CANBERRA, ACT, May 17 -- The Treasurer of Australia issued the following transcript:
Note
Subjects: tax reform package, capital gains tax changes, productivity
David Speers:
Treasurer, Jim Chalmers, welcome to the program.
Jim Chalmers:
Thanks very much, David.
Speers:
Let's start with this idea from Angus Taylor about indexing tax thresholds. Why won't you end bracket creep once and for all?
Chalmers:
We are cutting income taxes, we're cutting income taxes 5 times using 3 different mechanisms. And the last time we cut income taxes, Angus Taylor voted against it and said that he would repeal it. So we are cutting taxes.
Now, the big difference in the last week, David. I hear the panel on the couch talking about the differences that have been established. Our Budget on Tuesday night was one of the most responsible in memory, and the Budget Reply was one of the least responsible.
And one of the reasons for that is because Angus Taylor would be adding a quarter of a trillion dollars to national debt. That would cost tens of billions of dollars in extra debt interest because he's got these uncosted, unfunded tax announcements that he made in his Budget reply, which was all about trying to stave off One Nation.
And so that's the big difference here. We're cutting taxes in a responsible way. He's got an irresponsible way to go about it. He would dramatically increase debt. There would be much bigger deficits. There would be more inflation as well, remembering that what Angus Taylor is really saying is that he would pump the most amount of money into the economy when inflation is at its highest.
So there are a number of problems with what Angus Taylor is proposing. But overwhelmingly, this extra quarter of a trillion dollars in debt and tens of billions of dollars in extra debt interest makes his Budget reply, I think, the least responsible that I've seen.
Speers:
Well, if it's a quarter of a trillion dollars over the decade, that's a lot of bracket creep that you're going to be relying on in the budget, is that right; you need to- the budget is propped up by this quarter of a trillion dollars of bracket creep?
Chalmers:
Well, what we have shown, David, and not just said, is that this government is enthusiastically returning bracket creep. And on more than one occasion our opponents have tried to prevent us from doing that. So 5 different tax cuts-
Speers:
But why can't you lock it in and just say, 'We're going to permanently end bracket creep and index the tax thresholds'? Is it because you want the political benefit of being able to hand out- what is it- 5 tax cuts?
Chalmers:
No, David, it's because when you provide these tax cuts you have to do it in the most responsible and affordable way, and you have to take into consideration the economic conditions at the time.
What Angus Taylor is proposing to do is to pump the most money into the economy when inflation is already at its highest. We've heard him say countless times that the big issue in the budget is the amount of debt. He'd be adding a quarter of a trillion dollars in debt to the budget over the next 10years. And that would cost the Australian people tens of billions of dollars in debt interest.
Speers:
Right. So just so I'm clear, you need to keep that bracket creep in there to a degree to deal with the inflation problem; you need to be taking that bracket creep money-
Chalmers:
No. No, David, I'm saying-
Speers:
- from the economy?
Chalmers:
No, David. I'm saying we returned bracket creep, and we've created more room to do so.
Speers:
Not all of it.
Chalmers:
Well, I don't know about that, David. I mean for the 5 different tax cuts that we've put in place in 3 different ways it means about $2,800 a year for the average worker. And that's because this is a government that returns bracket creep when it is responsible to do that.
I've explained the issues that I think are at the very core of what Angus Taylor said on Thursday night. There's a big difference here. We cut taxes in a responsible way. He announces tax policies in an irresponsible, uncosted, unfunded way, and it would cost the Australian people dearly in debt interest.
Speers:
All right. But if you're seriously saying you're going to return all bracket creep, you would be returning a quarter of a trillion dollars that you're talking about here.
Chalmers:
We would be returning bracket creep, as we have been, in the most responsible-
Speers:
All of it?
Chalmers:
- way we can. We said in the Budget- well, we said in the Budget papers and subsequently, including at the National Press Club and countless other interviews that I've done since the Budget, that what we've done here by managing the budget in the most responsible way is we have created room to return more bracket creep into the future. It's important that that's done in a responsible and affordable way. What Angus Taylor is proposing is neither responsible nor affordable.
Speers:
How much extra tax will your changes to negative gearing, capital gains tax and trusts actually raise? How much will it collect over the decade?
Chalmers:
Well, I'll come to the decade in a minute, David, but over the course of the forward estimates our tax reform package is broadly neutral. We are returning what we're raising to workers and businesses, principally small businesses.
Now over the 10‑year period, the capital gains and negative gearing changes are a little bit over $40billion and the trust changes are also a little bit over $40billion. But there's also the tax cuts in there, the Working Australians Tax Offset over the course of the next 10years, and there's loss carry‑back tax cuts for business.
So overall we've pointed out, David, that if you look at that 10‑year period there's about 3 times as much savings as there is tax changes in net terms, but those 2 specific categories are a little bit over $40billion each.
Speers:
So just around over $80billion. The reporting all week has been that it's more than $100billion. You're saying over the decade, the negative gearing, capital gains tax, trust changes will actually be just over $80billion.
Chalmers:
Yeah. Both of them are a bit over $40billion, and, but as I said, David, they're not the only 2 elements of our tax package, there's tax cuts in the Budget for business and for workers.
Speers:
Look, you've argued what you're doing with negative gearing and capital gains tax in particular is about re‑balancing the property market to help owners get into the market. But most of the capital gains tax collected at the moment is not from the property market, it's from, I guess shares, unlisted investments and so on. Why are you also changing the capital gains tax rules for non‑property investments?
Chalmers:
Because we're taking one of the big distortions out of the market. I think as Alan Kohler said on your couch a moment ago. A really big mistake was made in 1999, and it introduced this massive distortion in the way that Australians invest in our economy. It made fixed housing much more attractive and it made other kinds of investment less attractive.
So by taking that distortion out of the system, it is a fairer, more neutral treatment of investment, capital gains in particular. And if you look at the average over a couple of decades since that policy mistake was made by Howard and Costello, what you can see on average is that housing was- established housing was over‑compensated, shares were under‑compensated.
That's one of the reasons why we had this big spike in house prices. It's one of the reasons why so many people, particularly young people, have been locked out of the housing market. But it's also been why shares over time have become relatively less attractive. And so by removing that-
Speers:
So just on that, so why then do you need to change it for shares, if they've become less attractive, what's the problem you're trying to fix there?
Chalmers:
We're trying to remove the distortion, David, by applying a fairer and more neutral treatment to capital gains. And as Alan said a moment ago, as I've been saying through the course of the week, after that mistake was made in 1999 too many people were locked out of the housing market.
Obviously the capital gain that you pay will be subject to your marginal rates, the type of investments that you've made. But over that 20‑year period on average, what we saw was this massive over‑compensation of people investing in established housing. And that's one of the things that has locked too many people, particularly young people, out of the housing market for too long, and that's why we're addressing it.
Speers:
So what do you say then to those young people who have been, you know, trying to put aside what they can, maybe raising $10 grand, $20 grand, putting in the share market, as they try to build up their first home deposit. Now it's going to be less attractive for them to do that.
Chalmers:
Well, not on the basis of 20years of experience, David. You know, we feel that when you look at the average in that 20‑year period shares have been under‑compensated, and so some people will continue to do that. It depends obviously on their marginal rate and the sorts of shares that they're investing in. But removing this distortion will help people make decisions based on economic outcomes rather than tax outcomes.
And so some people are doing that in order to save a deposit, and also, you know, we read a lot and hear a lot about rentvesting as well, David. And that's a part of our market but a very small part of our market, and for people who are investing-
Speers:
How small is it? It's a good point to raise, because this idea that, you know, young buyers are going for a negatively geared property as they- and renting while they try to save up that deposit.
Chalmers:
Well, first of all, they can continue to do that for the homes that they already own, or the home that they already own. And they can continue to do that into the future if they invest in a new build, which is a very positive contribution that they would be making to our communities and to our economy as well.
But in terms of numbers, it's much less than 5percent of people under 35. The closest we get to an accurate number here is about 5percent of people under 35 have got rental income, but that includes owner‑occupiers, it includes people who are positively and negatively geared. So well under 5percent of people under 35 are doing this. They can continue to do this if they invest in a new build, and they can continue to do it if they already own that home before Budget night.
Speers:
Okay. So well below 5percent. But there'd be more who have a bit of money in shares or an unlisted investment. You're saying to them they won't be any worse off under the capital gains tax changes?
Chalmers:
Well, first of all, I think about 9 in 10 people under 35 don't have any shares. And for people who do, by getting rid of this distortion which over‑compensates established housing and under‑compensates shares or investments in new supply of units and the like, then that will be a much fairer, much more neutral treatment of capital gains in the system.
Now we have to remember, David, as we get into the- obviously getting into the weeds of this is important, but we have to remember the big issue here is that the intersection of the housing market and the tax system is not working, it's locking too many people out of home ownership.
And so our primary motivation here is to better align the tax treatment of people who work and people who earn their income in other legitimate ways. But the real goal here is to try and fix a quarter of a century where people have found it too hard to get a toehold in the market, particularly younger people.
Now, of course, some people will pretend that the current arrangements in the housing market and the tax system are working just fine. We don't agree. We think the status quo is broken, and that's why we're fixing it.
Speers:
What about for start‑ups - are you going to have to change the rules here for investing in start‑ups?
Chalmers:
We do recognise that start‑ups and venture capital, and particularly the tech sector, have got a different kind of cost base calculation. We actually were engaging with the sector before Budget night because we recognised that. You can see in the Budget papers that we mention this specifically.
The Treasury has already had a couple of formal consultations with the Tech Council and I think the Investment Council as well. I've had a number of informal engagements even before Budget Night. So we recognise there's a different case here and we will work through the sector. It's not unusual after a big tax change is announced for there to be consultation on implementation, and we've flagged for some time that we are prepared to do that and that's already begun.
Speers:
On the initial reaction to the Budget, you would have seen the polls this morning, most, or more people think they're going to be worse off than better off, more people think the economy will be worse off. People don't seem to be thrilled with the Budget at this point. If this was your most ambitious budget, Treasurer, are you disappointed with that initial reaction?
Chalmers:
No, I'd be more surprised if there was a bounce, frankly. We didn't do this to get a bounce in the polls, we did it to get a boost in first‑home ownership, particularly among younger Australians who've been locked out.
And so if you think about it, you know, we've got- this Budget is full of hard decisions, not handouts, we've got a global oil shock putting a lot of pressure on people, we've got the usual predictable scare campaign based on lies from people who've got a commercial or a partisan interest here.
So we didn't do it to help our primary vote, we did it to help more people realise the aspiration of home ownership, and that matters more to us than any opinion poll published a few days after the Budget.
Speers:
What about broken trust though? Will the fact there's a broken promise here make it harder for voters to believe you in the future?
Chalmers:
Look, I think some people will focus on that, you know, I understand that. I've acknowledged that the government did come to a different view. But I think some people, hopefully a lot of people will focus on the substance of what we are trying to do here.
And it would have been the easiest thing in the world, David, to make a political decision to leave everything just as it is, but the longer that we left that, the harder this problem would have become for a lot of people.
Speers:
Well, in fairness, it would have been more difficult to take this to an election, wouldn't it?
Chalmers:
Well, what we took to the election reflected our position at the time, which is that supply is the main game; we still think that. Building more homes, as the Budget will do is still-
Speers:
And you weren't thinking about capital gains tax at all?
Chalmers:
No, we thought that the policies that we had overwhelmingly on supply, as well as the 5percent deposits policy, which has been really successful too, we thought that that would be sufficient. And those things around supply, our efforts on supply are still the main thing that we are doing, but they can't be the only thing while so many young Australians are locked out of the market.
And so I do understand, David, I acknowledge to all of your viewers and to the country beyond that when a government changes its position, as we have, on some big and controversial policies that some people will focus on that part of it, some people will focus on the politics. But I encourage people to focus on the substance of what we are trying to do here.
I think for a really long time-
Speers:
Well, okay.
Chalmers:
- I think for a really long time, David, people have been tired of governments taking decisions overwhelmingly for political reasons rather than for the right reasons, economic reasons. So we've taken these difficult decisions. Of course that will be reflected in the polls. It was a budget full of hard decisions and not handouts, some very difficult things taken on-
Speers:
Sure, but when-
Chalmers:
- and that's because helping people into the market is more important to us than boosting our primary vote.
Speers:
But integrity matters when governments rule things out at an election so clearly and then do them, that matters. If you've changed your position on these things, what's next? Will you change your position on franking credits?
Chalmers:
Well, there's no change to the treatment of franking credits in the Budget, David, and I do I understand-
Speers:
But will that change?
Chalmers:
- once again- well, I know that our political opponents will now engage in a bit-
Speers:
But you've set the template here, Treasurer.
Chalmers:
Well, what we've done in the Budget is we've said, 'Here's a different view to one that we had had previously', and explaining why. And I genuinely think that when all of the politics washes away, the most important thing is the meaningful difference that we make to people's lives.
These opinion polls after Budgets are not-
Speers:
I'm not asking about that, I'm just wondering-
Chalmers:
- not typically-
Speers:
- whether you're going to change your position on more things. Superannuation, will you change your position again on taxing superannuation?
Chalmers:
Well, we've already changed the policy on superannuation. We took that to the election-
Speers:
Would you go further?
Chalmers:
- we legislated it afterwards. Not intending to, David. We're trying to nail down the changes that we made in the Budget on Tuesday night.
Speers:
What about a gas tax-
Chalmers:
So you're asking me-
Speers:
- will you change your position on a gas tax now?
Chalmers:
Well, not something that we've been contemplating. Obviously there's been a lot of public debate about that, there's a lot of strong views about that. But we've made it clear that there are good reasons to prioritise our Gas Reservation Policy, and the 2‑way supply arrangements with our Asian refining partners.
Speers:
But you might change your position on that?
Chalmers:
And so that's our policy.
Speers:
You might change your position on that?
Chalmers:
Well, let's talk about the policies that we have announced, David, rather than-
Speers:
Well, this is the problem, isn't it, that if governments are now changing their position despite ruling things out, it leaves open all of these different changes?
Chalmers:
Well, I understand that that's the political point that our opponents will make, David. I'd rather focus on the meaningful difference that we are making to people's lives-
Speers:
Okay.
Chalmers:
- in the Budget that we handed down on Tuesday night. Yes, that involves a level of political controversy; obviously we expected that. But more important than taking the easy political path is to take the right decisions for the right reasons and that's what we've done.
Speers:
Okay. I want to ask you about productivity. The morning after the election last year you were on this program, you named productivity as your priority for this term. You have done some things in this Budget, cutting red tape in particular. But the forecast in your Budget says productivity is going to remain where it is. Do you need to do more? Is what you've done the limit or will there be more to come on productivity?
Chalmers:
I think you're really diminishing what we did in the Budget, David. What we did in the Budget was to address this productivity challenge in about 15 different ways, get compliance costs down by $10billion a year and boost GDP.
So we saw some green shoots in productivity growth last year, but nowhere near enough to deliver the higher living standards that we want for our people. So we took a really substantial broad agenda of productivity and announced it on Budget Night. We think that will shift the needle over time, but this is a 2‑decade problem.
Speers:
But the Budget doesn't say it's going to shift the needle, the Budget says it will remain at 1.2percent.
Chalmers:
1.2percent is higher than it is now, and even though we had those good outcomes in the course of 2025, we know we've got to build on that.
Now, David, we've had people talk about this productivity challenge for a couple of decades, it's not just a problem that's popped up in the last couple of years. This Budget has the broadest, most comprehensive productivity package of any Budget in decades, and that's because we recognise it's an issue. The more productive our economy is, the more we can lift the speed limit and grow with lower inflation, and most importantly we can lift living standards for our people over time.
Speers:
I guess what I'm getting at, and finally, is this - in terms of reform and ambition for Jim Chalmers, will you sit a back now over the next 2years of this parliamentary term, or can we expect more from you, Treasurer?
Chalmers:
Well, I think, like any government, we're always looking to do more where we can, where we can make a meaningful difference. No one ever rules a line under a budget and says 'that's the whole job finished' when it comes to productivity, for example, or some of these other perennial challenges in the budget.
So this is a very ambitious Budget because this is a very ambitious government, it was before Tuesday night. The pace of reform has picked up I think in ways that are welcome and important and meaningful. But reform is a direction, not a destination, and no doubt by the time we get to this time next year we'll have the opportunity to factor in all of the developments in our economy over that 12‑month period and continue to reform the economy, not as an end in itself, but so that it delivers for more people in more parts of our country, and in the case of Tuesday night's Budget, to deliver for a whole generation of Australians who risk being disregarded and dismissed.
And, yes, it's involved a whole bunch of difficult political decisions, yes, we will wear some political heat for that. But I'm very proud of the reforms that are in the Budget because they will make a meaningful difference to the lives of a number of Australians, even if they cause us a bit of political difficulty in the near term.
Speers:
Treasurer, Jim Chalmers, I know it's been a big Budget week. We appreciate you fronting up this morning. Thank you.
Chalmers:
Thanks David.
Disclaimer: Curated by HT Syndication.
