CANBERRA, ACT, May 25 -- The Treasurer of Australia issued the following transcript:
Note
Subjects: Budget, tax cuts, productivity, CGT and negative gearing changes
Phil Coorey:
Treasurer Chalmers, thank you for talking with the Financial Review for this video series. I want to start with the Budget, your fifth. It's now 2weeks since you handed it down. There's been a fair bit of controversy, so let's start there. Did you anticipate this level of hostility towards the Budget, that it's attracted, when you were preparing it, when you were handing it down?
Jim Chalmers:
It's nice to see you, Phil. We did, in short. We knew that it would be contentious because it's a budget full of hard decisions, not full of handouts. And we knew in particular that changing our position on some of these big contentious policy areas, particularly when it comes to tax reform, would be something that would attract a lot of attention. But the choice that we made at the end of the day was to change our position and do what we consider to be the right thing, even if it meant a bit of a political cost in the near term.
Coorey:
Would the sell of the Budget been made easier, and I want to go what you said the day after, you've set up an architecture, so you've brought in the Working Australians Tax Offset, I suspect, I think everyone suspects when we get to the election that will be more than $250. It gives you that flexibility to take a bigger tax cut to the next election. Would the sale of the Budget in a political sense been easier if perhaps you'd been more upfront with voters now about the size of the tax cut they'll get in 2years' time?
Chalmers:
Well, there's a couple of important points there. I mean, first of all, over the 4‑year budget period, we are returning to workers and businesses the money that we raise with some of these other difficult reforms. So it's broadly neutral over the forward estimates. And over the longer period, we have set up the architecture to give governments, including this one, the flexibility and the architecture to provide tax relief in a number of different ways. And I think what is often overlooked is that this government has now cut taxes 5 times 3 different ways. So, 3 income tax cuts done the usual way plus the standard deduction plus the working-
Coorey:
You're counting the top‑up tax cut as 2 tax cuts.
Chalmers:
Well, there's 3 tax cuts when it comes to rates and thresholds done the usual way. There's the standard deduction, there's the Working Australian Tax Offset. And so that demonstrates a willingness and enthusiasm for this government to cut income taxes when we can afford to do that in the most responsible way.
Coorey:
The government's had its integrity called into question because of the nature of, as you said, you didn't take these measures to an election. But why weren't you more upfront with voters if not before the election, if not before Budget night? I mean, you landed this Budget 2weeks ago, you want to get it through the parliament fairly quickly, at least the initial measures. There's not a lot of time for discussion or scrutiny. What was the thinking behind that?
Chalmers:
Well I'd contest that a little bit. I mean if you think about the big Economic Reform Roundtable that we hosted in the cabinet suite here, that was in August of last year. And the 3 big themes out of that were intergenerational equity for workers, they were simplification and they were investment and innovation in the business tax system and those are more or less the 3 themes that are in the Budget when it comes to tax reform. Now we hadn't determined then that we were going to make some of these contentious changes, in fact these decisions were taken relatively late in the piece, but I think it's been known for some time now that we are looking at trying to reform the tax system as part of our economic plan.
So we did a lot of consultation, not as much obviously as some would have liked us to do. It's not possible to consult with everyone in the run‑up to a budget, but I think people knew the broad areas that we were looking at. And there's also an opportunity after Budget night to consult on some of these important areas, including I think the Prime Minister responding to your question today at his press conference, talking about a first piece of legislation which is about the core elements of the tax reform. But in the usual way - just like there was with the GST, just like there was with the capital gains tax changes in 1999 - giving ourselves the ability to do some more work, some more consultation with a subsequent piece of legislation which is about the implementation details.
Coorey:
We'll get to that in a very quick minute. But I think the case on housing has largely been made, but the big shock in this Budget is the capital gains tax changes with regard to business, start‑ups, small businesses especially, seems to be where most of the anger is. When you decided to extend it to small business, what was the problem you were trying to solve?
Chalmers:
Well, we didn't think it made much sense to replace one big distortion, which is that policy error that Howard and Costello made in '99, which introduced this big distortion, over‑compensated investment in established housing, under‑compensated other kinds of investment. You would know, Phil and the Fin Review readership would know that there was a big decline in share ownership from that time and that house prices and incomes decoupled from each other. And so a policy mistake was made in 1999. And so we didn't think it made a lot of sense to replace one big distortion with another kind of distortion.
Now, it remains the case that even after these changes, some kinds of investment will become relatively more attractive. Shares - depending on the kinds of investments, medium‑density units will become more attractive in relative terms and that's because we're taking this distortion out. And there's a relevance here. I've read some of the stuff in the AFR about the relationship between our tax reforms and productivity. And we've had a quarter of a century now of the tax system encouraging the misallocation of investment and resources in our economy. And we've had a 2‑ or 2.5‑decade productivity problem in our economy as well. And so what we're trying to do is to encourage people to make investments because of good economic outcomes, not necessarily just good tax outcomes.
Coorey:
Okay, well the Prime Minister, as you did on Budget day, the Prime Minister's again flagged, a few hours before I spoke to you, about exemptions for startups and tech companies. He seemed when he spoke to be pushing a little, maybe going a little bit further than maybe you intended. How far are you prepared to go in terms of exemptions? And there's a bit of pushback on your own backbench on this as well.
Chalmers:
Look, first of all, I wouldn't agree that the PM and I have got a different view on this. We've been working very closely on this, speaking pretty much daily on all of these matters. We were consulting privately before the Budget. We put into the wording in the actual Budget papers that we were consulting here, and the Prime Minister's fleshed that out a bit more, talking with you and your colleagues and counterparts today. We don't want to pre‑empt the outcome of the consultation. It is genuine, good faith consultation. I've been doing a bit of it myself. My department's been doing it formally, no doubt the PM and others as well, and we take people's feedback seriously. We think there is this particular case when it comes to startups‑
Coorey:
All startups or just some?
Chalmers:
I don't want to pre‑empt where this is headed. Obviously there are some issues in the tech world when it comes to startups and we're working through some of the other feedback that we've been receiving. But when it comes to the calculation of the cost base, when it comes to making sure that this really dynamic part of the economy is a bigger part of our economy in the future, quite a small part now, we want to make sure that we get it right. That's why we've given ourselves the ability and the flexibility to consult.
Coorey:
Well, in your view, if someone who's starting a hairdresser from scratch, you deserve different treatment as someone who's starting a tech business from scratch.
Chalmers:
Well, the reason I don't want to get into the various industry types-
Coorey:
What's your philosophy?
Chalmers:
Well, we're engaging with the small business lobby. We're engaging with the startup sector in all different parts of the economy. And in order to make that consultation real, I don't want to kind of pre‑empt, or railroad that consultation. The most important thing here is that we better align the tax treatment of labour and asset income. We will work out the best way to recognise these particular cases, whether it's the calculation of the cost base or some other ways that there are special cases in our economy. We've been upfront about that for some time.
Coorey:
If I come at it from a different way, COSBOA is saying publicly they want the $2million turnover threshold that defines a small business lifted to $10million is the ATO definition. Is that a possibility?
Chalmers:
Well, obviously we engage with COSBOA too. They would like those thresholds lifted regardless of the policy change that we announced on Tuesday.
Coorey:
That threshold hasn't changed for years.
Chalmers:
It hasn't changed for a while. And so we've acknowledged that. We talk to Skye and her colleagues at COSBOA all the time. It's a terrific organisation and I work closely with Anne Aly through all of these sorts of issues, but again, I don't want to pre‑empt the outcomes.
Coorey:
Rule it out, rule it in, or is it a possibility? Is it something you'll give consideration to?
Chalmers:
Well, we try and give consideration to the feedback that we receive and we try not to kind of knock it off unnecessarily, but it's an important opportunity to remind people that there are currently 4 concessions and carve‑outs for small businesses in the CGT system and we haven't changed any of them. Those 4 concessions and carve‑outs which were available before the Budget will be available after the Budget, that's something that our opponents and critics have been a bit dishonest about.
Coorey:
This is your fifth budget, as we said at the start. Will you be revisiting the idea of a gas tax in the future, whether changing the PRRT or looking at the treatment of the taxation of gas, given there's a huge public groundswell out there?
Chalmers:
Yeah, I mean I acknowledge that there's very strong feelings about it. I reformed the PRRT in our first term, as you know, and you wrote about. It meant that 16 entities were covered rather than 11. It meant that we collect a bit more revenue sooner. I know that people would like us to go further than that. But our priority is on the 2‑way supply arrangements with our refining partners in Asia and also this big gas reservation reform, which I think will make a meaningful difference, decoupling prices in Australia from the roller coaster ride of international price movements, particularly during global energy shocks and we've had 2 just in the last few years. And so I think there are good reasons to prioritise that instead.
Coorey:
And finally this time next year we're going to be talking about the next election again. This is how our 3‑year terms come around. Is this the last budget of this term you're going to take a risk? Is it time to go all cautious again after this?
Chalmers:
I mean it remains to be seen but I like to make the most of our time here. I'm not here to mark time, I'm here to make a difference and sometimes that invites some politically contentious economic reforms, but this is a really ambitious government. The PM is ambitious and I'm ambitious in my role to try and do as much good as we can. So I don't want to pre‑empt the '27 Budget having just handed down the '26 Budget.
Coorey:
But do you feel like taking more risks? Again, you've taken a few with this Budget?
Chalmers:
Yeah, I don't see it exclusively in that way, but where there is an important economic reform that needs to be undertaken, I think what this Budget shows is we're not prepared to use global economic volatility or other reasons to keep kicking the can down the road. We've got very substantial challenges in our economy. Some of them are delivered to us from around the world, but some of them are longstanding and homegrown, this productivity challenge, the issue around the housing market, how it intersects with the tax system. We've shown a willingness to take some political risks to do the right thing, try and land some of these big economic reforms which have been neglected for too long, and so people should take their cues from that.
Coorey:
Thanks for your time.
Chalmers:
Thanks, Phil.
Disclaimer: Curated by HT Syndication.
