Senator the Hon Katy Gallagher

SAMANTHA ARMYTAGE, HOST: Now, Australia’s total debt is on track to pass $1 trillion with the budget deficit nearly $22 billion worse than expected, the mid-year economic update exposing the highest spending increase outside a recession or financial crisis since the 80s. For more, let's bring in Minister for Finance, Katy Gallagher in Canberra. Minister, good morning. These figures are grim. You say this is a balancing act, but spending has blown out here. Why haven't you reined it in?

SENATOR THE HON KATY GALLAGHER, MINISTER FOR FINANCE: Well, Sam, good morning. Thanks for having me on. But we have been doing that. Every budget, we've been finding savings. I think one of the reasons that we've seen some of the slippage, as you say in your intro, is really about those payments that are automatic. So, pensions, payments to veterans, use of Medicare, use of child care subsidy. So those are important supports that the government provides to the Australian community to make sure that people are getting the help that they need. And so that's really an automatic payment that's made, and these are – as you say, it's a balancing of a lot of decisions, but we think this strikes the right balance between making sure essential services are there for people, but also trying to find savings and get the budget on better track than what we inherited.

ARMYTAGE: Okay, you've managed to set aside $5.5 billion for an election war chest, which – obviously we’ll have an election in the first half of next year. So, will we see more cost-of-living relief promised by the Treasurer ahead of the election? Because this is all Australians are talking about at the moment.

GALLAGHER: Well, yeah, of course, this has been – a big focus for the government has been on cost-of-living and we'll see that come through in MYEFO. So, you see energy bill relief that people are getting now. Tax cuts are flowing through. We've got child care subsidy, child care wages for those workers and those HECS reductions in HECS bills for people with HECS debt. So, that all comes in MYEFO and then, yeah, we keep an eye on what else we can do to make sure that we are providing cost-of-living support for the Australian people, and we'll continue to do that. We’ve got a budget to plan in March, and so really that work is underway, but we've done that at every budget update. What more assistance can we provide people?

ARMYTAGE: A surplus is now a decade away, if we're lucky, government spending is tipped to make up a quarter of GDP in the next financial year, that is super high. Our economy is growing slowly. How do you balance that? How do we manage that going forward, Australia?

GALLAGHER: Yeah, so obviously, again, part of what we need to do is make sure that we are finding savings, and we're doing that in every budget that we've had. But we've also got to acknowledge that there – and particularly with some of the demographic changes we're seeing with an aging population, that we are going to have to fund services for people that people care about, whether it be Medicare or aged care services. And so, we need to do that as well. And government does have a role to play to make sure we're supporting the economy, but we've also got to have an eye forward on growth, and that comes with the renewable energy transition. There’s going to be huge opportunities there to make sure our economy is strong, as strong as it can be. And the biggest risk to that, Sam, is Peter Dutton’s nuclear power plant idea, which will raise energy bills but also threaten all of that investment into the renewable energy sector.

ARMYTAGE: If you win the election next year, will you rein things in?

GALLAGHER: Well, we've been doing that since we came to government, Sam, I mean, we've found $92 billion in savings.

ARMYTAGE: You’re spending more. More than the forecast.

GALLAGHER: We’ve found $92 billion in savings. We've lowered the debt. We've lowered the interest on that debt. We've delivered two surpluses. The budget is $200 billion better off than what we inherited, and that's because of the decisions we've taken. But yes, there is more work to do. There is always more work to do.

ARMYTAGE: But you're going to have to make cuts. What will you cut?

GALLAGHER: Well, I think we've shown that we're prepared to find savings, and we've found savings, $92 billion of them across a range of areas. It's really come across a whole range of areas across government, and we will continue to do that, but we will make sensible savings. We won't slash and burn. We're not going to pretend that you can cut Medicare or cut the child care subsidy or cut pensions as a way of getting the budget bottom line in better shape, because people deserve and rely on those services as well.

ARMYTAGE: Katy Gallagher, we have to go. Thanks for your time. I do wish you a Merry Christmas.

GALLAGHER: Merry Christmas, Sam, lovely to see you.