Senator the Hon Katy Gallagher

DAVID LIPSON, HOST: Katy Gallagher, thanks for being with us. Last year, the energy bill relief that the government offered was targeted at those most in need. This year, it’s across the board, and I’m sure that many voters – probably all voters – would be happy about that. And I do note that there is an election due within a year. But what is the economic justification for spraying this relief to every household, including those living in harbourside mansions?

SENATOR THE HON KATY GALLAGHER, MINISTER FOR FINANCE: Well, we’re not spraying it around. And I think one of the things we were pleased with last year was the impact that the energy bill relief had. It was clear that it did put downward pressure on inflation. And I guess broadening it out – and it will be paid through, various states and territories differ slightly but it will be paid through people’s electricity bills or energy bills – is a recognition that there’s cost-of-living pressure outside of people who are eligible for income support or payments. So, outside of the concessions regime. It’s a recognition that people are feeling the pinch. And this is a neat way of providing relief and putting downward pressure on inflation at the same time.

LIPSON: Through this policy, do you now believe that you’ve met your pre-election promise to reduce electricity bills by $275 for everyone?

GALLAGHER: Oh, look it certainly wasn’t about that. It was more about what’s the right thing to do at the right time to ease cost-of-living pressures on households. This is a way that we can do it. Puts downward pressure on inflation, which is something that we need to focus on in the short term. Provides that relief in a responsible way. But you know, we – I think last year’s rolling out to businesses and targeted concession card holders proved to us that there was a neat way to provide that additional support.

LIPSON: Putting downward pressure on inflation, as you’ve mentioned a couple of times – that is contested. A lot of economists will say this is an additional $300 for every household to spend and therefore it’s inflationary. How are we getting such different stories?

GALLAGHER: Well, that’s not the advice to government. And so we’ve taken the Treasury advice on this, it’s reflected in the Treasury forecasts. They believe it will take you know half a percentage point off inflation, rolling out this measure. And I think it’s genuine recognition that the bill pinch is really hitting homes and households right across Australia. So, this will not be paid into your bank account or given as a cash payment. It will be paid onto your bill and simply reduce the cost of some of those big increases we’ve seen hitting households. So, it’s a responsible way. The Treasury’s advice is very clear that it does put downward pressure on inflation and we think it’s a good way of trying to assist households.

LIPSON: Well, they talk about headline inflation, which I guess is this sort of CPI, the way we measure inflation. If this is really disinflationary, if it does reduce inflation, why not just give relief on everything? Rent assistance for everyone, relief for petrol, insurance, new cars, flat screen TVs. That’s all being measured as inflation. Why not give cost-of-living relief in all of those areas and we can solve the inflation problem overnight, if that’s the case.

GALLAGHER: Well, it’s also what the Budget can afford. I mean you know, I think there’s no shortage of ideas. Of people saying yeah, we’d like some more government assistance here, here and here. What we’re trying to do is provide cost-of-living relief in an affordable way. Obviously, the key part of that, the key sort of centrepiece of that is the tax cuts that’ll go to every taxpayer on 1 July. That’s the big part in this budget. But then we’ve had at what’s affordable, what’s responsible and what would put downward pressure on inflation. And we’re doing it through the two big drivers of inflation that we’ve seen, which is energy bills and rent. And we’re targeting the rent assistance to a million renters across Australia.

LIPSON: So why is that targeted and the energy bill relief not targeted?

GALLAGHER: Well, it's really – I mean again, it's the mechanism that we can provide. We can do that through our Commonwealth Rent Assistance, that is a targeted approach. We'll do the energy bill relief through the retailers, through states and territories. But it's also what's affordable and what's responsible. This package, the cost-of-living package is a pretty reasonable sized package on the Budget. And obviously we've got a whole range of other areas in the Budget that we need to deal with as well.

LIPSON: So you're certain that this budget is not working at cross purposes with the Reserve Bank's mission?

GALLAGHER: Well, that's not – well, yeah, I'm trying to see – that's a double negative. It's not – the advice we have from Treasury is that this will put downward pressure on inflation, and they've reflected that in their Treasury forecasts, which obviously are independent of us.

LIPSON: Wages growth is going down from four per cent this year to three-and-a-quarter percent next year. Why is that?

GALLAGHER: Well, I think we've seen a bit of uptick with some of those big wage cases that have been held before the Fair Work Commission. So, the big increases in say, aged care, for example, which we've seen flow across the economy. And then back to a more you know, probably a longer-term average rate of wages growth. You know, just above three per cent. So, I think it's really dealing with some of those big cases that have come through and the big annual wage cases which have had an element of catch-up and also you know matching some of the high inflation we've seen.

LIPSON: But real wages will continue to grow –

GALLAGHER: Yeah, that’s right.

LIPSON: Over the four years ahead. Okay, on domestic violence prevention, frontline services have been calling for increased consistent funding for many years. Are they getting that from this budget?

GALLAGHER: Well, the main funder of those frontline services are the States and Territories. So, where we've looked at the areas that we are primarily responsible for – and I should say that we've got a lot of partnerships with States and Territories where we fund elements of the National Plan to End Violence Against Women and Children. The big areas that we have responsibility for are in prevention and early intervention and support and through our income support system. So, the Budget reflects the Leaving Violence payment, that's almost a billion dollars, making that permanent. It was only funded for a couple of years. We need to make that permanent and better targeted. We've got some money in there for additional housing support for women and children escaping domestic violence. And then there's a range of smaller programs, including an important piece around perpetrator research so that we can fully understand the latest information about how we can intervene and change the behaviour of men – and they are primarily men – and not make this just a women's issue. So, look, there's always more to be done. This brings – I think this budget brings the women's safety spend in the order of about $3.4 billion, and then if you add in the housing, it's more than that. But there's always more to do and we'll continue to work with the States and Territories on that.

LIPSON: There's a $14 billion saving over four years – or perhaps it's five, I'm not too sure – on the NDIS. But the key is $14 billion, that's a lot of money that's coming out of the growth, I think, of the NDIS. Where exactly is that saving coming from?

GALLAGHER: So, we don't see it as a saving and we haven't counted it as a saving in the Budget. We see this as a moderation of the growth of the NDIS. So, the NDIS continues to grow. What we're trying to do is moderate the growth –

LIPSON: You banked it, right?

GALLAGHER: Well, that – we've done this on the advice of the NDIS actuary. So, there's some legislation before the Parliament which really goes to look at how we can manage inter-plan growth. That is how do we kind of manage the plan that gets given to an individual that doesn't, you know, significantly increase, that we can maintain the support and the funding within that. So that's the largest bit of that. So, the actuaries had a look at, well, without the legislation, the NDIS growth would be over $15 billion. Because of this legislation, it will be in the order of $1.5 billion, and that's the difference. So, it's not – we don't see it as a saving. We want the NDIS to work. We want people to get the right support. But we cannot allow it to continue to grow in the rate that it has been growing, because it will squeeze out other services and supports that we need to provide.

LIPSON: So, it sounds like it's more of a cap on the money that's being spent per person or per sort of package, I guess, within the NDIS, rather than removing people from the NDIS.

GALLAGHER: Yes. No, it's certainly not about removing people. It's really – when you get your package, we would like that package – you know, your supports and you’re assessed for that package – that that support is what you use to provide the extra help that you need. And that gives us a bit more certainty and it certainly stops some of that increased growth. We can't have the scheme growing at 14 per cent per year. It's – and we're saying over time, with some of these interventions, that we expect the scheme will grow in the order of eight per cent. Which is still quite high when you consider other government programs and the growth of the economy as a whole. But we expect that, and we just want to manage it in a more reasonable way.

LIPSON: Just very briefly, decisions taken not yet announced. It's about $6.5 billion over four years. Seems like quite a substantial election war chest. Is that the way to look at it?

GALLAGHER: No, not at all. I think there's always a bit of money put in decisions taken but not yet announced and they're for a variety of different reasons. In the contingency reserve, as well. There's money that you know, we're making sensible provisions for, for things like aged care wages. We know that that decision is coming. We don't know what it is yet. We've got the early educators case, we don't know what that is yet, but we're making a commitment to provide funding for that. We've got a range of other negotiations underway that aren't just yet finalised. But we're trying to be responsible and providing a provision within the Budget for it.

LIPSON: Senator Katy Gallagher, Finance Minister, thank you for being with us.

GALLAGHER: Thanks very much, David.