Senator the Hon Katy Gallagher

SALLY SARA, HOST: Well, the Federal Government is talking up its efforts to manage spending without cutting essential services as Australia stares down the barrel of deepening deficits. After consecutive surpluses, the mid-year economic outlook handed down yesterday confirmed that higher than expected deficits will occur over the next 4 years, with increased spending pushing debt past the $1 trillion mark. The Opposition has jumped on the figures, accusing the Government of running a high-spending agenda and losing control of the budget ahead of next year’s federal election. The Finance Minister, Senator Katy Gallagher, is my guest this morning. Minister, welcome back to Breakfast.

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

SARA: The Government has described much of this spending as unavoidable. If the spending was unavoidable, why has your government failed to bring in enough reform to pay for it?

GALLAGHER: Well, I think we have, Sally. We’ve got some big pressures coming on to the budget, we’ve been talking about those for a while. Aged care, health care, NDIS, defence and paying interest on the government’s debt. And I think we’ve made progress in all of those areas. They are the big five structural pressures on the budget. We have put in reforms to the NDIS, we’ve put in reforms to aged care, and both of those are showing improvements in MYEFO. In defence, Richard Marles has done an extraordinary amount of work to make sure that Defence can live within their funding envelope. And we’ve lowered the debt burden and reduced the interest on that debt in the order of $70 billion. So, you know, each budget update, budgets are a set of decisions and balances, but on the structural side of the budget, I don’t think you would have found a government that’s done more to try and address those big structural spends than we have done in the last 2 years.

SARA: The fiscal equation is spending on one hand but gathering taxes on the other. Why hasn’t the Government done more there to make sure that you can fund these spending priorities?

GALLAGHER: Well again, we have had some modest tax measures in our budget. We’ve got a couple of them still stuck in the Senate, where we’d like to make some reasonable and modest adjustments to revenue in the terms of high-balance super tax concessions, in taking some of those back a little bit - still highly concessional, but not as concessional. They’re stuck in the Senate. So again, these are - we make progress each budget update, each budget, it’s a balance of savings, reprioritising, dealing with those unavoidable but important spends, and when the Opposition criticise that and they call it wasteful spending, when you look at this, this is pensions, it’s investment in Medicare, it’s the investments in child care subsidies, we’ve got hundreds of thousands more children coming into early education and care, which is great for those children and great for families, but it does come with a cost to the budget. And we’ve got to manage all of that as we work through these difficult decisions.

SARA: Earlier on the program today, talking about the issue of reform, we had Cherelle Murphy, who’s the chief economist at EY, talking about how deepening debts have long been projected in our intergenerational reports. This is what she had to say.

[GRAB] CHERELLE MURPHY: We know that there’s pressure on government spending, this is not a new story, and yet it doesn’t seem like this Government or to be honest, many governments before it have been willing to take the really hard decisions to bring that under control so that we can get government revenue and expenditure to match up a bit more closely and get into a position where the fiscal stance is more sustainable it prepares us for any potential future shocks and it stops passing on more debt to the next generation.

SARA: Do you agree with that assessment?

GALLAGHER: Well, I caught that interview with Cherelle earlier and I don’t, well, I think it’s easy to commentate on a budget, it’s harder to put one together, was my assessment. And when you look at what we’ve done with this budget since coming to government, the budget is $200 billion better off since we inherited it. We’ve also paid down debt, we’ve lowered the interest bill on that debt, we’ve delivered two surpluses, and we’ve managed to find investments to go into all of those key areas that people care about, whether it be cost-of-living or essential services, and we’ve done all of that. It’s a balancing act, there’s more work to do, a budget is an ongoing project in a sense because the demands of government never stop and when Jim and I and the others lock ourselves in the ERC room, these are all of the issues that we have to consider. But government’s first job is to manage the budget responsibly, but to deliver all of those services that people rely on heavily. And we’ve seen that in MYEFO, we’ve been able to do it in budgets, but we’ve got to get the budget in better shape as well. And I would say when we hear the kind of Opposition criticism of the budget, the biggest risk to the budget going forward is this crazy idea about nuclear power plants across the country, because it’s highly likely they’ll be uncommercial and they will be completely budget-funded and that will completely destroy the budget and mean we won’t be able to fund things like Medicare and all those other important areas that the community relies upon.

SARA: You’re listening to Radio National Breakfast and my guest is the Minister for Finance, Senator Katy Gallagher. Minister, yesterday The Australian was reporting that the government-run service Open Arms, which provides counselling and support for Defence members, veterans and their families, that superannuation had failed to be paid from 2012 until the present. The Defence Minister, Richard Marles, said that work would be done to make sure it was rectified. Senator, given that you are the Minister for Finance and Public Service, has any other government agency or department failed to pay or underpaid superannuation? Are you aware of any other cases?

GALLAGHER: I’m not, but I think the issue that has been identified needs, we need to explore that across government. I mean, it does seem to be that this is a particular arrangement of an interpretation of an employment status, not wanting to get too technical, that has led to this issue. I totally support the words of Richard Marles yesterday, which was that it’s unacceptable and needs to be rectified. And as problems arise in government, you need to respond, if you’ve made a mistake then you need to fix it, and we’ll make sure that that’s the case. I am not aware that there is anyone else involved at this point in time.

SARA: Just on student visas, the government has issued a new direction to the Department of Home Affairs around how it prioritises the processing of student visas. Is this an attempt to get the student caps that you couldn’t push through parliament in place in another way?

GALLAGHER: Well, it is to try and manage the international student visa processing properly. We did want to have it done through legislation with the caps that we put to the parliament. They weren’t able to get through. The Liberal party voted against them. And so, the ministers have looked at other ways to manage the incoming international student numbers in a way that you know, best meets the needs of universities but also the numbers of people arriving in Australia. That was always the aim, and this allows us to do this. Our preference would have been through legislation, but that wasn’t possible, when Peter Dutton voted against it.

SARA: So, you’re confirming that this is happening?

GALLAGHER: Yes. So, there’s a new ministerial direction that’s been put in place and that will ensure that visa applications are processed in a way that those student numbers can be managed and also applications can flow to regional and smaller universities.

SARA: Minister, more than a year ago in November last year, you and your industry minister colleague, Ed Husic, declared that the National Reconstruction Fund was open for business. It’s a $15 billion fund. But since you declared that it was open for business more than a year ago, only $53 million has been allocated. At that pace, it will take more than 280 years to allocate $15 billion. Is it moving too slowly, in your view?

GALLAGHER: No, not at all. And I think when you talk to people in the commercial world, when you start a new organisation and you have a new mandate, you’ve got legislation in place, you put a new board together, it’s not unusual that it would take months to get the first applications out the door. I’ve met with the chair. Ed Husic is very closely working on this. I understand he’ll have more to say about that probably today. But to get high-quality, I mean, this is not just funding whatever first comes in best dressed, this is high-quality investments where the government can value-add and support new and emerging industries in Australia. It’s critical for our growth agenda. It’s an exciting opportunity that we have to support Australian-made. And the board takes its responsibilities very seriously. These are very carefully thought through commercial decisions and I strongly back the board in the approach it’s taking.

SARA: So, if the National Reconstruction Fund continues at this pace, which you’re saying is not too slow, but there’ve been some things to deal with initially, that will mean that this $15 billion won’t get out the door.

GALLAGHER: Well, no, you wouldn’t expect it to continue at this pace, that’s what I’m saying, I mean, a new fund with a new board with a new mandate with legislation that clearly establishes its role, it is not unusual in the commercial world that starting an organisation like that, you would have a lead-in time as you are processing those applications. I would expect that that pace would pick up now that it has been in operation for a year or so. The success of the NRF, I have no doubt it will be successful, is dependent on very good, careful, thought through commercial decisionmaking and I have no doubt that the board is making those decisions appropriately.

SARA: Minister, time is against us, we’ll need to leave it there. Thank you very much.

GALLAGHER: Thanks so much for having me on.