Australia Institute Live: Jim Chalmers delivers fourth budget with surprise tax cuts ahead of election. As it happened.

If you’re still with us (sympathies) now might be the time to grab something to help you through the next few minutes.

Here is Angus Taylor’s first response:

Well, this is a big-spending budget for the next five weeks, not for the next five years and what we see in it is a promise of 70 cents a day in a year’s time which will do nothing to restore Australians’ standard of living to where it was when Labor came to power. There are better structural fundamental solutions to the cost-of-living crisis. That is not what is being offered by Labor, and so we won’t support what they’re doing here

Q: You do not support the tax cuts?

Taylor:

No. Look, let’s be clear: They are a cruel hoax. They are not a genuine tax cut. 70 cents a day, 73 cents a day in a year’s time, when for a typical Australian family with a mortgage they are paying an extra $50,000 over around above what they expected.

We need a pathway back to the standard of living that Australians had when Labor came to power that. Is not what is being offered by this Budget. We don’t get there until the end of the decade and that’s simply not good enough Let’s be clear, the Treasurer described them as top-up tax cut as went along with the previous tax relief that the Government has offered during this term.

Q: Should the tax cuts have gone further. Is that what you wanted to see and sooner?

Taylor:

If you manage the economy, sooner? you don’t see a collapse in people’s standard of living.

Taylor has literally just been on a ‘marginal seat tour’ about the ‘$3,500 in additional tax’ he says you are paying under Labor, (without mentioning that is because most people are earning more, so therefore are paying more tax, or that it is the loss of the low and middle income tax offset, which the Coalition – his government – phased out). And now he is saying that he does not support the tax cut.

Q: How concerned are you about the situation, the impact on Australians?

Chalmers:

Very concerned and to go back to the original question, that’s why it’s important that we have the budget in a much better condition, why it’s so important that we are rebuilding incomes and household wages and building an more resilient and competitive economy.

This budget still has economic reform, [getting rid of] non-compete clauses, and it stills that savings and that’s because we recognise the best insurance policy against this global economic uncertainty is more resilient economy, stronger income and wages for Australians and a budget in much better nick. We’ve made progress on all three fronts tonight, but there is more to do.

Q: Where is the room, if you were compelled, let’s say, to raise Defence spending by 2.5% of GDP?

Chalmers:

I know you are asking a different thing, but first of all, we are dramatically increasing spending on Defence, quite an historical increase. I mentioned the $200 billion improvement and making room for our priorities in a tight budget, the fact that we’ve made room to help with the cost of living and strengthen Medicare and fund this increase in defence spending all at the same time as we’ve got this year’s deficit down, I think that augurs well for our ability to continue to make right economic decisions for the right decisions, managing the global uncertainty, recognising people are under pressure, but more than that, helping people who are doing it tough.

Q: When you first delivered your budget, you said they were hard decisions for hard time, possibly harder times now – are you going to be able to lay out to the Australian people in this election a plan that encompasses the future, not the situation, not the cost-of-living crisis you are doing now, but a genuine crisis in the Australian Budget going forward? We’ve talked about tax, but a growing deficit up to $42 billion next year?

Chalmers:

It hits $42bn and then starts to trail away again. Getting it back to balance is the need in the medium term, but I accept the general proposition of your question. We have become to address NDIS, aged care, interest costs all of those are ways to improve the structural position of the Budget. What I’ve laid out tonight in the Government’s economic plan and in our fourth budget was a plan to help the people here and now in the cost-of-living but investing in the future, green metals, innovation, making sure we are an indispensable part of the global net zero transformation. These are aspirations for us. We have taken an intergenerational plan and I’ve laid that out tonight

Q: The audience wants to understand how you will put politics in play, policies in place, that we are relying on tax revenue. Right now you’ve given you and me $5 or $10 in our pockets. But going forward, who else is going to pay for all of these promises you’ve made if it’s not the taxpayer?

Chalmers:

The reason I think that’s an unusual question tonight, Sarah, is I’ve just laid out in lots of detail the Government’s economic plan, to help people with the cost of living, strengthen Medicare and make ourselves more resilient in the face of global uncertainty. All we ask is that three years in eye 3-year parliamentary term, that the Opposition comes clean and the consequences.

Q: I want to talk about the global uncertainty because the next 3-year term, if re-elected, you could face an inflationary global trade war with the US, ongoing demands over Ukraine and a worsening security situation with China. With all of that uncertainty, would it have been more prudent to tighten the budget now to increase the capacity to respond to crisis?

Chalmers:

Well, there is a dark shadow from all of this global economic uncertainty over the world’s economy and over our own economy and budget, we are very upfront about that in the Budget Papers and in my Budget speech tonight we do think there is substantial risk that these escalating trade tensions mean around world and we wouldn’t be immune from that.

Q: There is one other measure that people are talking about today I want to ask you about briefly and that is the extraordinary drop in the tobacco excise. This is a situation where the tax has caused enormous profit to bikies and criminals, a failed policy. How do you fix it?

Chamers:

Well, there are two ways that we get tobacco excise down, one is a good way and the other is a bad way. The good way is people give up the darts – that’s a good thing. The bad thing is avoiding the excise. We’ve spoken about this on other occasions. We are investing more money in enforcement and compliance because we’ve recognise the problem here and we need to avoid the eggs because we have a problem in people avoiding it.

Q; Let’s talk about how the politics of the big decisions in tonight’s Budget are going to play out politically. Obviously we are in the teeth of an election. I think the Opposition has responded to your tax cuts, they are calling them a cruel tax hoax. Now, what does that tell you about how these tax cuts are going to be received? It’s strong language coming out from the Opposition straightaway is that because you stole Peter Dutton’s thunder or are we looking at a tax hoax?

Chalmers:

That’s the first we’ve heard of it. Sounds like they are not supporting our tax cuts. That’s what happened the last time we tried to give every taxpayer a tax cut, Peter Dutton said we should call an election.

Q; Is he entitled to have a legitimate concern about piling a tax cut on top of already a budget suffering from a structural deficit whose numbers are eye-watering?

Chalmers:

No, we’ve done this in a very responsible way. We are providing tax relief to every Australian taxpayer. If he doesn’t support that, he should say so.

Q: I think he has said so

Chalmers:

If he has alternatives, he should come clean. They’ve had three years now and they still haven’t come up or come clean on any cost or credible or coherent policies. Angus Taylor’s colleagues don’t take him seriously. It is an absolute bin fire of inconsistency. As he told your colleague David Speers, they’ve got to find $600 billion to pay for nuclear reactors. They can’t do that without coming onto Medicare. They need to come clear on their cuts. These secret cuts that people has in mind for Australians will make people worse off.

Host: That’s a slogan.

Q: We’ll give the audience the numbers again as to what will happen with the deficit $$42 billion this year, $179 the year after. What you’re going to do to attack that structural position of the budget?

Chalmers:

First of all the Budget position cumulatively is $207 billion stronger than when we came to office and that shouldn’t be lightly dismissed that. Is actually the biggest positive turn around in any budget in a single parliamentary term ever in nominal terms. That’s the first point, very, very important point, often neglected. Secondly, this year’s deficit is almost as half as big as what it was when we came to office. Thirdly, when you look at the overall positions, the bottom lines in this budget, it is stronger that what it was only a few months ago in the midyear budget. So we are chipping away. We are also making structural difference in NDIS and aged costs

Q: Yes, on that particular measure, on NDIS, it has been a huge pressure on the budget, can you confirm it will be hit its reduced target for growth of 8% next year?

Chalmers:

We’re on track for that for sure. We are seeing very encouraging progress. The thing we’re encouraged by is we’ve been able to get the cost of the NDIS to a more sustainable growth rate – still growing, but more sustainably, while we still meet our responsibilities to people who need and deserve of the scheme.

Q: You’re fortunate already in your previous budgets with record windfalls obviously, from the mining exports, enabling you to post surpluses. So, is what we are seeing now, the true picture of your economic management with its unending long-term deficits?

Chalmers:

Well, first of all, it is a popular misconception that the…

Q: I think I said largely.

Chalmers:

Also by tax receipts but largely by commodity prices played a welcomed and significant role and as did the employment market. That is benefit for the Budget as well. We have been clear about that. But what matters is when you get the revenue upgrade what you do with them and we unusually banked those revenue upgrades without which there wouldn’t have been a surplus or second surplus for the first time in two decades. Our predecessors spent most of those and we banked most of them I think we are talking about into the future not what your predecessors did.

Q: Let me put it another way: Over the term of this government, you are overspent the largest share outside of crisis, of course is going to pay for all of those commitment noose the future?

Chalmers:

First of all, during COVID, for understandable reasons spending as a share of the economy was about a third of the economy. We got it all the way down below a quarter of the economy. It is settling a little higher than that largely because of our responsibilities in the care economy and some of those you unavoidable investments as a Government. Sharing around the 26s. It was up in the 31s, it got down to 24s and now settling slightly higher than that. In every budget, whether it is the $94 billion in savings that we the way we’ve banked upward provisions to revenue, the way we’ve shown spending restraint when it comes to real spending growth being half the pace of 309-year average, all of that comes together to make room for your commitments, whether it’s strengthening Medicare, providing cost-of-living help or investing in the future.

Q: What about the specific question, if there is inflationary impact of these new tax cuts?

Chalmers:

We don’t believe there is for a couple of reasons. The timing, and a participation effect, we are encouraging more people into the workforce which is one of our key objectives but thirdly we think we have got the magnitude right to provide some top up tax relief to every Australian taxpayer but in the most responsible way we can. It is, as we are saying a course, preelection measure that sits alongside, I think, the $35 billion in preelection announcements that you have made since January.

Q: How are you going to pay all those promises for these tax cuts now sitting on top?

Chalmers:

Well, first of all a large number of those commitments we have announced over the course of the last few months were a provision for in the midyear budget update. Not all. Most of them were before tonight. The big mover has been the tax cuts, if you think about the net policies in the budget, $35 billion that is less then what our predecessors committed in their election point number one and half of that is the tax cuts, $17 billion in tax cuts and point number three is eight billion dollars of that 35 William dollars was already.

Q: Put it another way, a political advantage, whether you want to engage with that or not, outweighs the impact on the budget.

Jim Chalmers:

I think that is for others to determine. Genuinely. I genuinely believe that if you get the big economic decisions wrong, politics will take care of themselves. I’m not oblivious to the fact that this budget, this fourth budget, very rare and cherished opportunity, is being delivered on the eve of an election, and will set up a choice between Labor helping with the cost-of-living and helping with Dutton whose secret cuts will make Australians worse off.

Q: Have you ruled out an inflationary impact of the tax cuts that the RBA will look at?

Chalmers:

I briefed the Reserve Bank governor on the budget, I do that for every budget and every budget update, I have done that for the last two Reserve Bank governor’s and I will do that for as long as I am in this job. Secondly one of the most encouraging things about this budget is that the Treasury put forward its expectations for when inflation gets into the target band and we provided cost-of-living relief in a responsible way, consistent with inflation lower and earlier, which is one of our key objectives.

Q: Tax cuts are popular, but still political, are you stealing Peter Dutton thunder?

Jim Chalmers:

I see these cuts in economic terms, partly in recognition that as we make this quiet remarkable progress together as Australians in the fight against inflation we know that people are under pressure, and so we are providing cost-of-living relief, one of the defining features of this budget is the cost-of-living relief that we are providing an often the best way to do that is through the tax system.

We see the cost-of-living, we said terms of the economic benefits to participation, we found room in budget to provide these cuts and the politics will take care of themselves.

Q: Are they fiscally responsible in the environment we have?

Chalmers:

Yes. There is an appetite, obviously, and an enthusiasm, often, to provide the tax cuts and we have to provide those we think the budget can afford and we have to do that in the most responsible way and that is what has guided us, to give us as much cost-of-living help as we can in the most responsible way, judges of pressures on the budget and pressures coming at us from around the world.

Oh look – one of Richard Denniss’ and Greg Jericho’s favourite phrases (I hear it in my sleep) makes it into the first question:

Q: Budgets are about choices, you have chosen to give every Australian worker tax cuts spending $17 billion as we have heard, why are you giving a tax cut to you and to me?

Jim Chalmers:

This is about topping up a tax cut every taxpayer in addition to those which are rolling out from July last year. And so we know that they are modest in isolation but meaningful in combination, and with all the tax cuts we have provided with other cost-of-living help that we are rolling out as her when it comes to the design of the tax cuts, in order to give one to every Australian taxpayer the benefits are felt disproportionately to people were encouraging to work, younger workers, women, people on low and middle income is. They will proportionately be the biggest beneficiaries of this top up tax cut in addition to tax cuts already rolling out.