Senator the Hon Katy Gallagher

SARAH ABO, HOST: Well, China has issued a stern warning to the federal government not to increase our defence spending, attacking calls from the US for us to boost our military budget. Let's bring in Finance Minister Katy Gallagher in Canberra now. Senator, good morning to you. So, China's top diplomat in Australia says boosting defence spending will be a big burden on the budget. It's very nice of him to be mindful of your bottom line.

SENATOR THE HON KATY GALLAGHER, MINISTER FOR FINANCE: Well, there seems to be a lot of countries interested in our budget. Look, I mean, our position remains the same. We make decisions based in our national interest, based on our needs, and we’ll continue to do so, whether it be in defence, national security, or a whole range of other areas.

ABO: When China, though, says that we shouldn't be focused on our defence spend, I think you probably should take it as the opposite of what you actually should do, right?

GALLAGHER: Well, Sarah, I mean, we've been saying we've increased defence spending since we came to government three years ago. I mean, it wasn't, we weren't spending enough. We didn't have the right capability. We've now increased that. There'll be $11 billion over the forward estimates, $57 billion over the medium term, and that is to respond to some of the issues that we feel, as the Australian Government, need addressing in terms of our defence capability. That's the position we took in the last government last term, and it's the position we take going forward.

ABO: But Katy, this is almost a warning, isn't it? I mean, we know that China's military might is at full strength at the moment, and ours is not. I mean, you've even got Tony Abbott, former PM, wanting to up our defence spending. I mean, he knows a thing or two about that side of things. Are we militarily strong enough to combat a China? I mean, they obviously think we're weak.

GALLAGHER: Well, that's why we put $57 billion into our budget going forward, is to address some of the areas where we felt we needed to spend more. And I do take note of Liberal, former Liberal Members of Parliament, that continue to tell us what to do when they actually didn't do what they needed to do when they were in government, which is why we've had to find $57 billion to make sure we do have the right funding.

ABO: We’re in a delicate position, aren't we? I mean, you've got this stance with China, but then also with the US. We know Penny Wong is obviously off to Washington later this week to meet Marco Rubio. China will be a big focus of this Quad meeting, and in a terribly uncertain global environment. Is she likely to address that defence issue with her Quad counterparts, and there will be questions raised there about defence and our spend?

GALLAGHER: Look, I have no doubt that defence will be a topic at the Quad. You know, Penny leaves today for that important meeting, and our relationship with those, all the members of the Quad, and in particular, the US, is a really important one. So we'll be going there and doing what the Prime Minister says we always do, which is acting in our national interest, explaining what we are doing, and working in partnership with the other members of the Quad to ensure peace and stability in the world and particularly in the region around us.

ABO: Alright, she has a bit of a job mending that frayed relationship at the moment, too. Well let's move on to your portfolio and a pay rise is on the way for millions of Aussie workers. It's only about $33 a week, though, does that cut it?

GALLAGHER: Well, look, it all helps Sarah. We're not pretending that people aren't still continuing to do it pretty tough, which is why there's a whole range of support that comes in on July 1. So, it is about increasing the minimum wage and increasing super. But there's also increases in payments that come from the government. There's increases in PPL, and we're paying super on PPL. There's a whole range of areas where we're providing additional assistance. The energy bill rebates come in and they'll be paid from July 1. So, all of this makes a difference to what, you know, how people are putting their household budgets together. We'll continue to look at ways we can help, but these are important supports that come in from July 1, so tomorrow.

ABO: Alright, Katy, thanks so much for joining us this morning. Appreciate it.