Senator the Hon Katy Gallagher

KATY GALLAGHER, MINISTER FOR FINANCE: Thanks very much for coming today, I'm responding as the acting treasurer, as the treasurer is having some leave. But today's decision by the independent Reserve Bank to pause interest rates will be, for many Australians, some much needed relief. While this is welcome news, we understand that many people remain under strain from rising mortgage payments and cost of living increases.

So whilst inflation is continuing to moderate across our economy. It is still higher than we'd like and we want to see it moderate further. And that's why our Budget in particular was aimed at getting on top of this inflation challenge, providing cost of living relief where we could without adding to inflation, and was the central focus of the Budget we handed down in May.

Our commitment to save where appropriate, rather than spend is driving a substantial improvement in the Budget bottom line in the near term, when the inflation challenge remains a real one for millions of Australians. We're working alongside the Reserve Bank, not against it and our improved fiscal position is making sure we're not adding to inflation. In fact, our policies are directly reducing inflation, as has been the evidence from the Reserve Bank Governor and the Treasury secretary in recent months.

Our cost-of-living relief to Australians that are struggling has been carefully calibrated so that it doesn't put pressure on inflation. We are providing that extra relief in important and targeted ways, and we will see that rolling through from the first of July, with our cheaper childcare policy, the energy bill relief, some of the measures in our Budget on rent assistance, cheaper medicines, increased incentives for bulk billing, and importantly, and welcomingly we are seeing wages starting to move again. So we're focused on helping where we can responsibly do that without adding to inflation, repairing some of the supply side challenges and investing in the productive capacity of our economy. And this includes our investments in fee-free tafe, supporting small businesses with again measures in the Budget to innovate and grow, modernising our industrial base, and of course dealing with the energy transition. So whilst the decision today is welcome news and I know for households across Australia will be welcome news, we remain absolutely focused on the job that we have to do, which is providing cost of living relief where we can, without adding to inflation, investing in more productive and resilient economy, all work that's happening right across government. Happy to take questions.

JOURNALIST: Minister some economists in the last week or so have been criticising the spike in migration. Do you think that the government shouldn't be reducing the level of migration because of the impact on inflation?

GALLAGHER: Well, I think, you know, and we've got our forecasts on the NOM in the Budget and they outline what they are. And I would acknowledge the huge amount of work that Claire O'Neil is doing with reviewing the migration system, working with Andrew Giles on that, and I think what we are seeing, even though and I've seen the commentary in the paper, even though, you know, what we've seen essentially is a return back from pre COVID levels, and we're still even when you see them and though the numbers that we outlined in the Budget are large. They are essentially a pull forward from people returning to Australia and there's people leaving Australia. I think the issue where, you know, people are rightly focusing around housing, you know is a supply side constraint. I mean, that's why the government has been so determined to actually have the federal government back at the table dealing with housing and the housing shortage. So, I think rather than seeking to apportion blame, it's really about responding to a you know, a wasted decade where the Commonwealth wasn't at the table on housing to any serious degree. And getting through some of those policies that we're trying to get through. Our recent announcement about the housing accelerator is part of that, working with the states and territories to ease some of those pressures, to increase supply. But you know, it goes back to things like the housing fund, what role can the Commonwealth play, to alleviate and improve, well alleviate pressure, and improve supply on housing and on infrastructure, where we're reviewing the infrastructure programs as well.

JOURNALIST: Minister, do you share the RBA's concerns that current rates of wage growth will fuel inflation if there isn't an increase in productivity?

GALLAGHER: Well, I think the government's view on this is that we want strong, sustainable, and responsible wages growth and we want a more productive economy.

JOURNALIST: Are current rates responsible?

GALLAGHER: Well, hang on, let me answer your first question. So, on wages, we are seeing welcome increases in wages growth for the first time in a long time. And that's really important for working people when they're dealing with some of the cost increases that we're seeing across the economy right now. You know, and our, our Budget, you know, outlines our expectations about wages growth, and we welcome that. On the productive side of the economy, you know, again, you know, we've seen a wasted decade on that as well, and we're doing what we can, you won't overturn some of those challenges on the productive side, or on productivity in a year, after we've seen failed years of action. So you know, when we're looking at our fee-free tafe, our investment in skills, the work we're doing in energy, some of the work we've got to do around technology and driving innovation, all of that is to focus on improving productivity, but we don't think it needs to come at the expense of working people getting a reasonable wage increase, and I read the decision, when I read the decision today, I took it that the bank has said this for some time now, that they're keeping an eye on both, you know, and I think that's, I mean, that's their responsibility, but I don't see it as anything different to what they've been saying for some time.

JOURNALIST: Minister, core inflation is still high. It's coming down quite slowly. And the Reserve Bank is a bit limited in what it can do to address supply side inflation. So, what else is the government or can the government do besides the measures that they've already announced?

GALLAGHER: Well, that's, I mean, I think, you know, we are doing a lot on this side. When you look at it, you know, we our economic plan, and we've outlined this in the Budget was to look at where we could take the edge off some of those cost-of-living pressures. Not adding to inflation. Look at how we can repair our fiscal buffers, show some restraint, find some savings, repair the Budget over time so it's in better shape, and then look at how we invest in those drivers of growth for the future. And so, I think when you look across government, there is work happening in pretty much every single portfolio, but we you know, we have been in government for a year. There's work underway. I think when you look at, we know that we have to invest in our people, train them up, get them ready for the jobs of the future. We need to make sure we get this energy transition right. We're doing all of those things and looking at how we support new industries of the future under the national reconstruction fund and some of the work that Ed Husic is doing. There is a huge amount of work going on, even National Cabinet looking at the workload that they've got on, dealing with some of the pressures that face all governments. You can see it's a pretty hectic agenda after a decade of not a lot happening.

JOURNALIST: Minister, do you agree with the RBA's assessment that the unemployment rate will need to climb to four and a half percent in order to bring inflation back to target?

GALLAGHER: Well, I think our Budget from memory, our Budget had unemployment ticking up to about four and a quarter percent in 23/24 and four and a half percent in 24/25 and that aligns with the returning of, essentially over the next 18 months, of inflation back to the target range, that’s in our forecasts. They are largely aligned with the bank's forecasts. And I think it speaks to the challenge that's ahead of us as we manage the inflation challenge is that you know, as part of that, we will see more people out of work and the government needs to respond to that at the right time too.

JOURNALIST: Minister, as a Senator for the ACT, what do you make of the Barr Government considering voluntary assisted dying for teenagers as young as 14? Do you hold any concerns there may not be enough safeguards for this kind of proposal?

GALLAGHER: Well, you know, I stopped speculating on what the assembly does when I left the Assembly. I mean, I think the job for the Commonwealth Government was to remove the restrictions on the Territory Governments being able to consider these matters, but these are matters that are resolved at the territory level. They are a mature parliament; they undertake wide consultation with their communities and ultimately it will be a matter for them.

JOURNALIST: But Minister these are your constituents, the ACT, the people of the ACT?

GALLAGHER: Yes, indeed. And as an ACT constituent myself, you know, I'll watch that debate. But these are matters that are resolved by democratically elected parliaments. I have no doubt as a mature parliament, as a responsible parliament, they will undertake appropriate consultations and then finalise their position and then it's a matter for the assembly to determine.

JOURNALIST: Minister you mentioned.

GALLAGHER: Sorry, I'll go to Tom.

JOURNALIST: Thank you. Is it irresponsible for stakeholders and some of your colleagues to push for more spending from the $19 billion surplus announced at the end of last week, given the calibration and careful targeting that you've discussed?

GALLAGHER: Well look I can understand people, you know, responding to constituents themselves, you know, these House of Reps members, members of parliament more broadly, you know, listening to their constituents and, you know, and supporting, you know, I guess the feeling around cost of living pressures, you know, like, we were all out and about, we hear it all the time. You know, I think, you know, as the cost-of-living measures that we have in the Budget flows, people will see that, when they get it on their energy bills, when they see it in their childcare fees, when they go to buy their medicines, when they get bulk billed for a medical consultation. You know, people will see that these measures are there to support and ease and take off cost of living pressures where they are. In terms of the surplus, I think, you know, it is important when we look at, you know, the work that we've done to repair the Budget, you know, where we've put the effort into returning upward revisions to revenue, and bank that, at a point when inflation was highest, we did that for a purpose. We think it's important to put back in place those fiscal buffers that you need for when the next time comes around that you need them. So, getting the Budget back in shape is you know, a core economic priority for the government. But we don't also sidestep the issue that we need to keep an eye on things we can do support cost of living, you know, and I think members of parliament are always going to represent their constituents, good on them. That's what they're there for. You know, we're doing that in the Budget. We think you know, delivering the first surplus in 15 years is important. Our interest payments will be less, the amount of money we have to borrow for the deficits going forward will be less. There are good reasons why we have been so strong on the Budget repair side of things and again helps with the inflation challenge.

JOURNALIST: You touched on the childcare - a family according to local radio in Melbourne today say that they've got two children. With the rebates they'll be paying $300 more out of pocket a fortnight. How does the cheaper childcare subsidy square with families like that, that are going to be paying more?

GALLAGHER: Well, from memory it's a $5.4 billion investment in early education and care and it will mean for lots of families, over a million families using childcare that their bills and their fees will be reduced through this extra investment, there's no doubt about it. It's a historic investment in childcare. On the fee increases side of things. You know, there are, you know, I was in a childcare centre last week talking with childcare workers there about you know, they got a wage increase recently. So, there are reasons why childcare fees will increase. But there are a couple of things that we have in place so price caps that are in place. We've got work underway by the ACCC to understand the drivers of cost growth, particularly in the early education and care sector. And we've got a Productivity Commission review underway as well. So, we understand, you know, the importance of early childhood education to children and the family, for women's participation in the workforce and for the workers themselves. So, there's a lot to do in early education and care and that works before Jason Clare and Anne Aly. And you know, we'll review those reports when they come, but when you look at the significant investments the government has taken coming to government in the last year, a big increase in the care economy, big increase on support for early education care and in aged care. They are the two single biggest investments we've made.

JOURNALIST: Just on women's participation. You've obviously been a strong advocate for superannuation while on maternity leave, given the much stronger Budget position, when can women expect that to be back on the agenda?

GALLAGHER: Well I think both the treasurer and I said you know, this is a priority when we can afford it and when we can make room for it in the Budget which again goes to I think my earlier point about repairing the Budget getting rid of the waste and rort, it's, you know, looking for savings where we can to return them back to programs so all of that work is underway so that you know as we go forward, we can look to find room for priorities like that, and there's a lot of other ones as well. There's no shortage of ideas about where to make investments. But you know, when I again looking at the Budget going forward, yes, we are getting it in a much stronger position. Yes, we will deliver a surplus and the first surplus in 15 years. But looking forward, there's more work to be done to ensure that we get the Budget on a sustainable footing, and we'll be doing that as well.

JOURNALIST: Minister despite today's rate pause, the RBA has flagged there may need to be more action to bring down inflation in the future. Is there more that the federal government should be thinking and contemplating to assist the RBA in that?

GALLAGHER: Well, I think you know, we, as I said in my opening remarks, the inflation challenge and tackling the inflation challenge was a core priority in the Budget that we just handed down just a couple of months ago. But obviously the government will always make decisions based on the economic circumstances of the time. Whatever they may be, so, you know, our Budget focused on inflation, our October Budget did, our May Budget did, the decisions we took about, you know, targeted cost of living relief were based on, you know, ensuring that we weren't adding to the inflation pressures in the economy. So the Budget sort of sets out our decisions over the next 12 months. Obviously, we're going to other processes, MYEFO is just around the corner and all that, no doubt will be exciting for everybody. But, you know, from our point of view, the area that we can have the most effect, and our responsibility was to bank those revenue upgrades, find savings where we can, repair the Budget over time and invest in cost-of-living relief and the drivers of growth for the future. I mean, that was the whole focus of the Budget and that'll roll out over the next 12 months.

JOURNALIST: Thanks Minister, the RBA stayed on hold, but it did signal more tightening to come. Do you think Australia's growth prospects are looking weaker than previously forecast?

GALLAGHER: Well, I mean, we forecast our expectations around growth in the Budget. You know that we were expecting growth to moderate across the economy, slow, we're seeing that. The RBA acknowledged that today. But you know, we are expecting the economy to grow. And I think, I don't have the minutes, the decision in front of me, it was the one useful piece of paper, and I left it behind. My recollection is that they reiterated that view in their decision today.

JOURNALIST: But your growth forecasts were based on an interest rate of 3.85

GALLAGHER: An assumption.

JOURNALIST: Your assumption of 3.85%. But now it's 4.1. Is there a chance that gets downgraded in MYEFO?

GALLAGHER: Well, that's not the advice. So, to be clear, you know, the forecast in the Budget remains the government's forecast. As we go through any update, those get reviewed by Treasury and will be updated in the normal way at the normal time.

Thanks, everybody.