Besa Deda:
We've got a microphone here for the media and also a microphone here for the non‑media. So, it's our usual approach to just take a few questions from the non‑media first before we open it more broadly. So, thank you, and we'll see if we've got some questions. I'm sure there are lots. I think we'll take that first question.
Speaker:
Hi, I'm an economist at AMP. Thank you for your speech. So, as an economist, I love making charts after every budget release, and I think over the last 3 years there's a chart I always make which is where government expenditure is going as a pie chart. And that hasn't actually changed a lot over the last 3 years. For example, you know, welfare is usually around 42.5 per cent, health is just under 20 per cent, and around 8 to 9 per cent goes to education and [indistinct]. Since you said that this is going to be an ambitious budget, do you think that there's scope to revisit that pie over the coming years or do you think that things will stay the same in terms of that distribution? Thank you.
Jim Chalmers:
Terrific question. Thanks for kicking us off. I think part of the explanation there is that those headings haven't changed for a long time. Within each of those categories there are particular pressures. Obviously, when you look at the fastest growing half a dozen or so pressures on the Budget, there's a pretty familiar and pretty consistent theme of those half a dozen fastest growing pressures. One of them is interest on debt and one of them is defence. But the rest of them, in one way or another, relate to the care economy. Part of that is a function of having an ageing population. Part of that is pressures in areas like the NDIS. And part of it is the deliberate decision that we've taken to invest in primary healthcare and hospitals and emergency departments and the cost of things like the PBS.
If you break down some of those categories, one stat that might be of interest to you and as you go about making your charts this afternoon, is that most of - I think around 50 per cent - of the increase in payments‑to‑GDP, so the change in payments‑to‑GDP, over the past 2 years has been across 5 areas: aged care, NDIS, interest on debt, aged pension and hospital funding. So I think that gives you probably a more accurate sense than some of those older categories about how our budget is changing.
What that means for us is we've got to make room for some of these pressures. We've got to make sure that where we're spending in these really important areas that that spending is sustainable, that we're getting maximum value for money, that we're providing the level of care that Australians need and deserve and have a right to expect but that we're making that spending sustainable at the same time, so we're managing some of those pressures.
Speaker:
Hi, Treasurer, Tim Fawcett from Cisco. You mentioned AI in your presentation remarks and that it would require further investment. Would that be investment from the private sector and the public sector, government sector? And also, do you have any concerns around supply chain and availability of technology products in Australia? Thank you.
Chalmers:
Two very important questions. To be upfront with your first question, it feels like we are getting so much interest from the private sector for investment in AI and infrastructure, and you saw in the National Accounts in the second half of last year a big driver of that quite substantial rebound in business investment was effectively data centre investment. So we're seeing that grow quite substantially already.
Our role in AI is really to help make sure that we're capturing the opportunities, we're protecting people and working through often difficult issues in areas like copyright and the like. So not primarily, from our point of view, a case for massive government investment but certainly a role for substantial government leadership. Here I pay tribute to Tim Ayres and Andrew Charlton and also Michelle Rowland, Amanda Rishworth, Tony Burke, the PM and others. Really, this technological revolution driven by AI is a huge focus of the Cabinet. A lot of us are working on some of these issues. There's a lot of investment flowing. We see that overwhelmingly as a good thing. We've got to make sure that that investment is in our interests and I'm confident that it can be. Now you'll need to remind me of the second part of your question.
Speaker:
Supply chains.
Chalmers:
Supply chains. Well, obviously when it comes to technology, the big focus in the supply chains is on chips, on capacity, on compute. And, once again, it's a finite but extremely valuable resource that you would know a lot about in your line of work, and you spend a lot of time thinking about. Probably some sleepless night thinking about it as well. A lot of our engagement in the private sector is about making sure that we have secure and reliable supply chains for everything related to compute because, in lots of ways, that's the ball game.
Deda:
I'll go to Stephen, you've joined the media line, but as a former chair of the ABE we'll let you in.
Chalmers:
You can join whatever line you like.
Speaker:
Thanks. Stephen Halmarick from the Observatory Group. So, you said you're ambitious for reform in the Budget, but you also said that a lot of deliberations will be the subject of Cabinet. So I'm wondering if all your colleagues in Cabinet share your ambition, or is there a risk that we just get back to, you know, cost‑of‑living measures that just add to demand and raise the risk of more interest rate hikes? I mean, I'm just kind of asking you what's the vibe in the room? Do they understand the seriousness of what's the position of the economy?
Chalmers:
Yeah, they definitely do. The reason I very deliberately finished by saying ours is an ambitious government, not just an ambitious Treasurer, is the sense of the policy reform that we all understand is necessary to get us through a difficult period but also make the most of these tremendous opportunities and advantages we have as Australians. The question before about AI is a good example of the high level of ambition right across our Cabinet to make sure that we manage the risks in the near term and maximise those opportunities in the longer term as well. So I am confident that there is an appetite in our team.
Now, when it comes to why I have quite deliberately said that there are still a lot of deliberations to come, that just reflects the reality in normal times. Most of the decisions would be taken in April, not in March, for a May Budget. But I think you would understand - I think everyone would understand - that when the situation is as unpredictable and volatile as it is right now, then obviously that means that it makes a lot of sense to take some of those decisions as late as you can. I've been upfront about that as well.
When it comes to the kind of support that has been provided in budgets over the course of those last 4, maybe now 5 major economic shocks in the last couple of decades - and I've worked on a couple of those, and not just a couple of those recent ones - you always try and take into consideration the economic circumstances and the pressures being faced by real people. But we're constrained there by the fiscal situation. We understand that there are very real and very substantial constraints on the budget position. There are very good reasons to continue to make the kinds of savings that we've been making in our first 7 Budgets and Budget updates. And so those fiscal restraints will be a big part of those discussions as they take place throughout April, definitely, and potentially in the first couple of days of May.
Speaker:
Thanks. Alex Joiner, I'm the economist at IFM Investors. I'm sure all the economists in the room welcome the ambition on the Budget. It gives us something to look forward to, I guess. I want to ask you a question around sovereign capability. You mentioned 4 shocks over the last 2 decades. Most economists and investors would be expecting more shocks, whatever they may be. I'd be interested to know just, you know, how the Budget might frame fuel security, so water and electricity, with leveraging AI and data centres, that capability. And then, I guess, the extension to the question is leveraging one of Australia's clear sovereign capabilities, which is capital investment via the superannuation sector, the part that that sector might play in providing some of these solutions?
Chalmers:
Your question, Alex, is a good opportunity for me to thank you and the 35 others who participated in those roundtables in the Treasury building in Canberra a couple of Fridays ago. I appreciate that, and I appreciate that question as well, because it's central to how we think about these big challenges that we confront as a consequence of the conflict in the Middle East but also some longstanding challenges as well, which are effectively about resilience. If you look at the Prime Minister's speech yesterday about resilience, you would see that there is a huge emphasis right now on fuel security, as I said a moment ago. But people shouldn't expect those developments on fuel security and fuel policy to wait until the 12th of May. We'll have more to say about that sooner than that via the PM and Minister Bowen. We're working very hard around the clock effectively to come up with a suite of initiatives on fuel security, and the National Cabinet is helpful in that regard today as well. So on that specific area, some very urgent work is going on right now.
It does lead us to broader questions about sovereignty, security and resilience. In energy, one of the underappreciated elements of our efforts in the energy transformation is obviously by introducing more cleaner and cheaper energy into the system, more renewable energy into the system, that obviously has a very beneficial payoff when it comes to energy sovereignty and energy security. I find it strange that some of the people who are the most critical of the energy transformation are the ones now the most critical of us not having sufficiently diverse stores or sources of energy. We see the energy transformation as a national security play and a national sovereignty play when it comes to energy.
AI is another one, you're quite right. So where it all comes together is for us to learn the lessons of the last 4, and maybe this fifth, economic shock but to not overlearn it. To recognise that we are a trading nation, very trade‑exposed nation, who has done very well and will continue to do really well out of open markets in the world. Even our Future Made in Australia agenda is not about some kind of 1950s protectionist model. It's about how work out how we are indispensable parts of these global supply chains as they become dicier and weaker around the world. How do we play a meaningful and prosperous role in that. And so that guides a lot of our thinking in the Budget but also before the Budget and no doubt after it, too.
Speaker:
G'day, Treasurer. Shane Wright from The Age and Sydney Morning Herald. This is a bigger room than we are normally in.
Chalmers:
Shane only travels for 2 things, Besa. The Reserve Bank Governor and for you.
Speaker:
Pretty close to the truth, I think. Pretty close to the truth. I'm wondering - a 2‑parter - the 3 packages that you've discussed today, are they going to be working together? And does that mean that if one part fails to get through the Senate, for instance, you've got a problem? The second goes to the tax package. You've said I think to the PC, you actually said when they were deliberating about business tax reform that it had to pay for itself. Is it going to be tax reform, or are you just going to increase taxes on some and grab the revenue?
Chalmers:
Thanks, Shane. I think the best way to understand the first part of your question is the 3 packages will be designed to work together, but how we legislate them is to be determined. We haven't been anticipating that we will bowl up one omnibus bill with every single new part of the Budget that isn't in the appropriation bills. But those kinds of considerations, we'll get into that later on. But the 3 packages are very, very closely related, quite interlinked, and we'll consider them to be 3 parts of one big story rather than 3 different stories.
On tax reform, and I think it's right that you start with the model proposed by the PC, because from time to time people will ask me to come to a definitive view about the model that the PC put out publicly that we asked them to do as part of that five‑pillar work. We asked them to come up with ideas about reforms to the company tax system which could pay for themselves. And the reason why I haven't gone out of my way to kind of rule out the proposal that they put, even though we're considering a range of other options which are different to what the PC brought out, is because I think it's good to spur the necessary conversation about tax reform which is fiscally sustainable.
I look around the room at all these familiar faces. We've all been involved - some of us for decades - in questions like this. The easiest thing in the world is to put out a press release calling for a massive tax cut in one part of the Budget and leaving it to others to work out how to make that sustainable. And so we've encouraged people in the business part of this, but more broadly as well, to work out how tax relief in one area could be paid for in other ways, including savings in the Budget, not necessarily with tax reform. But I've done a lot of engagement with a lot of very senior business people over the course of the last 6 or 9 months on business tax, and we've made it very clear that we're more than likely to get something meaningful up if people can get around some other way - ideally in the business tax system - but some other way that we can make that sustainable. That continues to be the approach that we've taken. One of the reasons we haven't taken any decisions or landed any final model is because that's one of the key questions.
Speaker:
Thank you so much, Tiffany Lewin from Westpac Group. This is a question from the non‑economist in the room. Treasurer, you spoke about the complex global environment that we're facing into and those headwinds also extend to challenges in social cohesion globally and the potential for a widening divide in financial opportunities between the haves and have nots, between generations, and as we transition towards net zero. You've also talked about the supply side strategy and the importance of women, older workers and migration in fuelling our economy. How do we best consider key social reform priorities such as the National Plan to end Violence Against Women and Children, the National Plan to End Mistreatment of Older People that was released this week, as key enablers of our economic potential?
Chalmers:
Well, thank you for that great question. First of all, I believe that what we're seeing around the world in a breakdown in social cohesion, in the way that political systems are being busted up, I think that's closely related to this sense that people feel - and not always unfairly - that the economy is working in somebody else's interests and not necessarily in their own interests. And here in Australia the version of that that we've been most focused on in recent times is the intergenerational part of that. This sense of responsibility that I think we all feel to make sure that generations that come after us don't get a worse deal than what we have had. So, I think the politics and social cohesion and the economics are really tightly wound up.
In Australia, we've done a bit better on all of those fronts than a lot of other countries. But when we see what's happening overseas, it is a warning sign of sorts. We can see a lot of what's happening in different parts of the world as a cautionary tale rather than something that we want to replicate here.
So, obviously when it comes to putting budgets together, putting policy agendas together, what we're really trying to do not just as a Labor government but as an Australian Government, a government in a country that cares deeply about the social impacts of economic change, is we try and make sure that as the pace of change in our economy quickens that people aren't left behind. We try and make sure that people can be genuine beneficiaries of that change, rather than victims of that change.
At the extreme ends, there are people who are at real risk, whether it's people experiencing family or domestic violence or in other ways, we consider that to be a key responsibility of every member of the Cabinet to care deeply about those sorts of issues. Not to see them as some kind of side issue that exists over here and in one or 2 portfolios. So, I think your question is a good one because it reminds us of our responsibilities. I've given a speech here which is full of facts and figures and forecasts and modelling and hardheaded analysis and assessment of how we see the situation. But I want to assure you that this government never forgets our responsibilities to each other as people first.
Speaker:
Daniel Ziffer, ABC. You touched on intergenerational inequity in your speech. In the Incoming Government Briefs to yourself and other ministers, it talked about the fact that lower and middle‑income people are subsidising the retirement incomes of people who are wealthy, beyond also owning their own home as Senior Australians. Your job isn't to make people happy, but in the settings that you want to unleash in May to effect and rebalance that intergenerational inequity, how unhappy are you willing to make older and wealthier Australians?
Chalmers:
I think even a room like this doesn't have an index for that. So I'm not sure about that. But I guess I would point you to the reform that just passed the parliament around better targeted superannuation tax concessions and using part of the proceeds of that to fund a boost to the low‑income super tax offset. There's a number of people here who helped work with us and campaign with us for the boost to the LISTO, which I'm really proud of, the government is really proud of. I think that gives you a bit of a sense that we are prepared to take difficult decisions. In our case, effectively 3 years of consultation before it passed the parliament, but we're prepared to take difficult but responsible decisions to make the tax arrangements more sustainable and fairer in an effort to try and rebalance things a little bit so that people aren't getting such a raw deal in intergenerational terms. So, that gives you a sense of the sorts of things that we are prepared to consider.
Now, to go to the very start of your question, I understand that in any budget, I think particularly in this Budget in May, you're never going to make everyone happy. At some point as Treasurer - I'm sure my predecessors have felt the same way - you just try and make the best decision you can for the best, most informed reasons that you can. And some people will be pleased with that, and some people will be unhappy with that. I think that's just the nature of the beast of putting budgets together. This is our fifth one that Katy Gallagher and I are putting together. Our fifth one in 4 years. We know that the idea that you can make every single person happy with every single decision is an unrealistic and naïve objective.
But what's not unrealistic or not naïve is the idea that I feel like the Australian people are ready for the sorts of issues that we have been raising with them. The intergenerational issue, the issues around budget sustainability, the fact that our economy which is stronger in many ways than all of the major advanced economies. It has still has got these 3 big pressing problems that we can't as a responsible group of people ignore. So, I feel like the community, even though it's under maximum pressure - cost‑of‑living pressure and other pressures - I feel like there is a level or a layer of understanding in the community that sometimes hard decisions are warranted. My job as the Treasurer with a responsibility that I embrace is to take the right decisions for the right reasons, but also to spend time explaining to people why they're necessary. That's a big reason why I'm here with you today.
Deda:
Thank you, Treasurer.
