Senator the Hon Katy Gallagher

PATRICIA KARVELAS, HOST: Parliament's corridors are humming to life this morning, with the first sitting day of the year beginning tomorrow. This week the government will introduce legislation for changes to the stage three tax cuts and pressure is piling on the Opposition to back them. Meanwhile, questions are also piling on the government over what they should do next as calls for broader tax reform grow. Katy Gallagher is the Finance Minister and our guest. Katy Gallagher, welcome to the program.

SENATOR THE HON KATY GALLAGHER, MINISTER FOR FINANCE: Good morning, Patricia.

KARVELAS: Your internal polling shows that two thirds of voters support the tax changes. The Newspoll figures today aren't quite as strong, but they do show support for the change. This is all despite you breaking a promise not to touch them. Have you won the argument in the community? Is that how you see it?

GALLAGHER: Well, we're going to keep talking with the community about the decision we took, but I think people understand that there is cost-of-living pressures in the community. We've made a decision based on listening to those people talk about those pressures and we've responded with this change. So, I think people are up for a rational and reasonable discussion. But we made this decision based on putting people before politics, Patricia. It was really about what more could we do to provide relief when people are doing it tough, particularly middle- and low-income Australians.

KARVELAS: David Littleproud, the leader of the Nationals, says waiting until the middle of the year is too big a delay, that people need help now. Are you looking at anything else that might provide help earlier?

GALLAGHER: Well, we've got our cost-of-living measures rolling through at the moment. I mean, inflation is something that we are mindful of as well. But we have quite a bit of support going through, whether it be our energy bill relief, some of the investments we've made in child care and Medicare, and they are flowing through. But we are very conscious, particularly in the first half of this year, about that inflation challenge. The stage three tax cuts, as they were designed by Scott Morrison five years ago, were due to come in from 1 July and the legislation that we're putting towards, put before the parliament has them kicking in from 1 July as well.

KARVELAS: Is the lesson here that you can break promises as long as people aren't worse off as a result?

GALLAGHER: Well, I'm sure people will look at this and, you know, there'll be a lot of opinion writing, as there already has been, and lessons and all the rest of it. But we've just been focused on making sure we can get support out the door for people and to help them with those cost-of-living pressures. You know, I'm sure there'll be others that will write things about this in future, but that hasn't been something that we've been conscious of. It really has been about what we can do to help people particularly those that have been feeling the crunch from the interest rate increases. 

KARVELAS: New Grattan Institute analysis shows your changes will still benefit workers over the next decade despite bracket creep but says those struggling the most are missing out. They’re calling for another increase to JobSeeker. Is that something you'll consider?

GALLAGHER: Well, I think the Treasurer and I have made it clear that every Budget we look at all aspects of expenditure across government. That would include looking at our payments and looking at our services. And that's something we've done, and I think the PM committed to that before the election, this is something that we keep under consideration. It has to be balanced up with all of the other competing pressures where people want additional spending as well. And we're in the thick of the Budget preparation now, Patricia and so all of these matters are before the ERC.

KARVELAS: Are you prepared to have a short Senate inquiry into the changes to tax?

GALLAGHER: Look, the Senate will choose what it wants to do, as I know more than most as the manager. But look, it's a very simple Bill. It's, you know, about three or four pages. It just changes the tax rates and some of – two of the thresholds. So, it's a very simple bill. I'll be appearing I think before the cost-of-living inquiry later this week. They want to talk about it. We have Estimates next week, where I'll appear with Treasury for a day and a half. So, there is opportunity for the Senate to have a look at it through that process. But our focus is on trying to get it through the parliament as quickly as possible. Obviously, if the Opposition stop their opposition to it, we will see this Bill travel through the Senate very easily.

KARVELAS: Is it worth – so, I mean, I just want to get sort of a definitive answer if the parties, the Coalition, want a short inquiry – and it would have to be short – are you prepared to give it a green light?

GALLAGHER: Well, as I said, I will be appearing before Senate committees a lot in the next two weeks. So, there is the opportunity for a Senate inquiry in that sense. But it would be through the Estimates committee, through the cost-of-living committee. I don't see the need for anything further on that. I mean, I appear, for example, for 14 hours on one sitting day. So, there's plenty of time for inquiry into the Bill if that's what the Estimates committee chooses. But I think the changes that we're talking about are well known. It's not that people don't understand them. They've got the Treasury analysis. The Bill is there. I think it's a pretty straightforward question for the Opposition and for other parties in the Senate. Do they want every Australian taxpayer to get a tax cut? Do they want 11.5 million people to get a bigger tax cut? That's the question. And it should be supported, and its passage should be very quick through the Senate.

KARVELAS: Is your message to the Coalition that you would prefer to deal with them over the Greens?

GALLAGHER: Well, I think it's always easier when the Opposition doesn't oppose things. But as we've seen in the first 18 months, they've opposed pretty much everything we've brought to the parliament. So, you know, it's a choice they've made to be – you know, to stand in the way and to obstruct. And that means we have to talk to other people in the Senate. But my preference is that the Senate unanimously moves. That's obviously the best outcome, but in the event that the Opposition cut themselves out of the story, we look at other Senators to support our passage of our legislation. Whether it be the energy bill relief, they voted against the IR changes, they vote against all of those matters we've had to work with the Senate. But obviously on this one, if they choose to stand in the way of 11.5 million Australians getting a bigger tax cut, that's something that they'll have to explain to the Australian community.

KARVELAS: You've been criticised for not being definitive enough or allowing some sort of movement on whether there'll be negative gearing changes in the future. I'm sure you've seen some of that criticism. Can you just express to me whether you'd like to see changes to negative gearing?

GALLAGHER: Well, I mean, the answer I've given remains. I mean, we have made a decision on tax on this, the matter that we're talking about, based on cost-of-living grounds. That is why we have changed our position. And it's been driven by cost-of-living, providing cost-of-living relief. The only tax measure that we have brought forward on housing is actually to generate more supply and the build-to-rent tax. So, we've got a full book, including a lot of bills stuck in the Senate on PRRT, on high-balance super accounts, on multinational tax reform. We've now got this tax bill. That's a pretty full tax book, Patricia, to get through the Senate.

KARVELAS: Okay, so you're saying in this term of Parliament, you've kind of maxed your tax changes out?

GALLAGHER: Well, we have a lot of tax changes, and we've got a lot of bills and a couple of them – at least two or three – are stuck in the Senate and we want to get those bills through. And this one, obviously. And that is a pretty significant tax agenda, I would say. And that's our focus, and that has been our focus and will be our focus, getting this tax bill through so that more people can get a bigger tax cut.

KARVELAS: Do you think that if you want to take more – okay, I understand what you're saying. You've got a lot of change on the agenda already. But if you want to make more change, do you have to go and get a mandate for change from the electorate?

GALLAGHER: Well, I think, you know, people through election campaigns take election policies. We did it in 2022. Or in fact, we've done it in every election campaign. But I think people also expect their governments to manage to the economic circumstances of the time, and that's why we've changed our position on tax. I mean, I don't think the Australian community expect you, in government, not to respond to some of the challenges that you get in government. And that's what we've been doing on income tax, where we've had to have a look at what happened five years ago and then look at what is the right thing to do now. And that's why we changed our position.

KARVELAS: Just on another issue, of course, Catherine King was speaking to Sabra Lane a little earlier about the fuel efficiency changes. The automotive industry wants financial assistance to help it transition to these new standards. Are you prepared to consider that?

GALLAGHER: Yeah, look, I heard the interview you did earlier this morning with, you know, some of that commentary around – I mean, we look at all of these matters as they come. We deal with stakeholders seeking additional support. Minister King and Minister Bowen have been working across the industry on this fuel efficiency standard and they will continue to do so. And you know, we look at all these matters on their merits, what the right thing to do is, how to drive change and how to support people through reforms. This is no different.

KARVELAS: I hope you have a great sitting week, Katy Gallagher. Thanks for joining us.

GALLAGHER: It's gonna be a big one PK.