Topics: Budget 2023

E&OE

PAUL ALLEN: I’m joined now by Shadow Treasurer, Angus Taylor. Thanks so much for joining us here we're getting some of the analysis coming through now on the budget. How do you see this budget adding to inflationary pressures in Australia?

ANGUS TAYLOR: Well, sadly, I think it is inflationary. We needed a budget right now, that is putting downward pressure on inflation. If you're rely purely on monetary policy to deal with inflation, it’s very painful, we saw that in the 70s and 80s, you need to have aligned fiscal policy and that means you need to have a fiscal policy that is not expansionary. Preferably, you've got fiscal consolidation going on. The best way to do that is manage spending. We know that because the goal here has got to be a strong, low inflation economy at the back end of this. That means not having higher taxes, it does mean managing government spending. And that's not what this budget has done it has added $185 billion in spending since this government got into power and $2 worth of spending initiatives for every dollar worth of revenue. That's expansionary. Sadly, that means we're likely to have inflation and higher interest rates stronger for longer.

PAUL ALLEN: Yeah well, I want to pick up on that final point. Politicians don't like to offer commentary on what the Reserve Bank of Australia is doing, but do you get a sense that the rate hike cycle is going to continue?

ANGUS TAYLOR: Well, I think that the increase we saw last week was a real wake up call. It wasn't expected by the capital markets. It wasn't expected by the experts, economists and people realize that there is a deep, persistent, inflationary pressure in the economy and fiscal policy has a critical role to play in dealing with this and I think all around the world. I mean, we’ve had Blanshard, very renowned economist saying in the last few days, maybe fiscal policy needs to play more of a role, this is in the global context, but I think it's absolutely true. In Australian terms and we have core inflation in this country that's higher than G7 countries like the US and the UK. It's higher than Europe, and Canada. This is real pain we're seeing now on the ground. The payments being felt in middle Australia, in places like where I live now, a typical family with a mortgage $25,000 a year worse off than they were a year ago. And there's no light at the end of the tunnel on this one. Point being that inflation economics is different from other problems, because if you just throw money at it, you make it worse.

PAUL ALLEN: Yeah, it’s a difficult balance to strike now but isn't it, because the onus is on the Government to provide some relief in terms of cost pressures? Are there any measures in this budget in terms of addressing those pressures that you'd support them and what would you advise?

ANGUS TAYLOR: Well, the point I would make is the best way to deal with the cost pressures is to deal with them at the source and not just deal with the symptoms. I mean, there’s no point putting a Band-Aid on a bullet wound, you've got to get to the source of the problem. I think economists understand this and that way, you take away the pain not just for one group but for everyone, which is no good giving with one hand and taking away with the other, with higher inflation and higher taxes, and that's what we're seeing right now. So, we do think there is a real need to go to the source of the problem. That means managing spending, it means initiatives like $45 billion worth of spending that Labor's committed to that we oppose. There are initiatives in the budget that we think are sensible ones and dealing with women's safety, for instance, veterans, I mean, there's some things in there that we do support, but more broadly, if you look at the aggregate level, this is the wrong budget for the times.

PAUL ALLEN: Okay, well, in terms of addressing the source of inflation, you are concerned as the government in waiting, as the Opposition. What would you do to address this?

ANGUS TAYLOR: Well, you know, it's what you don't do in many ways, that matters with inflation. We learned that last time we had a big bout of inflation across the world. It's not doing things that governments are accustomed to. Don't throw money around. $45 billion of extra spending I mentioned earlier, there's significant spending in this budget. Ten thousand new Canberra places of public servants and outside of national security and frontline services, I don't think now is the time to be adding to the public service businesses and households are having to tighten their budgets, we should expect government to do the same.

PAUL ALLEN: In terms of spending there are some big-ticket items in the forward estimates that really can't be avoided, the National Disability Insurance Scheme, nuclear submarines something's got to be done on the revenue side, surely?

ANGUS TAYLOR: Well, yeah, let's remember what we achieved between 2013 and 2019 when we had exactly the same pressure. Fast growing NDIS, a really strong focus on increasing defense spending, and we managed to grow the economy faster than spending and get the budget back into balance by 2019. Now, I was there around the table, you've got to have enormous discipline, you've got to have enormous discipline. And that's what government’s need right now, that kind of discipline that puts that downward pressure on inflation, addresses inflation at the source of the symptoms and ensures that you you've got a fiscal policy that takes pressure off central banks and the Reserve Bank in our case, to raise interest rates and impose enormous pain on businesses and households, which we’d prefer to avoid.

PAUL ALLEN: Just finally, I have kind of buried the lead here which is, of course, the surplus. First one in 15 years, does this mean that the Liberal Party can no longer use that favorite attack line that the Labor Party can’t be relied on to deliver surpluses? Here they have done.

ANGUS TAYLOR: Well, it’s an incredible vanishing surplus this one, $80 billion windfall. The budget was in surplus from the time the economy opened up in late 2021 through to the May election. And you know, that was a remarkable, remarkable outcome. Very few other countries in the world could replicate anything like that and Labor inherited that. The bad news is they're driving the budget off a cliff, to a deficit of over $36 billion over the next couple of years. That's not what you need in an inflationary environment. You don't need expansionary policy that’s driving bigger deficits, you need a sensible balance. They've taken budget balance out of their fiscal strategy. That hasn't happened since the charter of budget honestly was put in place and so, they've given up the ghost. They’ve put up the white flag when it comes to balancing the budget over the medium term. That's the task that needs to be achieved now to take pressure off inflation to make ends meet.

PAUL ALLEN: Angus Taylor, Shadow Treasurer, thanks so much for joining us here at Parliament House in Canberra.

ENDS