Topics: Final Budget Outcome, Government’s $50 billion tax windfall, Labor’s lack of a plan for cost of living pressures, Federal budget, fuel excise

E&OE

KATHRYN ROBINSON: Despite a $50 billion improvement to the budget deficit, the Treasurer says unbudgeted spending on disaster relief will in part lead to some tough decisions. That includes not extending the fuel excise relief, which will end next Wednesday. Angus Taylor is Shadow Treasurer and he joins me now. Hi there, Angus.

ANGUS TAYLOR: G’day Kathryn. Thanks for having me.

KATHRYN ROBINSON: You're welcome. $50 billion returned to the coffers. $20 billion of that is on reduced payments. I mean, this is shaping up to be a budget the Coalition would be proud of, isn't it?

ANGUS TAYLOR: Well, there's no doubt but we've left the Labor Government a very strong economy, a very strong budget, a $50 billion windfall on the back of that strong budget. We've got a very strong labour market of course, and that reduces spending. We've got very high incomes relative to what was expected and of course, that helps with tax. Very strong commodity prices and so there's a $50 billion windfall and the test for the budget is how that $50 billion will be used. Will it be spent? Will it be banked? Will it be passed back in lower taxes, but what most Australians are feeling now is real pressures from cost of living, rising inflation and rising interest rates. They want to know that there's a plan that makes sense for them and supports the challenges they're facing. What we know is that Labor has a very, very strong budget position to work from. In fact, we even saw in the May statement of the budget, a surplus of $13 billion. I mean, this is extraordinary coming out of a pandemic that we’d be actually running a monthly surplus like that. What they want to see is a clear plan and so far, we've seen nothing like that. What we've seen from Jim Chalmers is talk of a bread and butter budget when we know Labor's bread and butter is big spending and big taxing.

KATHRYN ROBINSON: Well, we'll get onto that – the details of the bread and butter issue and in a moment but Labor says it inherited one of the trickiest economic conditions a new government has inherited since World War 2 including $1 trillion in debt. Given that financial situation that the government has found itself in since coming into office, debt, deficit cost of living pressures, I mean, is there any other option for the government to frame a budget like this?

ANGUS TAYLOR: Well Kathryn, what he admitted today was that he's $50 billion better off than he thought which is why he wasn't talking about debt and he wasn't talking about deficit because it's a far better position than he had anticipated and that's inherited, been inherited from us. I mean, the truth was, we always understood that coming out of COVID, a very tough time, I mean, talk about a tough time for the economy. The COVID pandemic, there's been nothing like it since the Second World War, that coming out of it, we knew the key was to have a strong economy, which would deliver a strong budget, and that's why he has a $50 billion windfall. He has no idea what his plan is. He doesn't know whether he's going to spend it, bank it or pass it back in lower taxes. But what we do need, given the very serious cost of living pressures, inflationary pressures Australians are facing, is we do need a plan to support Australians through a very tough time.

KATHRYN ROBINSON: So what does that plan look like then? We're five weeks away from the budget being handed down. You say you want to see a clear plan to tackle cost of living pressures. What should that look like?

ANGUS TAYLOR: Well, we've already laid out a number of elements that could be included in the plan which Labor has partly or fully rejected. There's no doubt we need to see more Australians in work wherever that's possible. And that includes pensioners. We've put a plan forward for how that might work. Labor has taken a half-baked version of it. We've seen them talking about industry wide bargaining. We don't need that. We need sensible pathways forward on industrial relations at a time when we've got huge labour shortages. Otherwise, we will see more inflationary pressures. We do need fiscal prudence. Managing the budget very carefully, because we know that if you don't manage the budget carefully when you have inflation and interest rate pressures, you make them worse, you throw fuel on it, and that's not what we want to see. So these are sensible things that can be done. Jim Chalmers is promising a long national conversation. Australians want a shorter term solution or a plan that can deal with these very real issues they're facing today.

KATHRYN ROBINSON: Well, the government will probably come back and say that it does have elements to its plan. It's reducing the price of medicines through the PBS, it's allowing pensioners to do more work before it penalises their pension, you alluded to that just then. It's also working to make childcare a lot, a lot cheaper. I mean, that sounds like somewhat of a plan, does it not?

ANGUS TAYLOR: Well, we going into the election, committed to reducing the price of medicines and we made major childcare reforms and they're important reforms. Sadly, Labor has only gone partway to where it could go in terms of pensioners. There’s an enormous opportunity given the labour shortages we're seeing and the inflationary pressures from those labour shortages, getting more pensioners into work. They went with a half-baked version of it. That's disappointing. They've been very unclear as to how they're going to use this windfall. Are they going to spend it? Are they going to bank it or are they going to pass it on in lower taxes? They've even shown real reticence about recommitting to important election commitments they made on electricity prices, on the stage three tax cuts. These are issues that really matter to Australians and we do want to see a clear plan and not a long conversation. Look, there's no doubt there's longer term reform questions the country has to work its way through. But more immediately we've got to deal with those inflation pressures that are very real, are being felt in households, being felt in businesses and need solutions here and now, not in a year's time.

KATHRYN ROBINSON: Just on those reforms. Katy Gallagher has alluded to the structural deficit problems. She's saying what we're seeing and what we're uncovering is that the previous government did the bare minimum to skate through. It didn't accept that things like aged care going across the forwards was going to cost a lot more and they're coming in now and telling you that there's enormous pressures. I mean, doesn't the previous government have something to answer for there with respect to these structural problems?

ANGUS TAYLOR: Well, we've been managing those pressures very effectively. And we're doing that in a way where the budget is in an enormously strong position. Now, Labor governments always want to spend more money. I understand that. That's always their instinct. They also don't want to admit the strength of what they've inherited. And we saw ducking and weaving from both Jim Chalmers and Katy Gallagher today about admitting just the extraordinary strength of the economic and budgetary position that they've inherited. They didn't want to fess up to the scale of the $50 billion windfall that they've received. They wanted to make it look terrible. They wanted to talk down the economy and the budget. Well, right now. Right now, we don't need ducking and weaving from them. We need an understanding of the strength of the economic and budgetary position we have, a recognition of the cost of living and inflationary pressures and interest rate pressures as we approach Christmas that Australians are facing and a clear plan to deal with that. During the pandemic we had to come up with plans as the world changed around us at tumultuous and unpredictable pace. We had to respond to that and we've got the same kind of pressures now.

KATHRYN ROBINSON: So you're saying that a trillion dollars in debt and hundreds of millions of dollars in deficit is a strong position?

ANGUS TAYLOR: Hang on. We had a budget surplus in May. A $13 billion budget surplus in May and the so-called trillion dollars in debt. Well, they've just told us there's a $50 billion windfall that they hadn't taken into account. Putting aside the fact that the Labor itself left a huge debt when they were in government. The truth of the matter is that the budgetary and economic position of this country is the envy of the world right now. It's very hard to find another country in a better position than Australia and that's been true throughout the pandemic and it really is now incumbent on Labor to lay out how they deal with the next set of pressures we're dealing with, which is the interest rate and inflation pressures that Australians are feeling in the suburbs, in the regions, in the cities, as well as the pressures on interest rates that small businesses are feeling as well.

KATHRYN ROBINSON: Just before we move on to another topic, I mean, it is fair to say that the former government also participated in some of those unintended windfalls with commodity prices spiking through the roof.

ANGUS TAYLOR: Well let’s be clear about this. This is about more than commodity prices. The strength of the labour market means that there's far less being paid in welfare than would otherwise be the case. I mean this is a great thing, having more Australians in work so we pay less welfare and those same people earning incomes and paying income tax. I mean, that is a significant part of what we were seeing here. The strength of our commodity economy, which we as a Coalition have always backed. We’ve always seen these agricultural and mining and resource sectors as enormously important to Australia. Many like to talk those sectors down, but you know what, they deliver and they seem to keep delivering and they're doing exactly the same again. So these are great windfalls. They're the result of many, many years of work to make sure that we put ourselves in this kind of position. We're glad that Australia is in this position. The critical thing now is to have a clear plan to deal with the next round of pressures we see on the ground around Australia.

KATHRYN ROBINSON: Okay. Moving on to another issue, Angus Taylor, is the government right to stick to the original timeline of cutting the fuel excise and reinstate it?

ANGUS TAYLOR: Well, look, you know, cost of living pressures are much broader than just fuel now. We have thankfully seen some reduction in international fuel prices. They’re below and they've stuck below $100 a barrel now for a reasonable period of time. So that's a good thing but there are many other inflationary pressures that are being felt. The single biggest one will be rising interest rates in the lead up to Christmas. There's a two to three month delay from when the Reserve Bank raises its cash rate to when that flows through to the mortgage payments of those with flexible mortgages, and even longer for those on fixed rate mortgages and so that pain we’ll start to really see in the lead up to Christmas. So it's a broader issue Kathryn. This is very important. That's why we need not just to plan on one particular aspect of cost of living, but one that recognises that this is happening right across the board. We need to take those pressures off. Most importantly, the government needs to adopt a policy that gives room for the Reserve Bank to raise interest rates less than they otherwise would. That's the key.

KATHRYN ROBINSON: Broader plans have smaller elements to it and one of that is that fuel excise. I mean, it's a simple yes or no. Do you think that the restoration of the fuel excise should go ahead?

ANGUS TAYLOR: Well, the truth of the matter is we've seen fuel prices come down. I mean, that's the reality and we now have a range of other pressures that we've got to deal with.

KATHRYN ROBINSON: So not necessary?

ANGUS TAYLOR: I'm saying it needs to be an across the board plan.

KATHRYN ROBINSON: The government has today framed next month's budget. The Shadow Treasurer says its code for high taxing and high spending. He’s with you on RN Drive with Kathryn Robinson. Angus Taylor, the government says that the higher than expected windfall to the bottom line is from partly from the higher expected revenues from commodities which we've discussed but we are starting to see a drop in the price of say iron ore. So if those revenues are falling, doesn't the bottom line, which is something your side of politics always wants to see in the black, doesn't the bottom line need more tax revenue injected into it?

ANGUS TAYLOR: Well, you know, we are certainly seeing very strong commodity prices. I mean, we've got iron ore prices around the $100 mark. The long-term assumption in the budget that Jim Chalmers is talking about is $55. We've got the coal price up over $300. Around $300.

KATHRYN ROBINSON: If I may interrupt, the iron ore price in those budgets that you’ve been involved, when your government was involved, the iron ore price in those budgets was $55 as well.

ANGUS TAYLOR: Yeah no I just said that Kathryn, so the point being that we have high commodity prices right now. We're not, I mean, Jim Chalmers again because he wants to tell a story about how terrible things are. He always wants to talk things down. He said, oh well, you never know, the commodity prices might go down, but look, the truth is, we have a very strong economy. The demand for our exports from Australia right now, our commodity, agricultural and mining exports is extremely strong. They have surprised on the upside, time and time and time again. So talking those down I think is not only unrealistic, it is also talking down one of Australia's great strengths and it's disappointing to hear that kind of language coming from the Treasurer.

KATHRYN ROBINSON: Angus Taylor, thank you for your time.

ANGUS TAYLOR: Good on you. Thanks for having me.

KATHRYN ROBINSON: That was Angus Taylor. He’s the Shadow Treasurer.