Senator the Hon Katy Gallagher

DAVID SPEERS, HOST: Katy Gallagher, welcome to the program.

SENATOR KATY GALLAGHER, MINISTER FOR FINANCE: Thanks for having me on, David.

SPEERS: So the Treasurer there says you found spending pressures that weren't disclosed or booked by the former government. Can you tell us what he is talking about there?

GALLAGHER: Well, at that press conference, Jim indicated that he would have more to say about that. We are planning for a budget in October and we are working through the detail of the briefings that we've got in the last week, but clearly we are inheriting a very serious set of economic and budget challenges, and we don't want to pretend it is anything but that. We need to be up front with the Australian community about that. We need to have a look line by line through the Budget which is the job that I've started now, to look at where we can find opportunities to relieve some of those challenges or to work towards some budget repair, but clearly there are some significant challenges facing both the economy and the Budget.

SPEERS: Well, the Charter of Budget Honesty, as you know, was introduced to avoid this, sort of, situation where after an election it’s like "Surprise! There’s a big hole there that we hadn't found." We now have Treasury and Finance Departments after the election is called producing the independent set of numbers as to how the Budget looks. Are you saying that the figures that were produced showing deficits totally $224 billion over the next 4 years - were they accurate or not?

GALLAGHER: Well, they are certainly the numbers that the Finance Department and the Treasury signed off on in the election campaign, but I think the point we are making is that there is a range of spending that we are having a look at in the Budget and there is also clearly some huge Budget pressures coming. I guess in those areas: health, aged care, the NDIS, defence, national security - where there are all of them growing faster than GDP and going to play significant pressure on the Budget going forward.

SPEERS: OK, but are you talking about beyond the four years? So the deficits that Treasury and Finance signed off on, as you say, that is still the deficits we are looking at the? You are talking about spending pressures beyond the four years?

GALLAGHER: Well, we are looking at the those spending pressures and some of them will be coming up, like I don't expect that all of those will be able to kick beyond the forward estimates. They are real, they are here now, they are growing rapidly.

SPEERS: So those deficits could be even worse?

GALLAGHER: Well, this is the work we are doing now, David. I am not going to get into that. We will update the official numbers as governments do through official economic updates. Most likely Jim will do an economic statement in that first sittings of the Parliament, and then we are working towards an October Budget where we will update all of the forecasts and all of the figures. But I think the point we are trying to make is that there are huge pressures coming on the Budget and we need to make sure that all the spending that we are doing is delivering a particular outcome, an economic dividend that we can't have this situation where we've got a trillion dollars of debt, not enough to show for it, massive deficits, huge spending pressures coming and the Budget weighed down this way. So we have to look at all of those decisions that were taken by the previous government and see where we can make the Budget work better for the Australian people.

SPEERS: Just on that, you talk about the huge spending pressures, you call them in defence, health, NDIS and aged care. Are you softening us up for spending cuts in those areas or potentially other areas to pay for all of that?

GALLAGHER: I'm not softening up anybody. I'm telling you the information that I have before me, and this is the view that Jim and I both have, is that we need an honest conversation about some of this. We can't pretend they are not coming and we can't pretend that the Budget is in good shape and able to absorb this. But we are absolutely 100% focused on delivering the commitments we made to the Australian people. Those investments are more important really than any time before because we need to use those key commitments in cleaner and cheaper energy, in child care, in skills to actually drive the economic growth that will help deliver a return to the Budget and help and assist with some of those challenges and budget repair.

SPEERS: So there may be some spending cuts in areas that aren't things you committed to? You're locked in on what you took to the election, but you might find some cuts elsewhere?

GALLAGHER: Well, the job I'm doing and that we have started in looking at the waste and rorts audit and going through the Budget line by line is absolutely looking to make sure that the spending - I mean, we can't afford this position where we are borrowing money and it is going into things that either aren't going to deliver an economic dividend or have no rules around them or no business case that guides them. The time for due diligence and proper fiscal discipline is here and I'm going to make sure, as the Finance Minister, that we are doing that from the get-go. So, yes, we are looking at spending that was allocated in the Budget. I've seen - we have already said in the election campaign we would return the $400 million Regionalisation Fund back to the Budget because it was unclear what it was for. There was no kind of scope around it and we think that that money could be better utilised. Yes, we will be making some of those decisions. They are difficult but they need to be made.

SPEERS: You have already re-allocated that money to some of the promises you took to the election. I'm just wondering if, in all honesty, the savings you can find through ending rorts and waste as you put it, will be enough to cover the huge spending pressures you’re talking about in health and aged care and NDIS and Defence?

GALLAGHER: Well, it's true that the vast majority of the Commonwealth Budget goes into non-discretionary spending. It is governed by legislation. It is a much smaller part of the Budget where you can make re-allocations or pre-prioritise or look to return money for budget repair, but we need to have that conversation with the community about the state that the Budget is in and some of these pressures, and that is the position Jim and I have taken from Day 1. We can't pretend these pressures aren't here. We have inherited the worst set of budget books, high levels of debt, half of which was borrowed before the pandemic hit, and we need to manage these in the interests of the Australian community for the long term, not just for the short term.

SPEERS: Just in the interests of that honesty and transparency, just to be clear, something has got to give, right? You can't just painlessly fix these problems - something will have to be cut?

GALLAGHER: We know we can't do everything we want to do in the Budget. Any budget is going to be a tough set of decisions and about priorities and what's possible and what is going to drive the best economic dividend and alleviate cost-of-living pressures for people. Budgets are a set of all of these questions that need to be answered and you try to find the right balance to deliver that. But, you know, I don't think we are pretending that it is anything but a serious set of challenges with a serious set of decisions that have to flow from that.

SPEERS: On cost of living, electricity prices are about to go up quite steeply for many, particularly in New South Wales, by the looks of it. The Prime Minister on Friday indicated you might be looking at additional cost-of-living relief beyond what has already been announced by the previous government. What are you thinking about there?

GALLAGHER: So it's early days, David. We might wait for the Cabinet to be sworn in and have some of these discussions and I'm conscious of that, but Anthony, as the Prime Minister and during the election campaign has made it clear that any budget that he is Prime Minister for will have a cost-of-living lens applied to it to see what is possible, and that goes back to the discussion we've just had. It is around all of those tough decisions but absolutely a cost-of-living lens has to apply across every budget that we hand down.

SPEERS: Let me put one to you: The fuel excise cut only lasts six months, ends in September and, bang, the price goes back up. Can you afford to extend that?

GALLAGHER: The fuel excise cut costs around $3 billion for a 6-month period, so it does have a high cost to the Budget. We said before the Budget that it was unlikely we would continue that cut beyond the end of September, and I think that remains the case. That's what we said before the election and that's what we've said afterwards.

SPEERS: Let me turn to an idea that has come out of the UK: The British Government has announced a windfall tax on the profits of oil and gas companies which are benefiting from the global pricing spike that we are seeing at the moment. The revenue they raise would help fund further cost-of-living relief. The Prime Minister here has ruled out something similar. Why?

GALLAGHER: Yes, I think we've got a different set of circumstances here that apply to the UK, for a start. And I think Anthony, in his comments, has been around making sure we are doing what we said we would do in the election campaign which is implementing our Rewiring the Nation policy and our Powering Australia policy which is designed to make those investment into the grid that allow extra renewables to come in, to lower, and bring down the cost of power prices on Australian households and drive business investment and meet our emissions reductions target.

SPEERS: But the point is with this windfall tax, as the British Government are calling it, the gas companies here are doing pretty well out of these higher prices. Ken Henry, the former Treasury Secretary, likes this idea. He told the Financial Review, these resources should really be thought of as the property of the state and indeed the property of future generations. A small group of companies are reaping windfall profits and if you miss this opportunity, you set up a dynamic that produces further policy problems for you down the track.

GALLAGHER: Yes, and as the Prime Minister has indicated in the last few days, we won't be pursuing that same pathway.

SPEERS: Why?

GALLAGHER: Well, for a start, I think we need to have the Cabinet in place, to have discussions in place and we also need, as I said- where can we make sensible and responsible decisions that alleviate cost of living pressures on Australians.

SPEERS: Why has he ruled it out before Cabinet has even been sworn in?

GALLAGHER: Well, he is the Prime Minister, David.

SPEERS: Is that how it's going to work?

GALLAGHER: He has had a very close interest in this. He has had a very close interest in the policy that we have presented to the Australian people. He is very focused on delivering that policy. And he has made those comments in the last few days. We are going down a different pathway…

SPEERS: And you just have to go along with that?

GALLAGHER: No, Anthony doesn't run a Cabinet like that but he has made those comments. He listens to his team and he listens to advice. But he has also been clear that we are implementing the policies we took to the election, but in addition to that, every budget and indeed all the decisions we take as a government will look at how we can alleviate cost-of-living pressures off individual households in Australia. That is our commitment and it is what we made during the election campaign.

SPEERS: Can I ask you about wages? The PM says he has written to the Fair Work Commission and a submission will be made from the Government on the minimum wage case. He will be arguing, he says, that those on the minimum wage should not get a real wage cut. So does that mean you want the minimum wage to rise in line with the headline inflation rate?

GALLAGHER: That is right. So the Prime Minister has written to the Fair Work Commission seeking leave to make an additional submission because we are quite late in the process and submissions had closed. So subject to that leave being granted, Tony Burke would provide that submission to the Fair Work Commission, and in that submission it would be clear that we don't think those workers on the minimum wage should experience a wage cut. The Prime Minister has indicated it wouldn't have a figure in it, but we would be bringing forward the evidence and the argument that would support the position we took during the election campaign which is that those workers on $20.33 an hour should not be going backwards, as they have been in the last two years, and have been experiencing no real wage growth over the last decade, and we have been clear about that.

SPEERS: A final one, Katy Gallagher. I want it ask you about this: This has been another election where extraordinary amounts of money have been spent in the campaigning. Last time 2019, it was Clive Palmer spending a huge amount. He did so again this time, but we also saw some huge amounts spent in individual seat contests. Kooyong is a really good example. Josh Frydenberg and Monique Ryan both spent enormous amounts of money in the one seat. When you were Chief Minister for the ACT, you brought in spending caps for parties and for candidates in the campaigns there. Do they work and should we look at it federally?

GALLAGHER: They certainly work in the ACT. They have been in place now for about a decade where it does restrict per candidate the amount of money that you can spend and provides an overall cap on parties, and it has managed, certainly that we haven't seen - well, because we can't under the cap, can’t see that big escalation in spending to deliver particular outcomes. Look, I think this was looked at during the last Parliament. I have no doubt it will come up again during this Parliament. My understanding is that it's harder for the Federal Parliament to impose caps than it is on states and territories around some Constitutional and legal matters, but I have no doubt that this- during the normal process of the review of the election which the Joint Standing Committees do, that they will have a look at some of these issues because there is no doubt - I mean, a million dollars on the ACT senate campaign is something that we have never seen before and that is bringing serious money into these seats.

SPEERS: I think you talk about David Pocock's spending in that particular race. Finally, from your perspective, you're in favour of spending caps to stop the arms race in political donations and fundraising?

GALLAGHER: Well, I think what we've seen, and it is increasing at each election, is that where you have large amounts of money, you can - well, you can change the campaign and I think it's definitely a question we should look at and explore further in light of the democracy, how it's working and the impact on elections, but this is for the Parliament to decide, not for individual members.

SPEERS: Finance Minister Katy Gallagher, congratulations on the new role.

GALLAGHER: Thank you.

SPEERS: Thanks for joining us.

GALLAGHER: Thanks, David.