Topics: Labor’s homegrown inflation crisis, Federal Budget

E&OE

PAUL ALLEN:

I'm here with Angus Taylor, the Shadow Treasurer. Of course, if there were an election and the government were to lose, Angus Taylor would be your next Australian Treasurer. So, Angus, thank you very much for joining us today and I want to start with the obvious question, and this is around inflation. We've had so many different forecasts. The government says this budget isn't inflationary, Treasury sees inflation back to the RBA target by the end of the year, the RBA disagrees. Bloomberg intelligence says this will put RBA rate cuts back. What's your view on this?

ANGUS TAYLOR:

Well, it's very clear the Reserve Bank has warned the government that there's inflationary pressures that haven't been beaten yet, and that was very clear in their forecasts. That's also the view of the markets, that there are still significant inflationary pressures, that are unbeaten and without beating them, the risk is there's ongoing, persistent inflation and that's certainly what we've seen so far. We've got the most persistent inflation in the world, in the advanced world, according to The Economist. And I think that's a very reasonable perspective to have. Sadly, this budget is not being that, this is a big spending budget 16% increase in spending in two years, $4 of spending for every dollar of savings, we needed to see restraint. We've seen some reckless spending in this budget and we think that is creating a risk of a more extended period of persistent inflation and higher interest rates.

PAUL ALLEN:

It is, as you say, a big spending budget, but I've heard some of your commentary saying you will be supporting some of that spending when the budget comes to vote. So how do you square that circle?

ANGUS TAYLOR:

Well, there's very significant parts of it that we've already disagreed with and we'll continue to. $45 billion of spending we've opposed in the parliament. We think these production tax credits of over $13 billion in this budget, which is money that is not properly allocated. So there's very significant parts of this budget we think is inappropriate for the times. I mean, whatever you think about those initiatives, production tax credits for some of our most successful industries, in this country, now is not the time to be doing that. We need restraint. That's how we beat inflation. We know that's how we've beaten inflation in the past, getting back to basics, making sure we've got low energy prices, genuinely low energy prices, not subsidies, making sure that we've got fast approvals for our most important projects, getting red tape out of the way. These are the ways that you deliver a strong economy with low inflation, not through government subsidies and government spending.

PAUL ALLEN:

So there was, as you say, cost of living relief in the form of energy subsidies - $300 for every household, regardless of their income level. Everyone's getting a tax cut as well. Do you feel that that should have been more targeted?

ANGUS TAYLOR:

Well, if you look at the energy relief, it's an admission of failure from the government who promised a $275 electricity price reduction before the election. They're clearly not going to deliver that now and so their answer is to hand out a subsidy. Well it's sad that it's got to that point, it is putting a band aid on a bullet wound, sometimes when you got a bullet wound, and all you got is a band aid, you put it on. So we're not going to get in the way of that. I think there's very real questions about why this is going to everybody. Does a billionaire really need a $300 subsidy, a $300 handout? That's a very reasonable question you ask. Particularly at a time like this. But the big numbers in the budget are initiatives like the $13 billion in production tax credits, I mean, they're highly, highly expansionary sort of investments and I don't think they're ultimately going to deliver the pathway to prosperity we need. This country has succeeded on the back of some extremely globally competitive industries, when you say we're actually going to make them government subsidised industries, I think you're taking us on a pathway to poverty.

PAUL ALLEN:

Talking about some of those tax incentives for, as you describe them, some of Australia's most successful companies. I mean, part of the intention of this is to boost critical minerals production, other things that are essential to the green energy revolution. It's hard to argue with that logic, right?

ANGUS TAYLOR:

Well, I think you can argue with it. I mean, Australia has been an economic miracle over multiple decades, and on the back of globally competitive industries, where we are the best and have been the best in the world. Make no mistake about it. When it comes to iron ore, for instance, when it comes to our LNG exports, we created that industry here in Australia. They have powered this economy, they have powered our prosperity, they've powered our aspiration as a country, they've paid taxes for the hospitals and schools and universities we have and now we say they've got to be government subsidised. That is a pathway to poverty. It is not the right way through. We can build a critical minerals industry in this country, which will be very, very successful. I have no doubt about that, but it's about getting back to basics, energy prices, deregulation, approvals, getting our industrial relations right. We know what's worked in the past. It's very clear, that's what will work in the future.

PAUL ALLEN:

Well, the impact of all this on the budget bottom line is it's back into deficit in 2024-25. Now, this appears structural, though, and this was something that was happening the last time your party was in power as well, is that the budget seems to exist at the whims of global commodity prices, other large macro events. It's pretty clear that there's some structural issues going on here, but would you be willing to spend the political capital and take the pain at the ballot box to bring about the reform that is obviously needed?

ANGUS TAYLOR:

Well, a couple of points about this. The first is that the budget's moving to a structural deficit of $43 billion in two years time. And there's a sea of red beyond that. So it's very clear, this is a windfall surplus we've got, not a structural balance, which is what we need. The government's taken the structural balance rule out of the budget. We would reestablish that rule, they won't. There has to be a commitment to getting to structural balance. How do you do that? You do that exactly how we did between 2013 and 2019, which is you grow the economy faster than your spending. It's very simple. Mathias Cormann, who was the Finance Minister at the time was relentless on this and it worked. We did it, we know how to do it. Instead, in this budget, we see a 16% increase in spending in two years, more than double the pace of the economy. That's why this government's taking it into the red and you know, if you want to beat inflation, having a sea of red on your budget is not the way to do it. That's very clear. We know that from history, the lessons of history are very clear and we would change those rules, reestablish those disciplines. That needs to be done now.

PAUL ALLEN

Alright, Shadow Treasurer Angus Taylor, thanks for joining us. We're unfortunately out of time.

ENDS.