Senator the Hon Katy Gallagher

JOURNALIST: The announcements that have been made so far today - you've got the $14.6 billion cost of living price tag. How certain are you that the measures that the government is announcing won't be inflationary?

KARL STEFANOVIC, HOST: All eyes will be on the Treasurer this week as the budget is handed down with a substantial cost-of-living package for expected struggling Australians. To discuss, we're joined by the Finance Minister Katy Gallagher from Canberra. It's your Coronation tomorrow, Katy, you know what I mean.

SENATOR KATY GALLAGHER, MINISTER FOR FINANCE: I had a very boring weekend, Karl. Reading budget books. It looks like there was more fun had elsewhere.

STEFANOVIC: I get it. Budget surplus for first time in 15 years. Is it a miracle or is it because you over tax us?

GALLAGHER: Look, the Treasurer and I have been clear for some time that we'll see significant improvement in the short term but the budget remains under pressure in the long term. Some of that is to do with the things that we sell overseas and getting good prices for that. But the other side of it, and the big part of it is the number of people in jobs. So that works for, certainly, revenue to the budget but it means less payments going out the door on social security. You will see combination of that flying through the budget which is welcome. We still have a big job ahead of us as we put the budget - repair it and put it back on in more sustainable footing.

STEFANOVIC: What in the budget will make the Reserve Bank less likely to raise interest rates?

GALLAGHER: Well, we're being mindful, obviously, of the environment we're in. High inflation, rising interest rates. Our fiscal approach has to work hand-in-hand with the monetary policy approach that the Reserve Bank is undertaking in terms of their side of that. And, you'll see the culmination of those decisions - there's a balancing act that goes into putting a budget together. How we can provide sensible cost of living relief, how we repair the budget, how we make sure our decisions don't add to inflation. We've been mindful of all of that, Karl, the inflation challenge has been really front and centre as has cost-of-living because we know it's hitting households right across Australia.

STEFANOVIC: For example, energy, if people have more money to spend outside of power they can spent it elsewhere and that itself is inflationary. That balance the tough.

GALLAGHER: It's really tough because I think people are looking for assistance and we want to provide that assistance where we can. We have to make sure it's targeted, that it doesn't add to inflation and we also have to make sure we're doing other things with the budget. Looking forward about how we seize the opportunities in the future. So our growth agenda, how we invest in the productive side of the economy, you'll see that as well. So, yeah, it's been a real challenge aligning all of that. The budget book at the end of the day, when Jim stands up tomorrow night at 7:30 will be the culmination of all of that work and people will be able to judge it then.

STEFANOVIC: Can you explain how cost-of- living relief isn't going to be inflationary.

GALLAGHER: Well, I think it's around the budget as a whole, Karl. So looking at where we are making the investments, absolutely, who they're targeted to, the size of those investments, how they work with other decisions we've taken. For example, in October we took some decisions around extra support for childcare, that will flow in, in July. But also how we've been trying to make savings in the budget. So we'll announce savings in the order of $17.8 billion. That offsets some of the investment we're making in new areas and we're being mindful of that.

STEFANOVIC: Categorically you won't mess with stage 3 tax cuts, address the bracket creep.

GALLAGHER: We haven't changed our position on stage 3, Karl.

STEFANOVIC: What about cutting from your own department. Everyone is tightening their belt at the moment. I hear that you're replacing Tim Tams with Milk Arrowroot. Is that true.

GALLAGHER: We expect government departments to ensure that every dollar they spend is wisely spent. So I wouldn't object to a Tim Tam being changed to an Arrowroot. But we have been very clear and you’ll see this in the budget. Where we can make savings we're making those savings. We're asking departments to tighten their belt but we're also investing in them to make sure they provide services the Australian people want and need.

STEFANOVIC: You work hard. I know you’ve spent a lot of time on this. Appreciate you being with us. Good luck tomorrow.

GALLAGHER: Thanks very much.