with the ways that we thought about it at the start. Obviously, like any policy - and it relates to Ron's question, too - obviously programs of this magnitude evolve over time. But the key objective here is to be able to pay for it in a sustainable way. So, that does go to some of these difficult questions. You've asked about one, Rosie and Mark have asked about some of these difficult questions - Commonwealth and state role, eligibility and access - these are all really important considerations. The last time that Mark Butler was at the Press Club, I thought he did a wonderful job at explaining some of the big issues that are playing out in our deliberations. He'll have an opportunity to tell you much more about that on Wednesday.
Journalist:
Thanks, Treasurer. You talked about the consequences from the economic fallout for growth, and you mentioned employment. How high could unemployment go, do you think?
Chalmers:
Well, we'll finalise our forecasts and release them in the usual way. But, clearly, if you're anticipating a slowdown in the economy, then we would expect to see that play out in peak unemployment as well. As I've said a number of different ways so far in this discussion today and on earlier occasions too, we do expect inflation to be higher, we do expect growth to be slower and slower growth, typically - not always, but typically - means higher unemployment. That's what we're dealing with, to be upfront with you.
But I also want to make it clear that, as we work through these consequences, which are already serious and could become severe, we also have some very substantial advantages and the labour market is probably the most important one. We had unemployment come in at 4.3, and historically 4.3 is a really good outcome. It's higher than what we've seen in recent times, but quite a good outcome. Our labour market is a source of considerable strength, which is a good foundation from which to face all of this uncertainty.
Similarly, the fiscal position, I know that there's more work to do on the Budget. I know that there's more work to do on savings and the fiscal position. You'll see some of that work in the Budget in May. But those IMF figures that we got last night said that Australia has one of the 3 strongest budgets in the G20. You can't forget that either. If you think about growth in our economy, we finished last year with stronger economic growth than any major advanced economy, stronger jobs growth as well. Lower unemployment than most of the major advanced economies, lower debt, I think, than all of the major advanced economies. So, even though we are upfront about the potentially severe consequences of this major global oil shock, we also need the perspective that comes from understanding that Australia is better placed and better prepared than most other countries.
Journalist:
Treasurer, at the end of '23, you and the Prime Minister met the states on the NDIS, and that's when they agreed to take the kids off the scheme. You offered a tonne of money. You extended the GST deal to the end of 2030 and you promised to increase your share of hospital funding. At the time that was about $25billion, if I remember. It's actually worth more now that you've increased the hospital funding by even more since then. Are you going to allow them to shake you down further in response to whatever you announce on Budget day, or are you going to stand up to them and say, 'you agreed to a deal 2years ago. Honour it'?
Chalmers:
We're going to work with them in the interests of people on the scheme and in the interests of the Australian taxpayer as well, to try and make the NDIS the best version of itself in terms of the standard of care it provides-
Journalist:
I get that, but are you going to give them more money? Are they going to ask for more money? Is that part of this deal?
Chalmers:
Well, we haven't had the discussion with the states and territories. I'll have a discussion with them tomorrow. That won't be primarily about trying to come to a new deal on specific dollars. The purpose of the discussions with the states and territories tomorrow is really to give them a sense of the sorts of directions that Mark will flesh out at the Press Club on Wednesday, it's a courtesy. I think, whether it's this issue, Phil, or across a whole range of issues that involve my state and territory colleagues, you know that I don't take shots at them about some of these important considerations. But I will say this: we all have a stake in reforming the NDIS so it can provide a decent standard of care for people who need and deserve it and to be able to pay for that in a sustainable way. Thanks very much, everyone.
Disclaimer: Curated by HT Syndication.
