Senator the Hon Katy Gallagher

KIERAN GILBERT, HOST: Now for more on the budget, earlier today I spoke to the Finance Minister, Katy Gallagher. I began by asking her if the Treasury’s forecast on inflation that we’re seeing – which is more optimistic than the RBA – is that all wishful thinking?

SENATOR THE HON KATY GALLAGHER, MINISTER FOR FINANCE: Well these are Treasury’s forecasts. So they’re based on their best assessment of the economic data plus the decisions we’re taking in the budget. And obviously they update those as we do with any economic update. But I think it tells the story that we’ve been telling, which is that inflation’s been moderating, the job’s not done yet, but we’re seeing pleasing progress.

GILBERT: And do you see it as a basis to say look, we’re doing our bit when it comes to inflation? That over coming when you’re selling this budget, you can say look at that number, we’re putting downward pressure on inflation? Is that how you see it?

GALLAGHER: Well, the forecasts are there on their own, but I think people will see the decisions we’re taking and how that contributes to those forecasts. So, you know we have been very clear since we came to government that we have a role to play when it comes to putting downward pressure on inflation. We want to work with the RBA, not against it. Part of the solution, not the problem. And I think you’ll see that in the budget.

GILBERT: The RBA said that the upside risks if we get it wrong on inflation are greater than the downside risks. Should Treasury be more cautious, then?

GALLAGHER: Well, the forecasts I think are the best assessment with all the data ahead of them. It’s not what they want to see or what they wish to see. It’s what their assessment of the data says. But you know obviously there are continuing risks. We’re living in pretty uncertain times. And that’s why forecasts get updated regularly, so that they can refine – based on their information that they have and the decisions we’ve taken in the budget, put those all together, they’re the forecast. But we’re not pretending that the job’s done or that there isn’t more work to do or that we would take our eye off inflation. I think this budget tries to find that balance between dealing with inflation in the short term, how do you provide cost-of-living relief to families and households across Australia, and then also look to how do we drive growth across the economy. So I think it has been a particularly challenging budget in that sense of trying to strike the right balance and I think we’ve found the sweet spot.

GILBERT: Last year’s efforts in some of those areas like energy and rental assistance knocked off half a percent from CPI. The RBA’s suggesting inflation or CPI will be at 3.8 per cent at the end of this year. Treasury’s saying it’s gonna be less than three per cent. So, will the government’s measures knock a full one per cent off CPI? Is that what you’re expecting?

GALLAGHER: Well, I guess the RBA – you know, they can speak to their forecasts and how they land on those and Treasury can on their forecast. They’re set independently, obviously. Treasury have more information about the budget and the role the budget will play in determining their forecast. I think the job for the government is really to make sure that those decisions we are taking are – particularly in the short term, in the 2024-25 year – putting that downward pressure on inflation. And you know you’ll see that. And it’s not just I guess some of the measures that will reduce inflation, it’s also in terms of spending and investments, the timing, the composition and the quality of those investments and what are you trying to achieve with them. And that goes a bit to the Future Made In Australia program as well.

GILBERT: In 2025-26, the inflation number is actually higher than what MYEFO had forecast. Is that when those assistance measures are removed? Is that the impact you see with the tick-up in inflation?

GALLAGHER: Well, measures that reduce inflation in the short-term – yeah, as you say, when they’re removed, they will impact forecasts and you know we’ve been mindful of that. I mean particularly the 2024-25 year is the one that we have our eye on in terms of continuing to put downward pressure on inflation. It’s staying a bit higher than we would have liked, but we’ve got a job we can do. But at the same time we’re doing that, we’re having to do a whole range of other things. As you know, there’s no shortage of calls for extra investment, extra spending and we’re having to make some pretty tough decisions about that.

GILBERT: There’s a lot at stake – you know, people’s kitchen tables, obviously, people are hurting with their budgets – but for the government, that you and Jim Chalmers nail this, isn’t there?

GALLAGHER: Well, we certainly feel the pressure every budget week I think. You know, it’s a culmination of months and months of work coming together and then you know we open it up and everyone has a view. And there’ll be I think a whole range of views as always with these things. But yeah, there’s no doubt that this is an important – the budget is the most important document for any government in any year. And you know because of the economic challenges I think we face, you know perhaps we feel the pressure this year more than others.

GILBERT: Yeah, economic and political with an election a year out. I wonder – you detailed some of the savings already and some pretty big ones, $22.5 billion in defence reprioritisations and so on. Not a big mention of NDIS yet? But that is a huge growth stream isn’t it? Can we expect any more detail, has Bill Shorten made any ground on that?

GALLAGHER: Well you will see movement on the NDIS. Obviously we’re trying to curtail the growth. It’s actually not about finding savings or reducing expenditure, it’s how do we stop the scheme growing at the speed that it’s been growing. And so you’ll definitely see more movement on that. We’ve got the legislation that was introduced into the parliament. If that passes, you know, there’ll be moderation of the growth. That’s attached to that legislation. So yeah I mean NDIS, we’re working on aged care reform, we’ve got the defence reprioritisation as you say. And you know we’re looking to pay down debt – to bank some of the revenue that we’re seeing, the revenue increases that we’re seeing, to use that to drive down debt and save you know billions of dollars in interest payments. So all of those five big spending pressures, you’ll see work away – us working away on all of them.

GILBERT: Yeah I can imagine. And on the university sector, we’re seeing a bit of a row at the moment, you wanna cap places. This is one of our biggest exports, international students. It’s a huge export. You don’t wanna damage that, surely?

GALLAGHER: Absolutely not. I mean, students, international students are a really important part of our economy and as you say, in terms of the work we do across the world. But we also need to manage it responsibly as well. We’ve seen a huge uptick in the number of international students coming to Australia, which is great, but we’ve also got to look at integrity measures within that sector, make sure that those education providers are operating properly and also work with the university sector about how they manage demand as well. So, more discussions to be had, but this is one of the big areas of pressure in terms of our migration numbers. And I think it’s right we have a say and continue to work with universities about what that looks like going forward.

GILBERT: Katy Gallagher speaking to me earlier today.