Source: Australian Parliamentary Secretary to the Minister for Industry
Jim Chalmers:
Responsible economic management is a defining feature of our Labor government and you can see that in the Final Budget Outcome which is being released today.
In dollar terms, this is the biggest ever positive improvement in the budget in a single parliamentary term. In just 3 years in office, we’ve been able to engineer a $209 billion improvement in the budget over those 3 years.
We turned 2 very big Liberal deficits into 2 substantial Labor surpluses in our first 2 years and now in our third year we’ve been able to get the deficit much smaller as well. This $10 billion deficit is a fifth of what we inherited and it’s around a third of what the Treasury forecast before the election. As a share of GDP, it’s about a fifth of the average between the GFC and the start of COVID.
Debt is now $188 billion lower in the year just finished than what we inherited. And because of our responsible economic management, that means that we will pay something like $60 billion less debt interest over the course of the next decade or so.
We’ve been able to achieve this outcome because we have found savings, we’ve shown restraint, we’ve banked upward revisions to revenue, we’ve kept unemployment low, we’ve got real wages growing again and you can see the dividends of all of that in the Final Budget Outcome. This gives us one of the strongest budgets and economies in the G20.
Australians should be proud of the progress that we’ve made in our budget and in our economy, but we acknowledge as a government that there is more work to do. Responsible economic management has been a hallmark of our first 3 years in office and it will be a defining feature of the next 3 years as well.
A big part of that has been the Finance Minister, Katy Gallagher. I’ll throw to her and then happy to take some questions.
Katy Gallagher:
Thanks very much, Jim. It’s great to be here with you in the blue room with the Final Budget Outcome today.
The FBO shows a final deficit of just under $10 billion, which is an almost $18 billion improvement on the deficit predicted at the 2025 PEFO and over $37 billion improvement on the 2022 PEFO which we inherited from the Coalition.
The improvements since PEFO are really due to 2 things: lower payments and a better‑than‑expected outcome for receipts. So, payments being approximately $4.6 billion lower. The majority of those relate to national partnership payments with the states, about just over $3 billion of that. And receipts were approximately $13.1 billion higher, really driven by the strong performance of the labour market. So, seeing that come through both in company tax receipts and in income tax, along with strong superannuation fund gains.
Now, as Jim said, this result shows that the work that we’ve done in the first 3 years continues where we’ve sought year by year to improve the budget to ensure that – well, we delivered 2 surpluses and in this deficit year, we’ve significantly lowered the deficit.
And we’ve done that by our reprioritisation and our savings effort, which continues and work is underway on that, but also making sure we’re running a government that’s as efficient as possible in terms of our programs and we’ve got some more savings to deliver through that, the commitments we took to the election campaign. And of course, banking about 70 per cent of our upward revision on revenue.
So, this is a result of all of that hard work and that hard work continues. Obviously, there’s pressures on the budget, they continue. Well, from my point of view, it feels like they continue to grow and increase, so there’s more work to do and we’ll take the same approach as we work through MYEFO and into budget next year.
Chalmers:
Thanks, Katy. Do you want me to drive?
Gallagher:
Yep.
Chalmers:
Okay, questions. Patrick and then Clare.
Journalist:
Could I just ask about Optus? Does the failure, the latest failure by Optus, does that mean there’s, should there be scope for a wider inquiry into the triple‑zero system?
Chalmers:
Optus is accountable for the outage that we saw on the 18th of September, and also what’s happened with the tower in NSW. The government is holding it to account. We have directed ACMA, the communications watchdog, to investigate. Telecommunications companies have obligations under the law to ensure that triple zero calls connect. This can’t happen again. This is an absolutely shocking failure from Optus.
And the most appropriate course of action for the government to take to get to the bottom of this is to ask ACMA to conduct a very thorough investigation and that’s what we’ve done.
We’ll go to Clare and then Greg and then Michael.
Journalist:
If that’s a follow up on Optus.
Chalmers:
Greg and then Clare and then Michael.
Journalist:
So, the Coalition are calling for an independent inquiry, what level would it take? Would it take another outage for you to consider going further than an ACMA inquiry? And are you concerned Australians are losing faith in the triple‑zero system?
Chalmers:
Well, they shouldn’t. And one of the reasons for that is where there has been a shocking failure – like we’ve seen with Optus – the government is getting to the bottom of it. And ACMA is the most appropriate body to conduct that very thorough investigation. Optus has clearly failed here on a number of fronts. Our focus as a government is getting to the bottom of what went wrong. We’ve instructed ACMA to investigate. We’ll obviously be closely monitoring that investigation and we will consider throughout this process whether further actions are necessary.
Clare and then Michael.
Journalist:
Treasurer on the tobacco excise, these latest figures show about $440 million extra in the take than what was forecast in March. What’s the explanation for that? Was it just overly pessimistic? But also since a year ago, it’s about $2.5 billion down. So, are you confident that the $350 million you’ve spent on compliance is actually going to make a dent in this downward trajectory?
Chalmers:
Well, thank you, Clare. I mean, as people know, there are 2 reasons why we’ve seen the tobacco tax take down. One of them is a good reason, people giving up cigarettes. One of them is a bad reason, which is people getting around the compliance regime. It’s why we found room in the budget for hundreds of millions of dollars in extra funding for compliance. We have seen in recent months some very welcome compliance activity. There have been reported by, I think, some of your colleagues in the room, some successful busts when it comes to these people who are doing the wrong thing and getting around the compliance framework.
And so we want to see more of that. That’s what the hundreds of millions of dollars have been provided for. But we’re under no illusion. We know that there is a challenge here. We don’t believe that cutting taxes on tobacco will stop illegal activity in this market that has developed over a longer period of time. But we do think compliance is a big part of the story and that’s why we’re finding room for so much new investment in compliance for the police.
Journalist:
Is that the explanation for the $441 million extra compared to what was forecast at the Budget.
Chalmers:
As I understand it, but I’ll have a closer look at it and come back to you if that’s not the case.
Michael and then we’ll go over here and then we’ll come over to that side.
Journalist:
Two questions, if possible. On the budget, expenses have come in higher than forecast, even though payments came in underneath forecast. I’m just curious what’s driven that discrepancy. And then separately, on EVs are you worried at all that road‑user charging will dampen EV uptake and prevent the government from achieving its climate targets.
Chalmers:
In reverse order, I mean, one of the key considerations as we work through all of the issues and complexities in road‑user charging for EVs is to make sure that we’re not a deterrent. We want to see more and more people take up the opportunity of an electric vehicle. And so in most of the discussions we have, publicly and privately and with the states and with others, we’re very conscious of finding the right balance, getting the sequence right so that we can continue to encourage people into an EV with the tax cuts that we are providing. But to also be conscious that as we implement over time – and we’re in no rush, as you know – but as we implement over time a road‑user charging regime for EVs, we need to make sure that we get that balance right.
I’m not sure if Katy wants to take this detailed question now or if you want us to come back to you. We’ll come back to you in detail.
We’ll go here, Greg, you’ve had a couple mate, so we’ll go over this side after that.
Journalist:
Just on Optus, the Coalition says the Communications Minister should have stayed in the country after the outage instead of going to New York, to speak on the sidelines of the UN. Was it a mistake for her to leave the country in the days after that serious, fatal outage?
Chalmers:
Of course not. I think anyone who knows Minister Wells knows that she would have been taking her responsibilities in the Optus matter very seriously at the same time as she advanced on the global stage, our world leading new regime to protect kids in social media. It’s possible to do both of those things at once and that’s what Anika has been doing. It’s not surprising that the Opposition Leader will be playing politics with something like this and I think we should just see the Opposition Leader’s comments in that light.
We’ll come over here, we’ll go John, Shane, Tom, and then we’ll go up the back. Just trying to avoid Jacob, we’ll go right around Jacob. Thanks.
Journalist:
Thanks Treasurer, maybe just a question individually for both of you as the Treasurer and the Finance Minister. Katy mentioned, the pressure on the budget, one area where there’s new demands on the budget potentially is for taxpayer support to smelters, be it in Mount Isa, Tomago, potentially Bell Bay in Tasmania, we’ve seen what’s happened in Whyalla. Could I ask both of you, as the custodian of the nation’s finances, what principles will you actually both be applying to test whether those sorts of facilities will deserve any taxpayer support.
Chalmers:
Primarily value for money. I mean, that’s what guides us in all of the investments that we consider and decisions that we ultimately take as an Expenditure Review Committee and as a Cabinet. We have been working really closely with Tim Ayres, with Chris Bowen and with other colleagues about the future of those smelters. It’s no secret that they are under extreme pressure. We are engaging with the relevant state governments. I think 4 at last count, Tassie, SA, NSW and Queensland. There are negotiations and discussions underway.
I don’t think it would be helpful for me to go into detail because of some of the commercial elements of those discussions, but we’re working very hard to see if there’s a way through and our principle there is value for money. We also want to make sure that whenever the Commonwealth government considers playing a helpful role, potentially a helpful financial role in resolving some of these issues. That that is used as a way to ensure that the commercial players do the right thing too. You know, I know the town of Mount Isa pretty well and I know how important that smelter is to that wonderful community in northwest Queensland. And we want to make sure that the private sector players do the right thing.
We’re prepared to do the right thing if we can afford to and if we get value for money, if it’s consistent with the government’s values and priorities. But we need to make sure that the companies do the right thing by their workers as well. We need to make sure those workers are front and centre. The hundreds of workers in Mount Isa and in these other places, Townsville, that you’ve nominated, in Tassie, in other parts of Australia, they are our focus. There’s not an unlimited amount of Commonwealth support, but we are willing to play a constructive role if that’s possible.
Gallagher:
John I think the only thing I’d add to that answer from Jim is a lot of careful consideration goes into our thinking around this and the role that the Commonwealth plays in some of the disruption and some of what we’re seeing playing across different parts of the economy because it’s not just in the areas that you’ve nominated, you know, it’s in other areas as well. And we put a lot of thought into the role we play. We put a lot of thought into things like the national interest. We put a lot of things into what it, you know, what’s in the workers interest and of course, as Jim said, value for money.
Chalmers:
Shane, then Tom, then Don, then Katina.
Journalist:
Treasurer, when you stood up in the House last May for this Budget, you forecast $327 billion in PAYG, just under $20 billion in super tax and $139 billion in company. You’ve nailed company, but PAYG is an extra $12 billion, and an extra $6 billion out of super funds. There is a tax cut coming, but the budget is being propped up by PAYG workers. Can they hope for a bit more relief somewhere along the line?
And just separately, possibly for the Finance Minister, the pre‑purchase of debt looks like you’ve brought in a, you’re under the stretch for reaching just over one trillion in AGS this year. Do you think you’ll tip over into one trillion, or do you think this improvement and possible improvement in the next Budget will keep you under the one trillion mark?
Chalmers:
There are 2 ways to look at your first question. You’ve touched on one of them. One of the key reasons why the budget is stronger is because more people are working more and earning more. And that is a source of considerable pride to our government. Not just because it’s good for the budget, but because it’s good for millions of Australian workers who were subject to almost a decade of deliberate wage suppression and wage stagnation.
It is a source of considerable pride, not just to the government, but it should be a source of pride to Australians broadly, that we have been able to get on top of this inflation challenge in our economy at the same time as we’ve kept unemployment extremely low by historical standards. Under this government we’ve seen the lowest average unemployment rate of any government in the last 50 years. More than 1.1 million jobs have been created on this government’s watch. And one of the reasons why you’re seeing some of that flow through to receipts is because more people are working and more people are earning more. That’s a good thing.
But the second way to look at your question is – and when it comes to bracket creep – we cut income taxes last year, we’re cutting them next year, we’re cutting them the year after. Not all of those tax cuts were supported in the parliament. The second and third round of tax cuts were at risk at the election. And because we won the election not that long ago, millions of Australians will get 2 more tax cuts. And that’s because we are enthusiastic about returning bracket creep where we can afford to do that. We’ve shown that willingness not just on one occasion, not just on 2 occasions, but on 3 occasions.
Katy, do you want to touch on debt?
Gallagher:
Yeah. So, the Australian Office of Financial Management they make obviously the decisions about how to fund our financing requirements. And you can see on page 15, the reduction in gross debt was lower than the reduction in the, or the improvement in the fiscal position because they didn’t change some of their, their issuance guidance that they provided to the market following the Budget.
So, they in a sense are pre‑funding some of our funding requirements for 25–26. As we work through MYEFO and the budget and we provide the forecasts for debt through that process and we’ll do that, we’ll follow those arrangements. Obviously, it can change with decisions that are made over the next little while.
Chalmers:
And can I just say one more thing about that? Under our predecessors Australia was supposed to cross a trillion dollars in debt a couple of years ago and we still haven’t crossed that threshold yet. And as you rightly imply in your question, Shane, the current expectation in the most recent PEFO was that we crossover at some time in 25–26, but narrowly. And so the trajectory of the next 9 months or so will matter a great deal obviously to when we cross that trillion dollars. But we shouldn’t forget, or we shouldn’t lightly pass over that under our predecessors we would have crossed that trillion dollar threshold a couple of years ago.
We’ve been able to get debt down $188 billion and save Australians $60 billion in debt interest. And that is what happens when you manage the budget responsibly. We found $100 billion in savings. There are $14.4 billion of savings just in this financial year, represented by the FBO. 14.4. Remembering our predecessors had zero savings in their last Budget. So we found $100 billion in savings.
We’ve banked around 70 per cent of the upward revisions to revenue. Our predecessors used to spend most of that. We’ve shown restraint, we’ve kept the labour market strong. And so you’re seeing the dividends of all of that, and where those dividends are most obvious is when it comes to the trajectory of the debt that we inherited from the Liberal Party.
Tom, Dom, Katina.
Gallagher:
And then can I come back to Michael?
Chalmers:
We’re just going to keep going back and forth like this. Sorry, Katy wants to add to it mate, and then to you.
Gallagher:
No, I wanted to come back on Michael’s question. I just had to check something.
So, the difference really between the payments underspend, but expenses going up is largely a result of timing differences essentially, with the recognition of expenses and the finalisation of the corresponding payment. And the big moving part there is the military compensation scheme which you can notice it actually flows through a number of the tables at the back of this document around expenses associated with that.
Chalmers:
We’re going to go Tom, Dom, Katina, Jacob and then you 2 at the back to finish.
Journalist:
My question’s on that same expenses subject. So, you’ve answered a big part there, but just there are a lot of really large moving parts in that section. So, just to point to a couple, in one year alone, education down $12 billion, health up $15 billion, welfare and NDIS line $10 billion and in housing it’s down $10 billion. And that’s half the entire housing budget that’s essentially changed in the course of one year in the budget. These are really very large timing movements. Why is there so much money moving around?
Gallagher:
Well, I’m not sure I can add to the explanation I’ve just given around timing differences. If you take the military compensation scheme, you can see the large numbers associated with that as well. But there are, there are just differences as you’re rolling out some of these big programs. I’ll see if, while you go to another question, I’ll see if I can come back on more of them. But essentially it is around the differences in timing.
Chalmers:
And in some instances there are issues around states hitting milestones or other ways that just change the timing of the payments.
Journalist:
Is that housing in particular?
Chalmers:
Housing is one of them.
Gallagher:
There’s components in housing, for sure.
Chalmers:
There’s a bunch of them. Dom.
Journalist:
Sorry, one for each of you. Treasurer, forecasts for the budget to return to deficit over the next decade are dependent on bracket creep balancing out growth in spending. Is bracket creep part of the government’s fiscal strategy?
And just for the Finance Minister in your other portfolio as Minister for Women, we see in your territory that ACT Labor is pushing to criminalise coercive control next year. The local Liberals want to do that quicker. Just want to get your take on the timing of that and whether you’re going to convene state and territory ministers to get a kind of blanket law across Australia with regards to coercive control.
Gallagher:
Sure. Well, I can deal with that if you like. So, we do. Tanya Plibersek actually has responsibility in this area of women’s policy because she has carriage of the National Plan to End Violence against Women and Children. But Tanya and I both co‑chair the Women’s Safety Ministerial Council meeting, which brings together state and territory ministers for women and ministers for women’s safety. And you know, there is a lot of discussion around the legal framework and protections for women.
And I think, like most ministerial councils, where we can align and standardise some of those arrangements, but that’s not always possible, I try not to get into telling states and territories how they should draft laws and when they should draft law. But I note ACT Labor has been out on this over the last week or so. I think that’s a positive thing. I think the issue of coercive control has really, with the use of technology and bluetooth and all of those other kind of apps and the arrangements that modern people live under, the issue of coercive control has grown in importance. And we need that legislative framework to respond to that.
Chalmers:
Our fiscal strategy is a combination of finding savings – $100 billion so far – showing restraint, banking 70 per cent of upward revisions to revenue and making room for our priorities. When it comes to bracket creep, we’ve shown an enthusiasm to return bracket creep last year, next year and the year after. And there is a political difference there because we believe the best way to return bracket creep is to try and return bracket creep for all taxpayers and not just for people who are already doing relatively well. And that’s the difference between us and our political opponents.
And when it comes to tax as a proportion of the economy, and from time to time you’ll hear our opponents talk about a tax cap. It’s important to remember that the only governments to equal or breach the tax cap that our opponents are talking about was the Howard government that did it 5 times, 23.9 per cent or higher, 5 times. The highest taxing government in recent times was the Howard and Costello government.
Our tax to GDP is a bit lower than that, partly because we’ve shown a willingness to return bracket creep where we can afford to do that in a responsible way. Returning that bracket creep gives cost‑of‑living help to Australians, it also makes sure that we are incentivising participation where we can.
Journalist:
Just 2 questions you talked about just then, around money shifting around the timing wise, but if you’re looking at it just fairly simplistically, it looks like you underspent on defence by $1.5 billion. How does that help our arguments with our overseas partners who might look at that and say «you’re not doing enough, you’re underspending’?
And secondly, you’ve spoken today, and you’ve spoken in here many other times about the need to be responsible with taxpayer money. Is it a responsible use of taxpayer money for the Prime Minister to have attended a political party conference overseas?
Chalmers:
I’ll answer that second one but Katy will answer the first one.
Gallagher:
So, yours relates to earlier questions really around movements in expenses. And I can certainly come back to people if you want to go through the detail of some of this. In defence, it’s not unusual from a timing point of view when you’ve got these large programs, you know, multi‑billion dollar programs moving around that you’ll have, you know, changes in payment times, but the money is there. We’ve done nothing more than increase defence spending since coming to government, making all of those resources available that we need to keep Australians safe.
And certainly that’s, I think, standard in terms of some of these adjustments in other areas. For example, I think there was a question around education. Student assistance expenses were lower than forecast, reflecting timing differences in the passage of the University Accord. So there can be these big changes, but they are usually explainable by differences in timing. I can certainly come back to you on a number of the other ones as well.
Chalmers:
And on your second question, Katina, I think that the Prime Minister answered this well yesterday when he was asked by your colleague David Speers. It’s entirely appropriate for the Prime Minister to take the opportunity to meet with the Prime Minister of the UK, the King, the Leader of the Opposition in the UK, the Prime Minister of Canada, the Prime Minister of Spain. That strikes me as a very good use of the Prime Minister’s time to meet with both sides of politics and the head of state while he was in the UK is entirely appropriate.
Journalist:
But he didn’t have to give the speech at the party political convention.
Chalmers:
Well, that slot at the conference has traditionally been given by a leader of another country, that’s not especially unusual. He made sure that he met with both sides of politics while he was in the UK, and the head of state and the Prime Ministers of Canada and Spain. I think any objective observer of that would conclude that that was a pretty effective use of the Prime Minister’s time. Jacob, and then you 2, and then we’re done. Thanks very much.
Journalist:
On your discretionary spending, the household energy bill relief was about $3.4 billion. I guess you could say that’s 34 per cent of the remaining deficit. You also mentioned that tax cuts have come in, wage growth is up and people have got lower interest rates on their mortgages. Does that mean the economics has changed as well as the politics? On the question of whether you go and extend those energy bill relief, that energy bill relief when it runs out, will you be still doing that or is there a change now, that means.
Chalmers:
The economic conditions shift either a little bit or a lot between every budget update. And one of the things that we try very hard to do is, is to make sure that our budget settings align with the economic conditions that we confront. And over the course of our 3 years in office, the balance of our challenges has shifted over time. We have made very welcome progress on inflation, growth in our economy is still relatively soft by historical terms, and so what we try and do is we try and calibrate our budgets and our policies for those conditions.
As I’ve said a number of times, when it comes to the energy rebates, they won’t be a permanent feature of the budget, we keep them under review from budget update to budget update. There’s obviously a Mid‑Year Economic and Fiscal Outlook to be released between now and when those rebates run out. They won’t be in there forever. We try and do what we responsibly can and affordably can to help people with the cost of living.
And if you look at these figures that we’re releasing today, I believe that we have struck an effective balance between getting the budget in much better nick at the same time as we cut taxes for people and help with the cost of living. That strikes me as an effective balance that we have been able to deliver and you can see that in this Final Budget Outcome.
If you look around the world and you look at our own economy here in Australia, we’ve got that low unemployment, we’ve got real wages growing again, we’ve got inflation down, interest rates have been cut 3 times in the last 6 or 7 months, we’re making good progress in our economy. And one of the reasons for that is the responsible approach that we’ve taken to the budget. Yourself and then next here.
Journalist:
Thanks Treasurer. I’m Brittney from the Canberra Times. A question for Minister Gallagher. You said in January the APS pay rises would be factored into the Budget. But this update shows employee and superannuation costs are about $13 billion higher. What’s the reasoning for that increase?
Gallagher:
Well, this reconciles the 24–25 financial year, so that will reflect actual expenses for the APS. Some of that will be how many staff we have on the nature of the arrangements, plus the salary expenses. So that is what we do in the Final Budget Outcome. And of course, what we’ve said at the time in terms of the arrangements for wage increases, because this was an issue that came up during the election, that wages weren’t factored in. Those have been factored in and are reflected and were reflected in the budget and will be reflected in MYEFO and through the Budget next year.
Chalmers:
Thanks Brittney. Next here. Last one.
Journalist:
Grace from AAP. The Prime Minister has ruled out holding a referendum in his second term. Has this set back the possibility of Australia becoming a republic?
Chalmers:
Thanks, Grace. I’ve heard the Prime Minister make that point on other occasions as well, that from his point of view, the referendum opportunity was the Voice referendum in the last term, obviously that didn’t get up. And so the position that he spoke about on the weekend is consistent with what he has said publicly before.
I believe, I think a lot of Australians believe that our future is one with an Australian head of state but we’ve got other more pressing priorities and I think that’s broadly understood. Even in the republican community of which I am part of, I think it’s broadly understood that the government’s got a huge agenda. Our primary focus is on delivering that agenda that we took to the last election and some of these other issues are not priorities for us right now. I was anticipating –
Journalist:
If you become Prime Minister.
Chalmers:
There’s a series of hypotheticals there, Greg, which are not worth coming at.
I was anticipating a question about the current meeting of the independent Reserve Bank Board and I just wanted to say, as Katy did this morning, we don’t pre‑empt or predict decisions taken independently by the Reserve Bank. There are no market participants or economists who are expecting rates to be cut tomorrow.
But again, we have seen 3 interest rate cuts in the space of 6 months this year that is providing substantial and meaningful relief to people with a mortgage, millions of Australians with a mortgage and what that reflects is the very welcome, encouraging progress that Australians have made together on inflation.
And the reason I finish there is because the responsible economic management which is a defining feature of this Labor government is playing a role in making sure we help people with the cost of living, we keep the economy ticking over, we keep the labour market strong, we get that downward pressure on inflation and without that downward pressure on inflation, that progress we’ve made together over the course of the last 3 years, the Reserve Bank wouldn’t have had the confidence to cut rates 3 times over the course of this year.
Thanks very much.