Source: Australian Parliamentary Secretary to the Minister for Industry
Tom Connell:
Thank you, Treasurer. I’m going to keep this broad, lest I be accused of ruling in, ruling out. So, if you think of how bold you’re willing to be. When we think of economic reform, the truly transformative reform is always, at the time at least, somewhat controversial. If you think of floating the dollar and the accord, if you think of the GST. Are you thinking of that level of boldness when you’re talking about the reform the economy needs around, whether it be productivity or tax or whatever it might be?
Jim Chalmers:
There’s an appetite to be bold and ambitious. What I tried to do in my contribution before is to run through all of the ways that we feel there is already an ambitious productivity agenda underway. We’ve already made a lot of progress on the budget. We’ve made progress in making our economy more resilient. But this is all about testing the country’s reform appetite.
And I don’t see it in personal terms, but I am personally willing to grasp the nettle to use an old saying. I am prepared to do my bit. The government is prepared to do its bit. And what we’ll find out in the course of the next few months is whether everyone is prepared to do their bit as well.
Connell:
I’ve started efficiently. One question and done. We’ll see if my colleagues can follow. We’ve got a long batting order. Tom Crowley from the ABC is first.
Tom Crowley:
Thanks, Treasurer, Tom Crowley from the ABC. Thank you for your speech. And I’ll also ask about tax reform and try to avoid the rule in rule out game.
Chalmers:
I appreciate it, Tom. Thank you.
Crowley:
There is a tension there between ambition and consensus. It goes to the question that Tom’s asking. And consensus is a comforting word for politicians, but maybe one that makes economists a bit wary, because the truth is, as well as constituencies for change in the media and among experts, it’s just a reality that if you want to reduce the reliance on income tax and at the same time you want to be budget neutral or positive, you’re going to have to increase the reliance on some other type of tax and you create losers in the tax system, losers in the electorate.
Do you see that this election gives you the political space to create losers and make an argument to them, even if perhaps you lose their votes, about why they should pay more to repair the budget?
Chalmers:
Thanks, Tom. A couple of, I think, important things about that.
First of all, I think in the aftermath of the election, and not because of the width of the margin, the magnitude of the majority that Anthony and the team won on election day, I think there has been a welcome and encouraging discussion about the level of ambition that Australia has – I’ll come to the Australian Government in a moment – that Australia has to recognise that this is genuinely a defining decade.
The decisions we make in the 2020s will determine the sort of living standards and intergenerational justice that we have in the decades to come. I think there is a broad recognition of that. That doesn’t always exist, but I think right now I feel encouraged and confident that there is an element of that in the broader community, and including in some of the commentary that people in the room here write.
So that’s welcome. That’s necessary, it’s welcome. I think there is some appetite there. The rest of your question, I think, goes also to an important point and it’s about trade‑offs. I think if you take a big step back and think about, take all of the political labels and all of the day‑to‑day commentary out for a moment, and if you tried to work out why a country like ours might spin its wheels on reform, I think one of the reasons for that is because governments have to consider trade‑offs and other participants in the national reform consideration might not need to. That’s why I’ve been very, very specific with the conditions that we put on people’s involvement, because there are trade‑offs, and often difficult trade‑offs.
If you think about in tax, you think about broadening the base and lowering the rate and some of these sorts of areas, which is an important element of tax reform theory, as Ken and others will tell you. There are always difficult trade‑offs associated with that. So what we’re trying to do with this roundtable, but more broadly as well, even absent the roundtable, is to be upfront with all of you and the country beyond, about the trade‑offs. To recognise that the easiest thing in the world is for people to come to us and say, we want you to dramatically cut the taxes in our part of the economy and spend dramatically more on our industry without recognising that there are necessary trade‑offs associated with that.
So let’s see how far we can go together, recognising those trade‑offs, having an appropriate high level of ambition, being upfront with people along the way, and explaining why those trade‑offs are important and why they might be necessary.
Connell:
Peter Hobson from Reuters.
Peter Hobson:
Thanks, Treasurer, I’ve got a question on housing. So Ezra Klein and Derek Thompson’s book ‘Abundance’ has been doing the rounds, and it argues that regulatory barriers –
Chalmers:
We should be on a commission with these guys.
Hobson:
Regulatory barriers and bureaucratic inertia are stifling the construction of new housing, and you want to build 1.2 million new homes by 2029. So how many have you built so far? And to achieve the goal, don’t you have to be more radical? Are you considering bigger changes to regulation, perhaps stripping more power from local authorities and, or, bigger incentives from federal government.
Chalmers:
Even if Clare O’Neil wasn’t in the room, I’d be careful not to front run the sorts of things that she would be considering. But I know that Clare won’t mind me saying that probably the most numerous conversations I’ve had in the last 6 weeks have been with Clare about housing, because we recognise that we need to build more homes sooner.
We’ve got tens of billions of dollars of Commonwealth investment. The states and local governments are very focused on the challenge. Institutional and other investors are working out what meaningful role that they can play. And so all of the ingredients are more or less there, but we need to do better and sooner in order to build those homes.
We have always acknowledged, Clare, her predecessor, certainly from my point of view, that the 1.2 million homes is a very ambitious target, deliberately so. And it will be hard to get there, but it’s not impossible to get there but everyone needs to do their bit. And I know that Clare is thinking about what else might be necessary in order for us to build the homes that our country desperately needs.
Connell:
Matthew Cranston from The Australian.
Chalmers:
I didn’t get a little nod from Clare at the end there so I’m worried that I didn’t nail it. Clare will be available for a press conference immediately following the –
Connell:
We can give her a question if you want?
Matthew Cranston:
Treasurer in your first term you had a desire for low, low inflation. And you pretty much got that. Productivity is a lot harder, and you’ve outlined very clearly, very transparently, that tax reform will be a big part of productivity. I wonder, does that mean, and you’ve said also today you welcome it and expect it. Does that mean you’re pressing the pause button at the moment on tax reform ideas such as unrealised capital gains tax. And do you think that this could open up a bigger conversation on tax reform that will help repair the relationship between tax, productivity and what you say, unsustainable budget deficit?
Chalmers:
First of all, we’re not changing the policies we took to the election. We’ve got a mandate for that change that you mentioned and that you write about most days. What we’re looking for here is an opportunity to build on the progress that we’ve made, including in the economy as you point out. We’re looking for, not opportunities to go back on the things that we have got a mandate for, we’re looking for new ideas.
Now when it comes to the role of tax reform in productivity, I very deliberately said that productivity is our primary focus but not our sole focus, budget sustainability, resilience in the face of global volatility, these are 3 very tightly related concerns, and tax reform is important to budget sustainability, but also to productivity. And so we do see those things as related. We’re delighted with the progress that we’ve made collectively on inflation, we do agree and accept your analysis that says productivity can be harder and less instant in the progress that we make, and tax has got a role to play there.
I think it would be unusual if I said to the country, we’re going to have this big national reform conversation about productivity, sustainability and resilience, but nobody’s allowed to talk about tax. That would be strange, and it wouldn’t be especially helpful to us. And so I anticipate, I welcome the fact that people will come to the roundtable, outside the roundtable, people will pitch up ideas about tax. We don’t see that as an opportunity to walk back on some of the things that we’re already committed to, in this case, some years ago. We see it as an opportunity to work out what the next steps might be.
Connell:
Millie Muroi from the SMH and The Age.
Millie Muroi:
Hi Treasurer, Millie Muroi from the Sydney Morning Herald and The Age.
Chalmers:
Hi, Millie.
Muroi:
Obviously you said ruling in and out is not very productive –
Chalmers:
But –
Muroi:
But you’ve set some ground rules. You’ve set some ground rules for this upcoming roundtable, including that ideas, or packages of ideas, should be budget neutral at minimum, but preferably budget positive. Would you be open to ideas that cost the budget in the short term, especially if they’re expected to improve growth and revenue in the medium or longer term.
Chalmers:
Look, if we’re sure about. We make investments all the time in our budget that have longer term payoffs and longer term dividends, but we don’t want to see that used as an excuse to pitch up a whole bunch of spending that nobody ever pays for. The thing that invites your good question Millie, with Tom’s at the start – and there’ll be people in this room who will be at the round table, there’ll be people in this room who will pitch up ideas before, during and after the round table.
Really, we’re just trying to respectfully encourage people to try and engage in the kind of work that we engage in around the Cabinet table. At the Expenditure Review Committee and the broader Cabinet as well, which is to understand that there are a lot of great ideas, often expensive ideas, and we have to make it all add up. And so the only way this is going to work is if everybody understands that. Not if it’s just left to Katy and I or the ERC or the Cabinet to engage in all of those trade‑offs. I want everyone engaged in that.
And inevitably, there will be a case made in some instances, and sometimes it will be a compelling case that investment up front will deliver a longer term dividend. But that doesn’t excuse us or extract us from some of these longer term structural budget pressures that we’re trying to deal with.
Connell:
The small room you alluded to, does that mean no room for the opposition?
Chalmers:
We’re finalising the invitation list. I say that very genuinely. We’ve done a bit of work on that, but we haven’t finished the work on that. I’ve been a little surprised, to be honest to hear that there’s been some interest from the Opposition, in some quarters. Sometimes you catch a part of an interview where people are running down the idea of a roundtable, other times you hear people saying that they’d like to be constructive. I hope it’s the latter. There will be opportunities for the Opposition to be constructive, whether they’re inside the room or not inside the room.
I think regardless of the final invitation list, it would be a very good thing for Australia if we all did take a constructive approach to it. What I’m going to try and do is where I think the Opposition or the crossbench or the other colleagues in the Senate are being genuinely constructive, I’m going to try and respond in kind, I mean that.
So let’s see how they go. Whether inside the room or outside the room, I think there’s an important role for the Opposition. And not just in the Senate, but in terms of the direction of the country.
We don’t pretend that we’ll be in government forever. Some of these issues will be long standing issues. I don’t even accept the argument that says another term of this government is assured. I think few things in politics are assured. So the more buy in that we can get across the parliament, the better. And so if they are genuine about being constructive, I will be too.
Connell:
John Kehoe from the AFR.
John Kehoe:
Thanks Treasurer for your speech. Spending as a share of the economy, according to Treasury’s own budget forecast for the next financial year is going to be the highest since 1986. Is it inevitable that the tax to GDP level needs to rise, as you’ve alluded to with by saying any tax changes need to be preferably budget positive. And within that, is it possible? Do you envisage that actually you could have a package of tax changes where some taxes go up, some taxes go down? And are you a believer of a package like that could actually deliver higher growth and prosperity for the Australian people?
Chalmers:
If I could just kind of respectfully make 2 points at the start, John. It’s not the highest spending since the 80s. I know that you mean absent COVID, but I think it’s unusual that we absent COVID.
Kehoe:
Excluding the pandemic. Yes, that’s true.
Chalmers:
So I don’t mean to have a shot at you, John, I say that very respectfully. But quite frequently I’ll hear we’ve got the weakest growth in 40 years, or we’ve got the highest spending. That’s not true. And I know that there are reasons why you want to extract that from your analysis, I get that. But let’s not forget that we had spending as a share of the economy almost a third. And some of those things that we didn’t extend when we came to office, they were difficult at the time, some of that spending. We had a lot of people calling for us to extend the fuel excise change, the LMITO was extended by our predecessors but we got called on to extend it. And so that spending that was almost a third of the economy during COVID, we got it down to less than a quarter of the economy in 2022–23
So, I’ll engage with the substance of your question but let’s not lightly dismiss that.
Secondly, when it comes to people coming with packages of ideas which are budget neutral, I hope that people come to this discussion and I know Katy hopes that people come to this discussion, not just with ideas about improving the revenue base, but also about where government spending is not giving us the dividends or the returns that we need.
And so it’s possible that people will come to the discussion with an idea to invest more over here, or to provide tax relief over here, which is not necessarily paid for by higher taxes, but might be paid for by less spending.
So we’ve got an open mind to that. All of those combinations, I think are reasonable. And I hope that people consider all of those different kinds of trade‑offs when they come into discussion.
Connell:
Next question, Trudy McIntosh from Sky News.
Trudy Mcintosh:
Treasurer, on tax reform, any proposal that comes out of this roundtable, will you look to legislate that as soon as possible? Or do you need to secure a mandate?
Chalmers:
First of all, it’s difficult to pre‑empt the steps that go beyond the ideas that people bring to the round table. I think the timing of any changes that we’re able to afford and pick up and run with, I think that’s to be determined.
It depends on the nature of the ideas. Some things where there might be broad consensus at the roundtable, it might not be feasible or wise to wait another 2 or 3 years to pick up and run with them. So let’s see what people propose. Let’s see what the nature of the changes are before we make some of those decisions around timing.
Andrew Probyn:
Treasurer, on the revenue side, what attitude would you bring to this roundtable when it comes to extending the breadth of the GST and the rate of the GST?
Chalmers:
Andrew, I’m not sure if you have, but others over the years have asked me, from that microphone, with me at this lectern, about that. And you know that historically I’ve had a view about the GST. I think it’s hard to adequately compensate people. I think often an increase in the GST is spent 3 or 4 times over by the time people are finished with all of the things that they want to do with it. But what I’m going to try to do, because I know the states will have a view on it, I’m going to try not to dismiss every idea that I know that people will bring to the roundtable.
I suspect the states will have a view about the GST. It’s not a view that I’ve been attracted to historically. But I’m going to try not to get in the process of shooting ideas between now and the Roundtable.
Probyn:
But when you consider that some of the carve outs were from 25 years ago, and a political deal between John Howard’s government and the Democrats, isn’t that something to at least consider?
Chalmers:
I think I’ve answered that, Andrew.
Probyn:
I don’t think you have.
Chalmers:
My view hasn’t changed on all of the other times that I’ve been asked it, but I think one of the ways I’m going to be inclusive and respectful in the lead up to this roundtable is I suspect people will raise that question.
Probyn:
So you’re not ruling it out?
Chalmers:
I haven’t changed my view on it, and again, it’s a nice little cheeky attempt to get a rule in, rule out in.
Probyn:
It sounded to me like you were ruling it out.
Chalmers:
I’m just reminding you of all of the other times you’ve asked me this question and what I’ve said, I’m not walking away from those views.
I think the best way to think about this roundtable is that we’re not using it because we’ve got a predetermined view that we want to change. We genuinely want to hear people’s ideas. I suspect people, particularly people who represent the interests of the states, might raise this with us. I want to be respectful about that, but my view personally hasn’t changed.
Connell:
Next question, Patrick Commins from Guardian Australia.
Patrick Commins:
Treasurer, you talked about the changing tax base, the structural changes in the tax base. And you also said that the net zero transition will reshape our revenue from resources. Is part of that a recognition that the next time we have the next resource export boom, maybe critical minerals, that we need to do better to capture more of the value of our natural minerals when we design a tax policy?
Chalmers:
First of all, I think it’s self evident that as the world’s appetite for different kinds of resources changes over the decades that our offering of the world will change as well. I know that the resources sector sees things in similar ways, and I don’t think that’s especially controversial.
What we’re focused on, as you know, when it comes to resources, the changes that we brokered on the PRRT so that there’s billions of dollars paid sooner to help fund our other priorities. It may be that people bring those sorts of ideas to the round table, a bit like the question that Andrew asked before you. I don’t really want to get into indicating or announcing government policy or rejecting ideas that people might put forward to us. That’s a pretty common view put by people that we can change the way that we tax our resources. It’s not something that we’ve been contemplating or considering or putting work into, apart from the PRRT change, but I suspect people will have views about that in the coming months and years.
Connell:
Nicola Smith from the Nightly.
Nicola Smith:
Thanks for your address, Treasurer, my question is on economic resilience and security. The independent Intelligence Review earlier this year recommended that the Treasury lead its own review of the structure and effectiveness of economic security functions across government, and for a distinct economic security unit to be set up in Treasury, including secondees from national intelligence agencies. What are your plans for these recommendations in the second term? And related to that, given the level of concern about economic fallout from the Middle East crisis, is the Treasury modeling the possible economic impact of conflict or blockades closer to home, including in the Taiwan Strait or South China Sea, and what you’re doing now to build resilience in supply chains?
Chalmers:
Thanks, Nicola. There’s a lot of your question. I’ll try and be efficient with it. First of all, on the structural changes proposed in the Intelligence Review.
I thank Richard and Heather for the characteristically insightful work that they put into that.
We’ve been discussing it over recent months to work out the best institutional arrangements which recognise that the national security interests and our economic security interests, which have always been linked, they’re now more closely intertwined than ever, and we want our systems of advice, we want our institutional arrangements to reflect that.
I’m not here to say that we finalised the work that we might have to do in Treasury under Jenny’s new leadership, new management, to give effect to some of those recommendations. But it is an ongoing conversation. We are taking the recommendations seriously, and we have a very, very high regard for our agencies and our other institutions involved in national security and because of the quality of their work, quality of the Treasury’s work, I’m briefed fairly regularly, or at the moment, daily, on the economic implications of what we’re seeing in the Middle East, and obviously sea lanes are very important to those considerations, the oil price very important to those considerations. I’m briefed daily on that. Some of the broader strategic considerations, the risk of conflict in our own region and closer to home, that’s really a central feature of so much of the advice that I get, so much of the thinking that we do when it comes to our resilience agenda.
I think there are good reasons not to go into a lot of detail about that advice that I receive and the thinking that we do, but to assure you that it’s substantial, it’s high quality, it’s across government, and it recognises that a big part of our economic challenges right now are security related.
Connell:
You want to make the budget sustainable enough, is that possible to do whilst increasing defence spending 3.5 per cent
Chalmers:
What I tried to say with those 6 major structural budget pressures is that there are good reasons in health and hospitals, for example, defence, for example, early childhood education and care, where we are increasing our spending in those areas for good reasons. They are very, very worthy investments that we’re making, and it forces us, encourages us to make room elsewhere in the budget.
So I’m an enthusiastic supporter of more defence spending. I don’t want to speak for all of the other colleagues, but the government is as one when it comes to increasing defence spending, an extra almost $11 billion over forward estimates, almost $58 billion extra over the 10 year, medium term projections.
So we’re making new, substantial and much bigger investments in defence, and that’s a good thing. It does put structural pressure on the budget. It does mean that we have to find room in other areas. But it’s not unique. We have to find room for early childhood. We have to find room for defence. We have to find room for health and hospitals. We’ve made good progress on interest costs, aged care and the NDIS, but Katy and I have never seen this work that we do with other ministers on structural pressures as a kind of a one and done, it’s ongoing.
Probably wouldn’t be a day, Katy and I don’t have a discussion with one or another colleague, out of those 6 main areas where the structural pressures are most acute, where we’re trying to work out, how can we get maximum value for money and make sure that we are satisfying our strategic purposes and our purposes elsewhere in our economy and in our society in a way that we can afford.
Connell:
Tim Lester from the Seven Network.
Tim Lester:
Treasurer, just to pick up on your comments there, you’re quite blunt about strategic threats, acknowledging a more dangerous world and more perilous times for the global economy arising out of the Middle East. Though, on saying that your government is increasing the budget for defence, do you believe that the track to roughly 2.3 per cent of GDP by the early, mid 2030s is still fit for purpose in the current environment. And if you do believe that, what are you saying about the United States’ demand for 3.5 per cent, surely that is stupid if you hold to the current Budget.
Chalmers:
I’d say, Tim, that to go from 2 per cent of the economy to 2.3 per cent of the economy by the early 2030s represents a very substantial increase in our budget for defence spending.
I try to read as much as I can of all of the commentary about national security and defence funding, and I think that’s one of the things that’s often missed, is that we are already making what would be seen in any other time a really substantial increase in investment in defence. Personally, I do that enthusiastically. I understand the risks and the threats.
It’s a really important, warranted thing that we are doing as a government, and it’s substantial. Now, of course, our partners would like us to spend more on defence. It’s not unusual, even people I have a lot of time for, the whole time I’ve known Kim Beazley, decades now, he’s said that we should spend more on defence. And so it’s not uncommon or unusual for there to be a constituency for more defence spending. It’s not unusual for there to be a constituency for less defence spending at the same time.
When it comes to our American partners, again, that’s the message they’re taking to all of their friends in the world, not just us. They’re saying that in Europe. They’re saying that in our own region, they’re saying that in our instance as well. Over the life of the next 10 years, it may be that governments are not necessarily just about political persuasion. It may be the governments make different decisions about defence spending, but let’s not dismiss the very substantial increase that we’re already making.
Connell:
Katina Curtis from the West Australian.
Curtis:
Thanks, Treasurer, just picking up on that defence theme, what you said just before about getting maximum value for money, and at the start of your speech, about your obsession with delivery. If there’s a submission comes to the NSC later this year that says, for example, we want to buy these frigates, we can get them for cheaper and faster if we buy one off the shelf being made overseas, or we can get them a bit more expensive, take a bit longer if we built them in Australia. What is your thinking in approaching those kind of trade‑offs as you talked about, and how much perhaps, has this been shaped by discussions, previous discussions with Steven Kennedy?
Chalmers:
First of all, I try and avoid hypotheticals at the best of times, but I think especially when it’s about defence spending and national security and issues which are obviously very sensitive. I think more broadly, what the government has shown a willingness to do and an ability to do is to engage in some of those difficult decisions about sequencing. I pay tribute to Richard Marles for the way that he’s come to us collectively, and Pat Conroy as well, to make sure that we can sequence this defence spending in a way where we do get maximum value. Richard does way more work at that than I think he is acknowledged for. I acknowledge him for that. Katy and I have worked with him very closely on that, and Pat Conroy as well. And I forget the last part of the question.
Curtis:
Just, how is your thinking being shaped?
Chalmers:
Well, Steven is an influential fellow, and I loved working with him, and I’m excited about working with Jenny, and we get the best of both worlds because Steven and Jenny, their colleagues, they think deeply about the economy, but also about the national security environment. It’s no coincidence that I’ve tried to tell you that the next 3 years of my life are going to be about 3 things – productivity, budget, sustainability and resilience.
In the face of global uncertainty, not every Treasurer over the last recent decades would have brought something which has a national security element to it on their list of 3 highest priorities, I think that reflects the world that we’re in. I hope Ken doesn’t mind me saying that when we were talking about a draft of the speech earlier in the week, we were really talking about this kind of permanent state of churn and change in the world. The fact that it would be a heroic assumption to pretend that 4 big economic shocks in less than 2 decades with national security elements to them that this is just some kind of bizarre period that we’re living in, and that we’re going to go back to this period where we have decade long periods of calm like we had after the end of the Cold War, and that would be a heroic assumption to make, almost certainly wrong and not especially wise when it comes to thinking through our options.
And so you asked me about Steven and Jenny and the advice that we get, really the whole government, I think, thinks very deeply about the fact that we’re in this period of extraordinary churn and change. From my point of view, my reason for being is to make sure that our country is a beneficiary of that churn and change, not a victim of that churn and change. We were huge beneficiaries of that great moderation that followed the end of the Cold War between then and whether you mark the end of it as the beginning of the war on terror or the GFC, Australia did so well out of that period of moderation and calm. And now we need to work out a way to do really well out of this world of permanent churn and change. And the advice that we get from very smart people who we respect greatly in a public service which is very well led, reflects, I think, the nature and the magnitude of that challenge.
Connell:
It’s only a month and a half after the election. You’re talking big changes in reform. Would talking about that during the election scare voters off.
Chalmers:
Well, I think we took a substantial agenda to the election.
Connell:
We’re talking new changes today.
Chalmers:
Well, what I tried to say today is that, from the Prime Minister down and again, talking out of school a bit, but all of the kind of collective conversations that we have as a government led by Anthony are about making sure that we deliver the things that we took to the election. And most of my time has been spent working with Clare and her staff, Chris Bowen’s got a big challenge to roll out the things we took to the election, Mark Butler’s got a huge portfolio and a huge opportunity, and so our obsession is with delivery, but we’ve also got, in addition to that responsibility to deliver, we’ve got an obligation to include people in a proper national conversation about what comes after that, and I think that’s consistent with the way that we talked to during the first term of our government.
One of the things that has kind of surprised me on the upside is that, when I rolled in bleary eyed to the Insiders studio the day after the election and David Speers said to me, what’s the priority? And I said, well, we spent a big chunk of the first 3 years trying to beat inflation, and now we’ve got to spend the next 3 years trying to get on top of this productivity challenge, I’m absolutely delighted with the way that the place responded to that, and that, I think reflects, again, going back to Tom’s I think first question, other Tom’s first question, it goes to the level of ambition that people have. It’s consistent with the way that we govern, which is to say, here is how the world is changing, these are the things that we need to do to be beneficiaries, not victims, of all of that change. We’ve got an agenda that we took to the people, we will deliver that agenda in the most efficient way that we can. We’re obsessed about delivering that, but we also need to work out what’s next, that’s what my speech was about, that’s what the roundtable is about, and it’s what the second term will be about.
Connell:
Just about time, are you happy for a couple more?
Chalmers:
Yes.
Connell:
All right, Michael de Percy from the Spectator Australia.
Michael De Percy:
Michael de Percy, Spectator Australia. Treasurer, the UK was decisive in increasing the defence budget. They did this in a budget neutral way by reducing or cutting the foreign aid expenditure. So it’s pretty obvious on what’s happened in Canada in the last few days, if Australia wants a seat at the table, we’re going to have to ramp up our defence spending. If we don’t, we won’t have access to the US. If we don’t, we’ll need to ramp up our expenditure. So if that’s the case, will you cut spending, increase taxes, accumulate more debt, or are you going to leave defence spending as it is right now?
Chalmers:
Thanks Michael. I think my answer to your question is a bit like the answers to some of the other defence‑related questions. I think Nicola and Katina and others. We are already substantially increasing our defence investment, and we’re talking about tens of billions of dollars in extra investment in the coming years because we recognise how important it is, we work with our partners to invest in our own security, and so those extra billions of dollars reflect that we’ve made room in the budget for that.
When it comes to foreign aid, I know that this is sometimes a contentious issue, but we don’t see it that way. The way that we invest in our region in particular is an important investment in our national security and I think in some ways it would be to cut off our nose to spite our face if we were to go after aid funding in the interest of making ourselves more secure, I think the outcome of that we would be less secure, and so I have always been within reason – my colleagues have backed me up – an enthusiastic supporter of investment in our region, particularly our Pacific neighbourhood, because if you genuinely understand the risks in the 2020s and the 2030s, a lot of those risks can be best addressed by genuine engagement and the aid budget’s part of it.
Connell:
Final question, Jacob Shteyman from AAP.
Jacob Shteyman:
My question is about the carbon tax, but not whether you’re going to rule it in or out. You had a front row seat the last time Labor tried to implement it and my question is, what have you learned from that experience about how to implement contentious tax reform and to make it stick?
Chalmers:
I think whether it’s that episode or – I have been around for a little while, not very long as Treasurer, but I’ve been knocking around with a lot of you for a very long time. So Misha Schubert, , now I’ve known Misha for probably 20, 25 years and so have been associated with a lot of the policy deliberations that we’ve gone through. I think, like anyone you learn from all of them, not just that one. I’m sort of reluctant to pull out a specific lesson from that period, but I think whether it’s in climate, whether it’s in tax, some of the other areas that we’ve grappled with as a country, not just as governments, I think inevitably, you learn from all of that.
What we’re trying to do here is we’re trying to say we have a big, ambitious agenda. We’re going to roll that out as we said we would, but we’re going to test the country’s appetite for more than that. And reform succeeds when you can bring people with you. It requires courage, but it requires consensus as well. And if you go through the reform experience of this country over a long period of time, you can isolate the lessons, but I think that’s one of them. Having a government prepared to make the necessary trade‑offs is really important. We will provide the leadership, Anthony will provide the leadership, and we will provide the opportunity and we need everyone to play their part.
And there will be some things that people can’t agree on. Of course, it would be a strange country if there was unanimity about some of these big challenges or what we need to do to address them, that would be a strange place but what we’re trying to do here is to learn from Australia’s reform experience, overwhelmingly, a proud experience of change and reform that delivers dividends, often decades down the track. And so let’s see what we can achieve together if we genuinely listen to each other, we genuinely try and find the common ground, we genuinely try and engage in some of these difficult trade‑offs. I’m realistic about that, but I’m optimistic about it too. I think there is the right amount of appetite. I think the problems are well understood and identified, and I feel confident, cautiously confident, that we can make some progress together.
Connell:
Treasurer, you’ve been generous with your time today.
