Senator the Hon Katy Gallagher

ROSS SOLLY, HOST: So, earlier this week, the Commonwealth put its offer to federal public servants, its pay offer. It's basically around 9% over three years. The union's already come back and said it's not enough. So, let's go back to the negotiating table. Senator Katy Gallagher is the Minister also, of course, Senator, here in the ACT. Senator, good morning to you.

KATY GALLAGHER, MINISTER FOR FINANCE: Good morning, Ross.

SOLLY: Do you think 9% is a reasonable offer?

GALLAGHER: Look, I do, and I think with some of the constraints that the budget is under right now, it is a fair offer and it's an affordable offer. We've got a bit of a way to go, obviously, with the negotiations and we've got to work through a lot of the different claims that are on the table. So, we thought we'd put this on. We're trying to engage in good faith with unions and other bargaining representatives, and we'll engage now that that offer is on the table.

SOLLY: The union thinks that a better figure would be around 15%. Is that unreasonable?

GALLAGHER: Well, I think so. Well, you know, unreasonable and unaffordable, it's definitely unaffordable for us. And we've been working with the union about stabilising the public service. We've added thousands of new jobs in response to many of their claims about workload. And so, we have to consider all of that in how we're rebuilding the public service. And we're trying to make sure that our conditions of employment are as good as they can be. And so, the pay offer has to be considered in conjunction with the conditions of employment as well, which we have made an effort in the last round and we'll continue in this round to make sure that they are very good conditions in addition to the pay.

SOLLY: Do you think, Senator, that public servants do have pretty good conditions? When we were talking about this the other day, a lot of people were texting and saying, you know, that public servants need to have a look at the real world out there and see how lucky they have it compared to a lot of other people. Do you think that's a fair criticism, that public servants don't realise, according to some of our listeners, they actually have it pretty good?

GALLAGHER: I think there's a lot of good conditions in the public service, for sure. And I think, you know, security of employment. I think the public service should lead the way on some of the conditions around, that we've been seeing, particularly in recent times, around flexibility at work, about, paid parental leave, about all of those, because we've got to attract people to work in the public service as well. So, I do think the conditions are good. I think we've got to keep up with pay. You know, people often compare public service with some of the pay and conditions you get in some parts of the private sector, particularly in some of those high-paid companies and things like that. And they're not always comparable because it's slightly different roles. But overall, I think conditions that we've got in place now are good. I know the union wants to improve on those. That's their job, that's their role. And we'll try and work through all of these issues at the bargaining table over the next little while.

SOLLY: Are you ready for a fight on this? I mean, how hard are you going to fight? I mean, you are, you know, you are going to be on the front line there. Are you ready for a tough fight on this?

GALLAGHER: Well, I will represent the government's interests and the national interest in that. And part of that's how we're putting forward the offer-

SOLLY: And if the union comes back to you and says, why should we pay the price because the government's, you know, mismanaging its budget or is, you know, finding it too tough to try and pay us what we deserve?

GALLAGHER: Well, I mean, I'm happy to engage robustly with the union. In fact, I met with the CPSU yesterday, the new leader, Secretary Rebecca Fawcett yesterday, to talk through how the bargaining was going, we're at reasonably early stages of it. We both accept that there is a lot of work to go, but that we come at this with good intentions of seeking to resolve it. We acknowledge that, you know, at different points it may get very turbulent and testy. That's pretty usual in bargaining. But I think the aim if you compare us to the former government that didn't bargain at all and didn't care if you didn't settle agreements with your employees, we do come to this with a genuine pay offer and a commitment to try and resolve it.

SOLLY: All right. On a couple of other issues, you ended up with a bit of a bloody nose yesterday over the private health insurance rebates for over-65s. The Greens and the Libs, basically, they all teamed up against you. Doesn't that send you a pretty strong signal that most people think that this is a bad idea, Senator Gallagher?

GALLAGHER: Look, I mean, the Senate does this from time to time where, you know, One Nation and the Greens and the Liberal Party vote together against the government. So, I deal with that pretty regularly-

SOLLY: That's a good—pretty good sign when they all team up. I mean, these are three groups in very different areas, and they all think.

GALLAGHER: This is usually for different reasons, Ross, that, you know, we don't have time to go into. But look, I mean, finding savings in the budget is not easy. Now, the Senate often says, particularly the opposition and One Nation say, you've got to find savings-

SOLLY: So why pick on over-65s, Minister?

GALLAGHER: Well, this is around ensuring consistency across private health insurance rebates. It's removing a higher rebate that is provided to people who are older that, isn't provided to someone who's 64, but is provided to someone who's 65. Now, what we're saying is, let's make that consistent. And with the money that we raised through that change, we want to put that $3 billion into provision of aged care, which is an area that's continuing to grow in terms of pressure on the budget. So, we've got to find ways to fund the new areas of pressure and look across the board about how we can do that.

SOLLY: But isn't, once you get to 65 and over, aren't you more likely to need private health? So, you know, finding reasons for people not to have it, that can't be good, can it?

GALLAGHER: Well, again, we've done the modelling on it and we have to make some decisions of how do we fund, and this is a thing that's probably on my desk more than most would think, how do we fund aged care? The demand for aged care is growing exponentially. We're trying to meet that demand. We can't just keep layering in through new expenditure. We have to find ways to meet those costs. It's quite different today, and the pressure on the aged care system is very different to what it was when that rebate was increased for those over the age of 65. And it is hard, Ross. All of these choices are hard, but we get a lot of, and I get a lot of, free advice like cut the budget, find savings, reduce government spending, and then when we bring a proposal that's relatively modest and we're not saving that money, we're reinvesting it in aged care. At that first hurdle, the Senate says, no, too hard, it's going to annoy people, we don't want to do it, and, you know, they can live in that world, Ross. I've got to make things stack up and that's why we put the change through. And in fact, we're reintroducing that bill today.

SOLLY: You do it today, you'll do it as soon as today. Okay, that's interesting. Just on battles you might be having, the minimum tax on discretionary trusts that Jim Chalmers introduced yesterday, it's obvious that the Libs are going to fight against this as well. The Greens want more negotiation. Businesses say this will lead to years of turmoil and it's going to cost them a lot of money to get across the line. What they're saying, and the stick that you're being beaten with at the moment, is that you are anti-small-business with all of these things. Katy Gallagher, do you understand why businesses feel that they are being picked on at the moment?

GALLAGHER: Well, I accept that we're getting feedback around some of the changes around trusts, and the Liberals don't support them. I should say, and if we come back to what we're trying to do here, less than 15% of all active small businesses use a trust structure. And what we've tried to do is work out and provide ways for people who might want to move from discretionary trusts into other arrangements to have that done, you know, rollover relief and a whole range of other adjustments. So, we have been trying to work with stakeholders about the best way to introduce this. But what we're trying to do here, and what we've seen, is a massive growth in discretionary trusts over time. And the majority of that, 90% of the value of private trusts, sits with the wealthiest 10% of Australians.

SOLLY: So, are they using it as a tax lurk? Are they? Are they using it as a way to get around paying tax? Is that the issue here?

GALLAGHER: I think it's well understood. There's been 50 years of reports saying that our laws should change in relation to some of the arrangements for trusts, particularly where what you see happen is people who are paying tax on their income earned through labour are paying much higher rates than what is paid through discretionary trust arrangements that have been set up in a particular way and where disbursements can be made at the discretion of the trustee each year.

SOLLY: And is that most of the cases? Do you think that's most of the people who are using discretionary trusts are doing it to avoid paying tax?

GALLAGHER: Well, I definitely think the advice to government is there's a way to restructure tax arrangements so that we can minimise the opportunity for that to happen. Ross, I know that trusts are used in very legitimate ways. It's a very complex area of tax law. But, we have sought to try and ensure that those that are using it for very legitimate purposes are able to continue. But when you look at discretionary trusts, the increase in the number of them, where those trusts operate and how they operate, this is saying, look, at a minimum level, we think you should pay 30% tax on that income. You know, many people paying tax on labour pay higher rates than that. So, it's establishing a base. We think this is an important reform to make the tax system fairer. We've got a bit of work to do to get it through the Senate.

SOLLY: Senator Katy Gallagher, appreciate your time this morning. That is ACT Senator Katy Gallagher.