Senator the Hon Katy Gallagher

SALLY SARA, HOST: The Budget is days away now, and a number of key government funding announcements have already been made, including sweeping changes to the National Disability Insurance Scheme, a fuel security package and the axing of funds for the Inland Rail Project. There are also expectations that the budget will feature changes to capital gains tax discount, negative gearing and the taxation of trust funds, but the government hasn't fully confirmed this as yet. Katy Gallagher is the Minister for Finance, Minister for the Public Service, Minister for Government Services, and Minister for Women. Minister, welcome back to Radio National Breakfast.

KATY GALLAGHER, MINISTER FOR FINANCE: Thanks for having me on.

SARA: Before we talk more directly about the budget, there's been some breaking news in this half hour that Iran has accused the US of violating the ceasefire by targeting two ships around the Strait of Hormuz and attacking civilian areas. How closely concerned is the government by what is unfolding?

GALLAGHER: We've obviously been following developments in the Middle East closely. We've consistently called for de-escalation and have welcomed the ceasefire. So any news that that, and we acknowledge it's fragile, but any news that there's been developments on that front and breaking of a ceasefire would be deeply concerning. We continue to urge all parties to de-escalate and to respect the ceasefire.

SARA: Before we move on to the budget, last night women and children with links to former ISIS fighters began arriving in Australia, almost two weeks after leaving a refugee camp in Syria. What plans does the government have to deal with the return of this group, Minister?

GALLAGHER: As the police AFP Deputy Commissioner outlined last night, and I think the Commissioner yesterday, plans have been developed since 2014, really, to manage the return of people from these countries. Indeed, around 45 men, including foreign fighters, have returned to Australia from 2013 to 2021, so this will be handled in the way that that was handled, as you would expect. This is managed absolutely appropriately by the police and by our intelligence agencies. The government remains briefed on all aspects of that, of course, as you would expect, and we follow that advice very closely.

SARA: Are the children in this cohort in any way responsible for their situation?

GALLAGHER: Well, I think we've consistently said these parents of these children have made a terrible decision to either take those children or have children in these camps or in these war zones, and those children, I think, are going to need a lot of assistance to reintegrate into Australia. They are Australian citizens. You know, obviously have entitlement to Australian citizenship, but we would, you know, support the efforts of the state governments, the police and the intelligence agencies to make sure those children are supported and managed appropriately.

SARA: The Coalition has pointed to reports that it cost the government about $2 million per person to provide monitoring and countering violent extremism programs for those returning to Australia with links to Islamic State. Is that figure accurate? That's been in the public debate.

GALLAGHER: Well, we've been investing additional resources into this side of the budget since we came to government. I don't think it's useful to speculate on individual costs around ensuring Australians are safe as it relates to individual, you know, programs.

SARA: So it’s about right?

GALLAGHER: We will spend what we need to spend to keep Australians safe. And I would suggest that the opposition would have done exactly the same when they were in government.

SARA: Yesterday, the government announced that gas companies have to set aside 20% of their exports for the domestic market from July next year. The peak industry group, Australian Energy Producers, says the policy raises significant concerns about potential impacts on competition, investment and future gas supply. Does the government accept those industry concerns?

GALLAGHER: I think we accept that there'll be different views about the decision the government's taken. Industry have, you know, I've seen some of the commentary come out since yesterday from the gas producers. I've also seen from manufacturers and on that side of the industry welcome this decision. So, you know, it's not always the case that you make a decision that everyone embraces, but we have to make decisions in the national interest. And we think being clear with the gas industry about what a gas reservation would look like is important. And now we will have further discussions with them as we design and develop the legislation that we'll bring to the Parliament to put this in place.

Sally Sara: When we're looking at the budget, you've asked government departments and agencies to identify potential savings of up to 5% in their budgets, in the lead-up to the federal budget. Should Australians expect a cut to the public service?

GALLAGHER: Well, I've made it clear that we've rebuilt the public service. It wasn't the size it needed to be, and it wasn't delivering for Australian people. We saw long waits in Services Australia. We saw lots of problems in policy capability across the public service. The NDIS was a shambles, and now we've rebuilt that capability. I've said that it's largely the right size now. There's ons and offs in different departments, but there are also areas of the government that are growing at the moment, including in the areas of Defence. So, I think what people will expect, or what they should expect to see, is a public service that's resourced to do the job that we need it to do in 2026, and that those allocations have been made to those priority departments.

SARA: Government departments are seeking expressions of interest for voluntary redundancies. How many staff are you hoping will take up that offer?

GALLAGHER: Well, this is really a matter for departments to manage. I mean, they are responsible. The government provides agencies with allocation and budget; they allocate those resources. You know, the Secretary and their executive teams manage that. Now, when there are programs that are ending or priorities have shifted, you may see agencies undertake some of these voluntary redundancies exercises, but that's a matter for those departments. There is no edict from government around reducing the size of the public service. We expect secretaries to manage their departments within budget.

SARA: The Prime Minister is expected to announce a further $3.8 billion investment in the Suburban Rail Loop East project in Melbourne. It comes after the decision earlier this week to shelve plans for the Melbourne to Brisbane Inland Rail, which the opposition has criticised as a devastating blow to regional Australia. Is the government favouring metro voters over the regions?

GALLAGHER: Not at all. And, you know, I think people should wait to see the budget as a whole, rather than kind of take a view on that from two projects. Obviously, investment in infrastructure is a critical part of any budget, and I'm not going to foreshadow announcements the PM might be making. But when it comes to Inland Rail, we inherited a project that was in absolute shambles. I've seen the Nationals raising concerns yesterday. I raise a concern that when we came to government there was essentially no business case, no understanding of the route, no understanding how to get there, no understanding of the cost of it, and no detail at all. Now, what we've had to do is go back and have a look at all of that and make the decisions we've made. They're tough decisions, I accept that, but we believe the decision to finalise the Inland Rail at Parks is the right one, both from a commercial point of view and from, you know, what the budget can absorb at the moment.

SARA: Minister, thank you very much for coming in this morning.

GALLAGHER: Thanks Sally.