Colour head shot of Katy Gallagher, current Minister for Finance.

Senator the Hon Katy Gallagher

Minister for Finance

TV interview - ABC News Breakfast

Minister for Finance
Minister for Women
Minister for the Public Service
Senator for the ACT

Inflation rate drop; Labor’s bigger tax cuts plan for more Australians; Senate negotiations

LISA MILLAR: Inflation hit a two-year low in the December quarter, some welcome news in the battle to get those numbers down. It means all eyes are on the Reserve Bank next week when it meets. A lot of the experts are expecting interest rates to be kept on hold, maybe even cut down the track. So, the Minister for Finance, Katy Gallagher, joins us now from Parliament House. Minister, good morning, welcome to News Breakfast.

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

MILLAR: What did you think when you saw those numbers yesterday?

GALLAGHER: Well, they’re very encouraging numbers, Lisa. So, was very pleased to see them, obviously. Obviously, we’re wanting to see inflation moderate. We want to see it come down. It's tracking along very nicely, but we recognise that people are still under the pump which is why our cost-of-living plan is so important to get through the parliament.

MILLAR: So, it's still 4.1 per cent. The goal is between two and three for the RBA. There are some black spots, still – housing costs, insurance, medical and hospital costs. When are people going to feel that they are no longer facing this cost-of-living crisis?

GALLAGHER: Well, the Treasury and RBA forecasts see inflation coming back into band over the next 12 months or so. Obviously, the results yesterday were a bit better than market expectations. So, they are very encouraging. But we recognise that whilst they remain high and particularly, as you identify, in a couple of those areas, still seeing high costs and increasing costs, we need to keep focusing on the job that we can do to manage some of those cost-of-living pressures which is through our tax cut plan and also through some of those targeted relief measures. So, you know, they're very encouraging numbers, Lisa. We want to see inflation back into the target band, but there's more work to do.

MILLAR: When do you think you might see interest rates starting to actually fall?

GALLAGHER: Well, we don't pre-empt the decisions of the independent Reserve Bank. We'll leave that to them. I think it's – obviously, the market will have views about what's going to happen with interest rates.

MILLAR: Well, some have said August. That could be possible.

GALLAGHER: Yeah. I mean, I've seen some of the predictions. I mean, one thing I've known in this job is people have a lot of views. And economists in particular have a range of views. But we leave that job to the Reserve Bank. Our job is to work hand-in-hand with the Reserve Bank and also look at ways that we can relieve cost-of-living pressures without adding to inflation. Obviously, we would like to see interest rates come down. Our job is to make sure that we're not making the Reserve Bank's job harder. And I think you've seen these inflation numbers in childcare, in rent, in energy bill relief, our cost-of-living [measures] have actually reduced inflation and had an impact on those numbers that were released yesterday, which is a really good result as well.

MILLAR: Well, there are some people who are now asking, is the economy slowing too rapidly? We had the very weak retail figures and the news about the decades-old vacuum cleaner company Godfreys going under. Is that a sign of what's to come? Are you worried about trying to ensure that the economy isn't slowing too quickly?

GALLAGHER: Well, again, I think the Reserve Bank has been talking about the narrow path that they've been trying to find the right balance for over the last 12 months as interest rates have increased. There's no doubt that we're seeing in the economic indicators, the impact of those interest rate increases on confidence, on consumer spending. They're flowing through in the retail trade figures. So, we absolutely understand that, you know, times have been really difficult for people. And that's why our focus has to be on what we can do. Obviously, our tax cut plan, giving increased tax cuts, bigger tax cuts to 85 per cent of Australians, is an important part of that, from 1 July, plus, our other cost-of-living measures impacting as well. And that's the job we've been – Jim Chalmers and I have been – focused on since we came to government. And it's the one that will continue to focus on.

MILLAR: Minister, on that tax reform. There are reports today that the Greens are looking for increases to JobSeeker or adding dental into Medicare for you to win their support. Are you prepared to look at amendments to negotiate it with the Greens?

GALLAGHER: Well, Lisa, as you know, the Senate is a fickle chamber. We often – we have to work across the board. Particularly if the Opposition are going to vote against these tax cuts. I hope that's not the case, and the opportunity is there for the chamber to move as one. Our plan that we're taking is the proposal that we've outlined. It's the one we've been talking about. It's a really good deal for the Senate, we hope to pass that. And that's what we'll be focused on. Obviously, we work across the board to try and facilitate that and it's not unusual for the Greens to try and prosecute other matters but we're concentrating on getting that tax plan through as outlined.

MILLAR: If you don't have the Opposition on side, you are going to have to negotiate with the Crossbench and the Greens

GALLAGHER: Yeah, not an unusual place for us to be, unfortunately. I mean, the Opposition often says no and removes themselves from any discussion. But you know, we are focused on getting our tax plan through. Obviously, there's a lot of discussions to be had, but we've carefully considered the proposal. We've looked at it from an inflation point of view. We've looked at it from the fact that 84 per cent of people will get a bigger tax cut. So, we think at the end of the day when the vote is put before the chamber, the Senate chamber, that senators will support it. Because it's a very important package to ease those cost-of-living pressures on Australians

MILLAR: Final question, Minister – what's wrong with having a tax summit, as business would like to see? That they feel there's still a lot of room for reform. It worked for Hawke and Keating – why is your government ruling out doing something like that?

GALLAGHER: Well, I think we've been we've been clear on what our tax plans are. And there's a number of them that are currently before the Senate, whether it be super concessions, the PRRT, the multinational tax reforms that we've got. And now this tax plan – the tax cuts plan. So, we feel that certainly in the time available to us, over the next 12 months or so, that's a pretty busy agenda to get through the Senate. And that's what we're focused on doing.

MILLAR: Katy Gallagher, thanks for your time this morning.

GALLAGHER: Thanks very much, Lisa.