Senator the Hon Katy Gallagher

PAUL ALLEN, HOST: I’m here at Parliament House in Canberra with the Finance Minister, Katy Gallagher, to talk about the Budget, which has just been handed down. Minister, thank you so much as always for joining us. I want to start with the obvious question, which regards inflation. There was obviously billions of dollars in spending in this budget, economists are warning of the inflation risk, how do you tell them that they’re not right?

SENATOR THE HON KATY GALLAGHER, MINISTER FOR FINANCE: Well, for a start, economists have a range of views and it’s always probably hard to find a group that agree with each other. But I think you need to look at the Budget as a whole. So, we’re delivering the first back-to-back surpluses in 16 years; we’re showing spending restraint, whether it be through savings or reprioritising across budget; we’ve you know put back all the revenue upgrades, the vast majority of those, back to budget repair; lowered debt, lowered interest payments on that debt. So that tells the sort of budget responsibility, kind of looking to find restraint – but we’ve also had to work out ways to provide some cost-of-living relief without adding to inflation and have a view and an eye on the future. So, this budget tries to do a lot of things, but I certainly support the view that there is restraint in the Budget. There’s a lot of calls on the Federal Budget and we had to say no to a lot of things.

ALLEN: I want to return to the deficit question in a moment but just on inflation, if you’re correct, even if there is a short-term drop in inflation, longer term those pressures remain in place don’t they? What’s the plan to address that?

GALLAGHER: Well, I think both the Reserve Bank and the Treasury see inflation moderating over the next 18 months, continuing to moderate. I mean when we came to government, inflation had a six in front of it, it’s now got a 3 in front of it, we’d like a 2 in front of it. That’s what the Treasury forecasts show. And you know, the decisions we’ve taken on whether it be medicines or rent assistance and the energy bill rebates, focus on putting downward pressure on inflation over the next 12 months. Which we think is a good outcome. But it also provides cost-of-living relief for households.

ALLEN: In terms of the deficits, I mean we had a couple of surpluses there, but of course commodity prices are coming down. These deficits start to look a bit structural, at the whims of what else is going on in the global economy. Do you have the stomach for the really hard reform that might need to be done here?

GALLAGHER: Well, we’ve put our shoulder to the wheel on that since we came to government, looking to find savings. We’ve found $77 billion worth of savings or reprioritisations in the last 3 budgets. That’s a lot more than our predecessors did. And you’re right, there’s a lot more to do. We need to look at reforms in NDIS. We’re working on reforms in aged care. Defence are doing a lot of the heavy lifting in this budget in terms of looking within their budget to find out how they make room for new priorities, and they’re the big calls. Interest payments on our debt, we’re lowering debt so those interest payments are lower. They’re the big structural pressures on the budget. They increase, they don’t decrease, but we need to reform in all of those areas.

ALLEN: Well, certainly Australia’s debt to GDP ratio will be the envy of many developed countries, but in terms of the savings, let’s look at the other side of the coin – spending. You’ve delivered the cost-of-living relief as you say, tax breaks for all Australians as well. Was there not a sense that maybe those really high income earners don’t need this? Could there have been more of a saving there?

GALLAGHER: Well, I think if you’re talking about energy bill relief, I mean our cost-of-living package – there are elements there are targeted as we’ve done in the past. So, the rent assistance and medicines, looking at how we can provide that over five years to concession card holders. But the most efficient and easiest way to deliver a short-term cost-of-living relief on energy bills and electricity bills is you know – the minute you move out of the concessions regime – is to allow it to be broad-based.

ALLEN: In terms of some of the tax incentives, particularly under Future Made In Australia, this was obviously a centrepiece of the budget. Critical minerals, hydrogen, those tax breaks don’t start until 2028. Can you explain the reason for the delay? Why not now?

GALLAGHER: So, the Future Made In Australia, you’re right, is a big part of the Budget. An element of that is renewable energy superpower and that has kind of the production tax credits system that we want to put in place. The reason they don’t start until 2027 is because it’s around production. So, you know, people need to make the investment, actually start producing green hydrogen, refining and processing the critical minerals before they can get a tax benefit from that. So, there is a couple of years there on that, but in the meantime we’re also looking at a range of grants, equity, loans. We’ve got our National Reconstruction Fund working. So, there is intervention and support from the government in the short term as well.

ALLEN: Now, is this the last budget before we see an election, or is there gonna be one more?

GALLAGHER: Well, the Prime Minister’s outlined that there’ll be a budget in March. We have to have an election by May. But ultimately that decision’s for the Prime Minister, above my pay grade.

ALLEN: Okay, I was anticipating that kind of response.

GALLAGHER: Oh no.

ALLEN: There is the risk for you isn’t there, heading into that election, returning to deficit. I know the Labor government’s been trying to deliver itself as responsible economic managers, have you left your flank open to an attack with this deficit that you’re forecasting for 2024-25?

GALLAGHER: I think we’ve been open with people and honest about the pressures on the Budget since we’ve came to government. We have worked hard to deliver those surpluses. They don’t happen by accident. I know people – there’s a bit of commentary around that they just happen. They don’t. I mean there’s no shortage of calls for spending on the Budget, we’ve had to say no to a lot of things. We want those surpluses, they help with inflation in the short term. But I’m not going to pretend that there aren’t increasing pressures. NDIS, aged care, health, defence and interest on government debt are the five key structural pressures on the Budget that we need to continue to work on and reform.

ALLEN: Alright, Finance Minister Katy Gallagher thank you so much for joining us.

GALLAGHER: Thank you.