Senator the Hon Katy Gallagher

ADAM SHIRLEY: One of those who was a key architect and consulted with the Prime Minister, Anthony Albanese, on the changes is Senator Katy Gallagher, Senator for the ACT, Finance Minister for the nation. Senator Gallagher, great to speak with you and thanks for your time on Breakfast today.

SENATOR THE HON KATY GALLAGHER, MINISTER FOR FINANCE: Thanks for having me on, Adam.

SHIRLEY: So, you would have also had a chance to look at the numbers, particularly in the Senate. The chances of getting these changes through. I presume that you think you've got a good chance of getting the Greens and the Independents, at least a few of them, on board to make it happen. Is that the case?

GALLAGHER: Well, Adam, I'm hoping we can get the whole Senate. I mean, this is around ensuring that more people can get more money through the tax changes on 1 July. And under the proposed changes, around 80 per cent, or just over, will get more of a tax cut than they would have otherwise got. And we know that that's going to help with cost-of-living pressures. So, the Senate always has to be managed. You know, we'd never have – it's not a majority chamber for the government. So, we always have to work with colleagues across the across the chamber to get legislation through and we'll be doing the same with this one.

SHIRLEY: Presumably, though, you can bank on Senator David Pocock’s support? If I'm reading that correctly, maybe I'm not, but he repeatedly criticised the Stage Three Tax Cuts in their previous form. Likewise, the Greens – in fact, they want more concession in the way of working class wages, if I could call it that. So, do you fancy your chances at least getting it through that way?

GALLAGHER: Well, again, I don't get ahead of myself in the Senate. We've got to work with all of the members in that chamber. The senators in that chamber. Obviously, we work pretty closely with the crossbench when we need to. But there is the opportunity for the Opposition to back these changes in as well. There has been a number of senators who have raised concerns around the distribution of the Stage Three Tax Cuts as they were implemented by Scott Morrison five years ago. But you never count anything before you've locked people in. We're going to work with the Senate, in short, Adam. I'm confident that if we can have those reasonable conversations we should be able to get the legislation through. But I also don't want to let the Opposition off the hook here. Because, if they vote against it, they're voting against more Australians getting a bigger tax cut than they would have otherwise got.

SHIRLEY: But I mean – repeatedly, in public, on this program, you backed these changes in – until last week. I wonder what suddenly was wrong with the existing policy when you said you were committed, several times, to the Stage Three Tax Cuts version one, I'll say?

GALLAGHER: Well, I think as the Prime Minister has said in the last few days, and last week, certainly that when the circumstances change, when economic circumstances change – the government had to look at options to provide more relief to more people. We'd had – we certainly had a number of measures in our Budgets going to try and relieve cost-of-living pressure. But they were quite targeted. So, through child care, if you had children, you would have noticed that. If you’re on medicine, take medicines regularly, you would have noticed the cheaper medicines. We had targeted relief for energy bill relief. But this – revising this plan, the tax plan, the new tax plan – actually gets to millions of Australians who wouldn't necessarily have received some of that other cost-of-living help. And so, we're not pretending we haven't changed our position. We have. But we've done it based on advice and based on – I think you have it on your show almost every day, all media outlets do – about the cost-of-living pressures people are under. And the counterfactual is that the government just doesn't respond, which I think people would look at pretty seriously as well.

SHIRLEY: Which goes to a point I think is worth pursuing, you say circumstances have changed. I don't think there's much disagreement about that. But that did not happen overnight. This has been building for years. And it makes me wonder why you weren't perhaps more elastic, or reflexive, or responding to that in due course? Rather than seemingly being a sudden decision? Which it did seem to be last week.

GALLAGHER: Well, I think if you go back and have a look at everything we've always said, which is we try to make decisions based on the economic circumstances at the time – I've said that a number of times, it's how we put our Budgets together. We have been very clear that we've been looking at how we can provide effective cost-of-living relief to more people. We've been pretty upfront about that. But we also acknowledge – and yes, you're right, that some of those pressures didn’t occur overnight. If we're looking at the ongoing impact of COVID or the conflicts overseas – although the Red Sea is perhaps more contemporary. But, you know, we've also had 12 interest rate increases. I don't think people foresaw that.

SHIRLEY: But through that entire time, Senator, you kept sticking to “Stage Three Tax Cuts are going to be untouched”. “We committed to it, we're sticking to it.” So, I'm not so much debating here the fact you've broken a promise. It's more, why did it take that long and then you suddenly decided, seemingly, circumstances have changed?

GALLAGHER: Well, our position changed last Tuesday. That is when the cabinet took the decision. And that is when, I think, within a day we were out explaining that decision being changed. And the PM stood up at the National Press Club to face the country's top media to answer questions about it. So, from the point that our decision changed, we have been upfront and answering questions about it. And we'll continue to do that as we tried to shepherd the legislation through the parliament.

SHIRLEY: To what degree, Finance Minister, are you banking on voters ignoring a key broken promise because they will be better off financially?

GALLAGHER: Well, you know, it's up to voters how they interpret this decision. We're trying to make the right – well, we are making the right decision – based on the economic circumstances at the time. And putting people first. And so, I hope that when people get their tax cut on 1 July – and they'll get more of their tax cut. Like here in the ACT, 80 per cent of taxpayers will get a bigger tax cut than they would have under the previous plan. And importantly for women, with my Minister for Women hat on, 84 per cent of women taxpayers in the ACT will get more of a tax cut. So, this is about making the right decision. Not the politically convenient decision. It’s about doing the right thing. And I think that's what governments expect. And they certainly expect that from their Prime Minister and their ministers.

SHIRLEY: And I wonder – if on politics during the last election campaign – you in your heart and other colleagues thought, “hmmm, these Stage Three Tax Cuts, they're a bit hard for us to stomach but we're going to say yes to them to not scare the horses in the interest of winning government”. Is that the case?

GALLAGHER: Adam, I think at the time, when the legislation went through, we tried to move amendments. They failed, actually, on the vote of Jacqui Lambie. Who has now changed her position on Stage Three Tax Cuts as well. But we went to the election saying that they were legislated. But we have changed that position. We certainly have. And we've changed that position based on the advice from our departments. Through the Department of Treasury. And the economic circumstances that we face, which is that middle Australia, particularly those with mortgages, those who are perhaps not interacting with the social security system, have felt the brunt of those interest rate increases. And that's very clear from the Treasury advice. And we've changed our position because we want to help more of those people deal with some of those pressures they're experiencing.

SHIRLEY: Quite a few messages coming through on this. Andrew has a question – I guess it summarises some of listeners’ responses to what you're saying, Finance Minister – “either version of the so-called tax cuts are actually just doing a small amount to reduce the impact of bracket creep from inflation as wages rise”, begins Andrew. “It’s revenue raising by stealth. Why won't the government consider annual increases in the tax brackets in line with inflation so we don't all just keep floating up and paying more tax without any real wage increases? Thank you.” To Andrew’s question, as I say, it summarises a few different thoughts that are coming in at the moment.

GALLAGHER: Yes, on the point of bracket creep – this plan does deal with that by ensuring that the thresholds are increased. And, I can go through that, Adam. It's a lot of numbers. Basically, we're increasing the threshold and lowering the rate at the bottom end. And we've made no secret that we think governments, where they can afford to, should return bracket creep through the tax system. Those tax thresholds aren't indexed. So, it does require a decision through the ERC. But we absolutely agree bracket creep should be returned. But I would also acknowledge that the Budget is under a fair – this is with my Minister for Finance hat on – is under a fair bit of stress. And we've got a lot of costs coming our way which people value. Like through the health system, through aged care, through disability. And so, every Budget, we have to weigh up a range of those competing pressures to finalise a Budget that tries to do the right thing.

SHIRLEY: And on another matter, just before we conclude, you're a former Chief Minister of the ACT. To what degree could an independent movement, similar to what we've seen happen in the ACT for the Federal Senate, shake up politics here, make people feel more represented? Do you think there is a degree of perception the Labor Government for 20 plus years is getting jaded and not supporting or listening to people enough, Senator?

GALLAGHER: Well, the Labor Government has been a long-term government. It's been extraordinarily successful. But independents have always been a part of our electoral system here from the early days. And that's what Hare-Clark tries to deliver as an electoral system. From my point of view, I've been reading a bit about it this morning in the media, but I think the more candidates the better. People in the ACT like choice when they go to vote. I always choose to vote Labor. And I think Andrew Barr has done an incredible job as Chief Minister. But the more candidates to choose from, I think, the more interesting campaign. And I wish everybody well with it. It's hard putting yourself out there for election. And here in the ACT it’s probably a harder electorate than most. But it's a great thing to do. And it's a great thing, you know – a public service to contribute in that way to the ACT community.

SHIRLEY: Will it bring a response from your party? I anticipate you'll be out trying to support Labor candidates. Is there a threat there, perhaps to the Labor dominance over the years?

GALLAGHER: Well, I don't think – from my experience in working in ACT campaigns, ACT Labor has never taken a seat for granted. One of the things about Hare-Clark is that every seat is a marginal seat. There is no safe seat. And candidates have to respond to that. So, ACT Labor never takes anything for granted and they'll be campaigning. We launched our candidates on the weekend. Incredible mix of talented Canberrans. And, over to the campaign now. People will have to work hard to earn the trust of the Canberra community and I’m confident ACT Labor and the ACT government can do that.

SHIRLEY: In the end it does matter and people get the democracy that they end up voting for. Senator, Minister for Finance, Minister for Women, Katy Gallagher. We do appreciate your time. Thank you for it.

GALLAGHER: Thanks very much, Adam.