Senator the Hon Katy Gallagher

PATRICIA KARVELAS, HOST: Final federal budget outcome figures to be released later this month will show that debt levels have fallen by nearly $150 billion. Treasury says this will save $80 billion in interest over the next 10 years, but while that will please the Government, it faces several key challenges still. Just a couple to mention, the Greens are threatening to derail any reforms to the Reserve Bank, demanding that the Government step in and cut the official cash rate. Finance Minister Katy Gallagher joins me this morning. Minister, welcome back to the program.

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

KARVELAS: The final budget result shows a $17 billion reduction in debt, but there’s still a $906 billion debt. It’s not as if debt isn’t there. It’s quite large. Has enough been done to reduce that mammoth debt Australia lives with?

GALLAGHER: Well, PK, we’re doing what we can and certainly since we came to government, we’ve been looking at ways to cut spending in you know areas that were wasteful before we came to government. We’re looking at spending restraint and we’re looking at how we can reprioritise spending as well, and all that makes a difference. And the Final Budget Outcome, when we release it, will show that we you know have done a lot of heavy lifting on the debt front. It’s saving a lot of interest, as you say, $80 billion worth in interest payments alone, $4 billion in the 23-24 financial year. That’s a huge difference. So, we’ll continue to chip away at that. The less we have to borrow, the less interest we pay, the better the budget shape is in. And that’s been a key part of Jim and my approach to the Budget, looking at ways we can invest in good, high-quality services, but at the same time, getting the Budget in much better shape than when we came to government.

KARVELAS: But the Treasury analysis that will be released in the Final Budget Outcome will reveal less than expected revenue generated from taxes and payments. That’s an emerging and growing structural issue, isn’t it?

GALLAGHER: Well, we’ve certainly still got structural challenges in the Budget, that’s for sure. And we’re seeing some of that revenue, as you say, come off. Importantly, we’re seeing less payment, so less on the spending side as well. That’s helping. The second surplus will be handed down. That’s helping, particularly with the inflation challenge in the economy. But yeah, some of those big structural pressures remain. We’ve made good progress on aged care and NDIS in the last couple of months, you know, but we still – interest is one of those big pressures on the Budget as well, and Defence and Health. Those are going to require continued management, that’s for sure.

KARVELAS: So the economic story you’re out trying to tell today is that the Government’s managing the Budget well. But if you look at some of the polling and I know you would’ve, there is evidence that the public isn’t buying what you’re selling, if I can be blunt. Voters have turned on Labor in two of the biggest states, the Coalition has lifted to a stronger position nationwide. Doesn’t that demonstrate that the economic story that you’re telling isn’t resonating with voters?

GALLAGHER: Well, there’s no doubt that households are under a lot of pressure. I think you see that reflected in some of the research you talk about. So, I don’t think it’s any surprise that people, when they’re feeling those cost-of-living pressures, you know, will seek to attribute responsibility. Our job, though, is to turn up and continue to make the right economic decisions for the times that we’ve got right now, that we get the privilege of serving in government. At the moment, we’ve got an inflation challenge, we’ve got a budget under enormous pressure. And so the numbers that we’ve been talking about this morning reflect the responsible economic decisions that we’ve been taking, and part of the reason why we’re trying to get the Budget in better shape is so that we can provide more cost-of-living help or additional support to people while they’re going through this difficult time. But it’s, you know, I’m not going to pretend it isn’t a complicated story to tell. And the numbers that you’ve been talking about in the papers today, I think, reflect people’s experience of doing it tough at the moment.

KARVELAS: And that the public is demanding more action from the Government. So, will you meet them where they are? Because they are marking the government down.

GALLAGHER: Well, we’re always looking at ways that we can help with cost-of-living and you’ve seen that through the tax cuts, you’ve seen that through the energy bill relief, or investments in child care, cheaper medicines, Medicare. All of those areas where we’ve been able to provide additional investment, but it hasn’t thwarted some of the issues around inflation. So, it hasn’t put upward pressure on inflation. So, we’ve been looking at ways to do that. We’ll continue that approach. I mean, that’s Jim and my day-to-day job. Every day we’re looking at ways that we can support households, but still managing the economy responsibly when it comes to the inflation challenge. We’ll get some more data out on Wednesday. The monthly CPI figures are out on Wednesday and we’re hoping that that will show continued progress of getting inflation back into the target range, and that helps the Bank, obviously, with some of the decisions they’ve got to make.

KARVELAS: If you’re just tuning in, this is Radio National Breakfast this Monday morning. My guest, the Finance Minister, Katy Gallagher. I want to change the topic, Minister, and ask you about the Reserve Bank. A central part of the government’s agenda to create these new two Boards. But the Greens you need because the Coalition has withdrawn. So, the Greens senator Nick McKim has said they won’t pass any reforms unless the Treasurer orders an immediate interest rate cut. Can you work with the Greens on these terms?

GALLAGHER: Well, I just think the Greens are out of control at the moment. Full of self-importance and out seeking a populist approach to everything. And it’s crazy what they’re saying to us. So, if that’s their ultimatum and you know, it’s a bit unseemly, Nick McKim going around issuing ultimatums. You know – no. We won’t work with that because that is crazy. It’s economically irresponsible and we won’t do it. But the real question, I think, and we saw this play out last week in the Senate, is the Greens and Peter Dutton lining up to thwart sensible changes to the RBA, just like they did on Help to Buy with housing last week.

KARVELAS: So, where does it leave you? The RBA reforms are dead, aren’t they?

GALLAGHER: Well, they remain on the table. We’re pretty keen on them, so is the Bank. And we certainly thought that the Reserve Bank’s support for these reforms would sway the Liberal party. You know, we don’t go to the Greens for common-sense economic policy, that’s for sure. But we would have thought that a mainstream party of government would have seen the merit in these proposals and the Treasurer’s been working with the Shadow Treasurer closely on it, but they’ve dealt themselves out for whatever reason. They remain on the table, we remain committed to them and we remain open to talking to anyone who would like to see those sensible reforms implemented.

KARVELAS: Okay, but the two groups you’d need talking to you are not going to deliver what you’ve asked. So, they’re essentially dead. I mean, you might be keeping them on the table but no one’s picking up what you’ve got on the table.

GALLAGHER: Well, we remain committed to them, PK. And you know, if, and I would say the more likely path is if Peter Dutton stops being stubborn and engages with us, there is a way through on this. I don’t know why they have dealt themselves out on this, I understand –

KARVELAS: Well, they say that you’ve politicised the RBA, they say all of the tough talk on the RBA, the smashing the economy – they don’t trust the process.

GALLAGHER: Well, that’s politics, it’s not policy. They know this is good, sensible policy and I would urge them to reconsider their position. Because we’re not going to go around being threatened, having the finger waved by Nick McKim saying that the government should rip up the way the Bank, the fiscal and monetary policy systems have worked in this country – very successfully, without political interference on the monetary policy side – for decades. 

KARVELAS: Let’s get to what the polling actually tells us, though, about where you might be. You might be in a situation where you have to govern in minority. You’ve said some pretty strong things in this interview about the Greens being out of control. If they are out of control, does that mean you just can’t govern with them if you were to be in minority? 

GALLAGHER: Well, we’re campaigning for majority government, PK.

KARVELAS: Okay, if it doesn’t work out that way, and that’s what the public polling so far is showing might be the trend, where does it leave you in terms of being able to work with the Greens?

GALLAGHER: Well, we work with the Greens, you know, and you have to. In the Senate, it’s a minority chamber, you work with everybody in that chamber. It’s the Greens, there’s a very large cross bench, there’s the National Party and the Liberal Party. That is not unusual, to have a minority government in the Senate. So, in order to do anything, PK – we’ve got 25 votes, we have to get 39. So, it requires us to talk to people and work with people, but in terms of the election campaign – and I hope that people are engaging on some of these crazy ideas the Greens have, and the fact that Peter Dutton is blocking some sensible areas like our Help to Buy scheme in the housing program – and see that the Government is genuinely trying to push forward both on all of these issues, in the long-term interests of this country. And that’s why we will continue to campaign for majority government. And there’s a lot of what-ifs. It’s very hard to speculate what-ifs. I mean, the Australian people will have their say when the election is held, but we are certainly campaigning for majority government.

KARVELAS: Just a couple of other issues before I let you go. Almost 150,000 Australians have accessed their super to fund medical procedures in the past 5 years. That number is rising. Does that concern you?

GALLAGHER: Well, there are rules in place. So, certainly the Government would be hopeful that all of those rules have been followed. I’m sure the Minister for Financial Services would be looking at some of this data coming out. There’s good reason to let people access their super for, you know, the specified reasons like health or paying for an operation, things like that. But there’s also very good reasons why people should keep their super in their super for their retirement years. So, I have no doubt that the Minister would be looking at this data.

KARVELAS: Is it not worth looking at the rules again, then?

GALLAGHER: Well, I think the rules have been in place for some time, so I think if there is the increase, as you say – I mean, this data that I saw was over a five-year period. If it is looking like it’s increasing and increasing in certain areas, then I’m sure the Minister will be having a look at that. Because we need to make sure that we’re finding that right balance with supporting people when they really need it for something that they – an operation, for example – they really need. But also having pretty tight rules about retaining your super in your super for what it’s really meant for, which is your retirement years.

KARVELAS: And if you can use it for weight loss, IVF, dentistry, why can’t people use it to buy a house?

GALLAGHER: Well, again, when you look at the numbers, it is very small, really, over a five-year period, for the number of superannuation accounts that are in operation in the country. So I think this is a very small number of individuals, really. On the housing thing, all the evidence is there, PK. This is another one of those kinds of populist policies that sounds good but ultimately isn’t. Because all of the data shows that if you take your money out of your super for housing, it just automatically inflates housing. The data is very clear and I don’t think we’re wanting to make housing more unaffordable for people as well as reducing your superannuation. So, it really is a problematic policy and we don’t support it.

KARVELAS: Many thanks for joining us this morning, Minister. 

GALLAGHER: Thanks very much, PK.