Interview with Katharine Murphy, The Guardian, Australian Politics podcast
KATHARINE MURPHY:
Hello, lovely people of the podcast, and welcome to the show. You are on Australian Politics and you’re with Katharine Murphy and you are also – it being Budget week – with the Treasurer, Jim Chalmers, who has staggered into the pod cave. I’m in awe and admiration that he’s still standing. We’re recording on Thursday night and after a really heavy‑duty Budget week, he has agreed to come in and have a chat, which I’m very grateful for. Jim, welcome to the show.
JIM CHALMERS:
Thanks for having me back.
MURPHY:
I want to start slightly big picture and also by rolling back a week. Now, you and I had a conversation a week ago for a profile that we published last Saturday in The Guardian and we were talking about your admiration for Paul Keating as an economic communicator and your belief that you can’t just photocopy agendas from that period; that you’ve got to basically face the challenges of, you know, contemporary times. And you said to me that, “One of the things I had to do this term” – this is you I’m quoting – “is turn the multibillion‑dollar superannuation pool to our own advantage when it comes to our national economic priorities.” Now, I’ll just confess to my listeners that I kicked myself on Budget night when there was a housing initiative, partly funded by the super industry. Anyway, we can talk about housing in a tick, but I want to stay a bit bigger picture about this issue. So, unlocking super to fund our national economic priorities – what do you mean?
CHALMERS:
I mean a couple of things. In the broader sense, before we get to housing, if you think about the condition of the Budget and if you think about some of these economic challenges which are intensifying - you know, investment in cheaper, cleaner, more reliable energy, you think about the housing shortage, you think about the transition we need to make in terms of data and digitisation and the tech economy. I think if anyone flew here from outer space and they said, “Okay, we’re in this country called Australia and these are the challenges we’ve observed. What are the things we’ve got going for us at the moment to help us meet the moment?” And super is one of those things.
And I’m not for one moment saying that super should be about anything other than delivering good returns for members, but surely there’s a way that we can deliver good returns for members and invest in some of these big national priorities that we’ve identified. And so, I think there’s an opportunity there.
MURPHY:
Housing, like I said, we’ll get to it in a tick, but I want to sort of open with energy if we can because that’s obviously been such a big issue this week because of the new forecasts in the Budget about what energy prices will be doing over this year and next. I can see all these things in plain sight, Jim. Indulge me for a minute, right? I can see a Labor Government that’s come to office, basically making a commitment to build a massive new transmission system, to lock renewables into the grid. I can see that. I can see state premiers, a couple of them, Daniel Andrews and Peter Malinauskas in South Australia, over the last, I don’t know, what you’d call 10 days, starting to talk about state ownership of electricity assets again for the first time in 20 years. And, I mean, they’re not re‑nationalising their sectors, but anyway there’s just some interesting sort of thinking at the margins there. Is there a role for superannuation in that – first question? Because that’s a huge ambitious build and you can already see that your political opponents are limbering up to make it the new pink batts, school halls, et cetera. Obviously, there’s sort of oceans of capital there. So, what role might super play in those things?
CHALMERS:
I think significant, and what I’ve uncovered in particularly in the last few months but probably it’s the last couple of years is that superannuation funds are good at spotting opportunities. They’ve historically been keener to get into – in the jargon – the kind of brownfields, already existing infrastructure, ports, airports; they’re still interested in that. But the thing that is becoming of more interest to them is the kind of greenfields, newer projects, whether it’s housing projects, energy projects, there is more appetite and more interest and they’re getting better and better at analysing those opportunities. And they’re probably a little bit further along on energy than they are on housing. One of the things that that means is it gives us confidence that what we’re trying to do as a Government – to get cleaner, cheaper, more reliable energy into the system – is not uneconomic. It’s an investable proposition and others have put it more forcefully than I’m about it, but it’s a huge economic opportunity.
And for as long as I’ve known you, you know that I’m a believer when it comes to climate change action, and one of the reasons why over a long period it has gotten easier to make the case and that’s because the economics are so compelling. The investment community, when they hear the sort of rubbish that our opponents go on about, they laugh at them because there are big investable economic opportunities here and super will be part of it.
MURPHY:
Do you think the privatisation of energy assets was a mistake?
CHALMERS:
It’s largely at the state level that’s it’s happened. Certainly, one of the reasons why, as I understand it – in this part of the energy system I’m not an aficionado - the reason Queensland’s generation is in better nick is partly because they held on to it, and that’s obviously the conclusion that those two Premiers have drawn in one way or another in those two states. But also, to broaden it out beyond those two Labor states that you identified, in New South Wales, I think they take this seriously. That’s a Liberal Government. And in Tasmania, we’ve just done a deal with the Tasmanian Liberal Government about that Marinus Link project that Anthony Albanese and Chris Bowen signed the deal for. I think the Federal Coalition is behind their state counterparts and a long way behind us.
MURPHY:
I think that’s sadly, for the country, true. You are talking about regulatory interventions in the energy sector. But your language on this changed in the week before the Budget. You’ve reinforced that point several times this week that this is what you’re thinking about. And look, I obviously understand that this process is still in play, but what I’m trying to understand is whether or not the regulatory intervention that we might see down the track is bigger than any of us realise. What is the scope of the ambition of the regulatory intervention?
CHALMERS:
I’m a very careful, very cautious, if not reluctant intervener in markets where there’s been a lot of investment. What makes this different – and the reason why you’re right to say that my approach is evolving – is because what we’ve got right now, we’re in the middle of a really important transition. We’ve got a war in Europe which is causing absolute havoc with global energy markets and because our country has had a decade of stuffing around and stuffing up energy policy, then we’re more vulnerable to that. We’re more exposed to that than we should be. And once you put all of that together you and think about the potential impact of incredibly high gas prices in particular, but more broadly, then I think any responsible government – take the kind of party labels off, take the kind of all the other labels off – I think any responsible government needs to consider its options and there’s still a lot of work that we need to do, and it involves multiple ministers – Bowen, Husic, King, Prime Minister, myself and others.
MURPHY:
And officials and agencies –
CHALMERS:
Officials and multiple levels of the Government. When it comes to regulation, in the electricity market, a lot of the levers are held by the state governments. And so, for all of those reasons, yes, we are contemplating some kind of intervention. We’ve got to do it very responsibly, very sensibly. We’ve got to do it conscious of our international relationships. We’ve got to do it conscious of the investment that people have put in, companies have put in, but my personal view has evolved to the point where I can’t see a situation where we would do nothing.
MURPHY:
But there’s kind of oceans of distance between doing nothing and buying back the farm, which is kind of where I’m going in terms of thinking.
CHALMERS:
That’s not really something – we haven’t been contemplating pulling these assets into public hands, if that’s your question.
MURPHY:
I’m sort of asking that, I guess. It is about more than that. Whatever you do in this area is obviously about more than that, but I can just see these multiple pieces in front of me and I just don’t know whether they’re connected or whether they’re not.
CHALMERS:
What I’ve tried to do and really, during the course of this week in particular because like it or not the conversation about our first Budget has become a conversation about energy.
MURPHY:
I know and we’re coming –
CHALMERS:
No, that wasn’t a reflection on you.
MURPHY:
No, it wasn’t. No, we are coming to those bigger issues about the Budget because there are two big issues of this week. There’s energy and what we do about that in the short and medium term and then there’s the Budget problem, which anyway we will get to, I promise, and I am sorry to make you the Energy Minister, but it kind of has been that week. Sorry, I’ve cut you off.
CHALMERS:
My point really is that in the course of this week I’ve tried not to narrow down or limit our options. There are a range of levers and we’ve got a relatively open mind to them, but it requires a lot of work, a lot of consultation. The one thing that I have done which your listeners might be interested in is – one of the most important inputs into this whole conversation has been from the ACCC and not just because – I mean, it’s actually a terrific organisation and Gina Cass‑Gottlieb is a terrific regulator. And people think of them as kind of monitoring markets - they do that. But some of the broader thinking and conclusions that the ACCC drew earlier in the year was very important to the way that I feel about this market, and so I have written to them, and you have covered that I’ve written to them, and I’ve given them a job to do some policy thinking here, not just monitoring. I do dial up their monitoring, but I’ve asked them for something a bit more than that and that will be an important part of what we’re doing.
MURPHY:
It’s quite an interesting development actually. It sort of takes the ACCC back into territory it was in when Allan Fels ran it, which is kind of funny to think about that. Just a couple more just on this before we get into the Budget and economy. So, a couple of things slightly in the weeds that I know the audience is interested in just in relation to gas and I was very interested – Craig Emerson wrote a column in the Financial Review this week, which I think had a few Budget tips for you but also discussed the Petroleum Resources Rent Tax, which is the tax that gas producers pay or don’t.
There was a Callaghan review; it recommended a resumption of the residual pricing method. So, basically, that’s the price that determines the level of tax that the gas producers pay, and he suggested this was open territory for you still. So, there’s two sort of separate issues, just to not confuse the listeners. Jim and I are talking about sort of interventions to deal with sort of pricing factors that are related to global disruption and other things, but there’s also been a separate debate over several weeks now about whether or not the gas companies are taxed enough, whether or not, there’s this sort of – in the sort of narrative of history, there’s this kind of boom period for fossil fuels as we transition out to low‑emissions technologies, a lot of profit taking at the moment in international markets, which is sort of notwithstanding global events and conflict and everything else, right? So, there’s two debates here. It’s what we do about pricing and it’s what we do about taxing resources. So back to the residual pricing method. I hope we’re not boring you to tears, listeners –
CHALMERS:
Are you still with us?
MURPHY:
Exactly. Is everyone still alive? They are alive. I get letters. They are alive. What are you thinking about that? That’s sort of a specific thing. Like, is that still open? Is that still open territory for you to look at that? I guess it’s sort of a more personal question because I have known you for a long time. I knew you when you were an adviser to your former boss during the mining tax period. I’m just wondering whether or not you’re – are you scarred permanently by the mining tax super profits stoush and that would be not unreasonable at a human level? Do you feel – are you fighting the last war too much by sort of being very, very careful about what you say about taxing resources? So anyway, there’s a lot of questions there.
CHALMERS:
Okay, in reverse order, I see that period as character building, and I’m trying not to overlearn from that period. But, you know, everybody’s formed by their experiences. And that was not a particularly edifying period.
MURPHY:
It was really difficult.
CHALMERS:
Yes, and so that’s – but I try not to overlearn it in the current context. Two specific things that you asked about: so, first of all, on the Callaghan review, which was actually Scott Morrison. I thought it was Josh Frydenberg until I looked it up, but Scott Morrison as Treasurer and then Josh Frydenberg as Treasurer - they started and advanced this Callaghan review, which is all about how we get PRRT right. So, they did a review, and it came out with an interim report and Treasurer Frydenberg did some of the kind of low‑hanging fruit from it and there was more work to be done and that work got paused by the Treasury when COVID hit, and so Treasury is in the process of restarting that work.
I haven’t been gung‑ho on the tax front here. The PRRT take has come up a bit in the Budget but I know that a lot of people, including potentially some of your listeners, would like the PRRT take to come up much more. But it hasn’t been something that I’ve been working on, is the truth but Treasury will work away and at some point they’ll provide some advice to me. And I’ve got a great relationship with the Treasury, and I trust them, and they’ll give me some advice and I’ll consider it when the time comes.
Separate to that is the work that I’ve been more forward‑leaning on and that is Madeleine King, my colleague, did a deal with the gas companies to get more supply. That is important. I think it was good but we need to build on that and we need to build on that because supply is part of the story but price is another part of the story, and in the gas industry there’s a thing called a code of conduct, which is voluntary and a lot of people would say perhaps not as robust as it could be. So, I will work with the ACCC and with those Ministers Bowen, Husic, King, et cetera, to see if we can make that code of conduct more robust when it comes to price. That’s what I have been working on.
MURPHY:
The PM basically said in question time today, “We’ll look at making it mandatory”, which is further than I’ve heard the Government go before so that’s all pretty interesting. I’ll spare you from being the Energy Minister now. Let’s talk about more traditional Treasury matters.
So, I said a moment ago it’s been an energy prices week and an inflation week. The other big question that the first Albanese Government Budget sort of unfurls before the Australian public is how we pay for this bigger, more empathetic Government that basically that in a way is a bequest of the pandemic. People’s – in Australia I think people always liked the social services that we have in this country, but I think the pandemic shifted the dial, don’t you, in terms of how people look to Government and want a relationship with Government in terms of what they deliver? So, you’ve asked the question this week, right, how do we do that? What’s the answer?
CHALMERS:
I think one of the overarching themes or the overarching task of a new Government is to work out what’s important and work out how we fund it, and for a long time now, that’s been out of whack and different people – depends where you sit on not just the ideological spectrum – but different people have different views about how you do that. Some people will say you need radical austerity. You need to slash‑and‑burn, and you need to get spending down to tax. Other people say you need to make up the difference entirely with tax. And what I’m pleased about, proud about, in the Budget – and we’re not pretending to have finished this task; we’ve still got a structural problem in the Budget. I haven’t pretended it otherwise. I didn’t pop up on Tuesday night and say, “It’s all fixed and I’m going to go and play golf for the next two and a half years.” I acknowledge there’s a lot of work to do, but we did show - and what I’m proud of - is that we showed that you can operate simultaneously on a number of fronts.
We saved $22 billion. We haven’t got any grief for that yet. In fact, the grief comes from the kind of high‑end print media that says we should have cut harder. We showed by historical standards remarkable spending restraint. We got this temporary surge in revenue from high commodity prices, and we banked it. My predecessor used to spray it around. And we made some sensible tax changes – multinationals, compliance and a couple of other measures. We’ll need to do that combination, really, one way or another going forward, and we will. We will do that.
But I think another kind of interesting thing about that lesson, about people counting on Government, which is true and I agree with it, is this sense that the last two big global downturns have taught us or conditioned us to expect that the only response when the world is going to custard is to throw a lot of money at it. And that was definitely right in the GFC, right in a different way in the pandemic. And what I have tried to say this week – I don’t know how successful I’ve been at this – is that sometimes you can have a global downturn if it is about inflation and higher interest rates that’s when you have to tap the brakes a little bit. That’s a hard message for a new government, a new Labor Government, bristling with policies and plans; colleagues have got these long to‑do lists.
Maybe you get kind of a bit soppy on a Thursday afternoon of a Budget week, but one of the things I was looking around at my colleagues at the Parliament on the front bench and I was thinking how genuinely lucky we are that they get themselves to a level of understanding that these times warrant a slightly different response but also an understanding – and this comes from the Prime Minister down – that we can do great things. We don’t have to do them all in one Budget. We don’t have to do them five months in.
We did a heap in this Budget that I’m really proud of, but I’m proud of my colleagues too for recognising that we might have two or three more of these things and all of the other opportunities that being in Government brings, and so there is a sense of patience, which is surprising to me but appreciated by me.
MURPHY:
Yes, it’s sort of interesting, as you say, because at one level it is patient in terms of, you know, there’s a long game to play but at another level what you’re talking about is this moving past the sort of temporary Keynesian response, crisis response because this is a different sort of economic crisis. That’s actually quite radical in terms of the sort of default mindset. I really noticed this actually. Sort of day 2, right, after the Budget, the sort of initial run of media in the morning, which obviously we all listen to, was very, very focused on the lack of payments and the lack of – not necessarily negatively but I just thought: God, it’s amazing.
You know, in Budgets that I covered 10 years ago, it’s kind of like if there had been payments, this would have been negative, this would have been a terribly negative thing because the default mindset would have been: Budget repair, surpluses. It’s just really funny how sort of radically the mindset has kind of shifted. And, like, I pay that in the Budget as being quite radical actually in context, right, even though what you’re trying is to say is the agenda creeps up more slowly.
Getting back to the structural deficit thing, which is obviously the big problem in the Budget, right, that is dealt with by structural savings or revenue, so –
CHALMERS:
And/or.
MURPHY:
And/or, both.
CHALMERS:
If I promise to be quick do you mind if I just pull up two things that you’ve said more broadly? I’ll try and gallop through it. The thing about the day after Budget not focused on the money we’re spending, I think that’s partly a function of some of the things I put in the Budget on Tuesday we promised three or four years ago. So, people had a level of familiarity with it, so I think that’s part of it. The things about Keynes. I am a Keynesian. The thing about that, though – the economists talk about countercyclical fiscal policy, which you understand, which is about when demand is strong you pull back and when demand is weak you get involved. There is a version of that in what I did in the sense that we’ve got a lot of inflation and we’ve got a lot of demand. Retail figures have been relatively strong. We expect them to soften a bit. So, what I did was not entirely inconsistent.
MURPHY:
No, that is true actually. That is a good note.
CHALMERS:
So the structural issue in the Budget is brought about some of these services we’re talking about – health, aged care, NDIS. The biggest part of it is actually the increasing cost to service the debt because interest rates are going up and we’ve got some other issues as well, but what we were still able to do, even by applying these new more realistic assumptions to what happens to debt over the 10‑year horizon is by banking a lot of that revenue surge in the near term, we save a lot of interest, compounding interest, so that’s been an important part of it too.
But you’re right. There is a structural problem, and it needs a structural solution. And what we did on Tuesday night was designed and calibrated deliberately to be the foundation of that. We never said Tuesday night will be the end of it. We always said Tuesday night would be the beginning of it. And I think inevitably it needs to be some combination of spending restraint, structural savings and sensible tax reform.
MURPHY:
But sensible tax reform, what is that – like, just put this concept which won’t be news to you, sort of in terms of the tax mix and tax justice in the country at the moment, it’s sort of, like, you know, there is – like ordinary wage and salary earners are carrying quite a lot of the revenue load, so then it sort of like gets you into stage 3 tax cut territory. Like do you keep that? Do you not keep that? Do you keep it, or do you do a different version of that? What I’m trying to do is here is – I’m not a fan of the stage 3 tax cut package –
CHALMERS:
I gathered that.
MURPHY:
As you know.
CHALMERS:
I picked that up.
MURPHY:
But I also recognise that bracket creep is an issue, and there does need to be some thinking about that. Because, you know, we want people in the workforce to aspire to earn more and et cetera. So, you’ve got a bracket creep problem. But also I’m just sort of, I don’t think you can really whack wage and salary earners harder than is currently the case, so then you’re in company tax territory and obviously that brings you to corporate tax and minimum rates of corporate tax, which is the territory the Government is in, and then what are your other options in terms of taxation?
CHALMERS:
I think first of all – I’m grateful you acknowledge the multinational tax thing. I think because we’ve been talking about it for so long it goes into that category of “Oh, yeah, we’ve heard about that from you before”, but that wasn’t a small thing. It wasn’t a massive revenue raiser, but it wasn’t a small thing to say we’re going to act on these two fronts of multinational taxes and here’s what we might do down the road.
There’s a tax measure in there around the share market. There’s a tax measure in there around the depreciation of assets. There’s a whole bunch of compliance measures in the Budget that have collectively raised billions of dollars without increasing the burden on people in the regular income tax system. So, that hasn’t got a lot of attention, but it’s important.
MURPHY:
No, there was a lot there.
CHALMERS:
More broadly, your point about bracket creep is not contested by me. And it is probably not contested by a lot of people who have called for stage 3 to be rewritten. Some people will say there should never be income tax cuts and some of them are in Parliament. But there’s another school of thought that says you can return bracket creep in a more sensible way. And I think that’s really your position.
MURPHY:
Well, I think I am – yes. That is. Are you in that faction, Jim, or where do you line up?
CHALMERS:
As you know, if there was going to be a change in the Budget, you would have known about it by now. I think we made our view pretty clear. What happened, I think, in that conversation, which got pretty hot, as you know, is we deliberately wanted a conversation about the sustainability of the Budget and inevitably people will raise this. And what I’ve tried to do, the reason I appreciate these kinds of longer conversations, is I’ve tried not to be judgey about people raising ideas that are different to ours. A bit like in the gas market, ideas that might not have seemed like a great idea six, 12, 18 months ago might seem like a better idea now.
We’re trying to engage with different views differently, and maybe that gets harder the older the Government gets but one of the things I try to do – and today there were shocking headlines about me today and what I tried to do is recognise that not every day is going to be great. Not everyone is going to agree with you. It’s unrealistic to think that everyone is going to stand and applaud a Budget and there’s going to be unanimity about its direction. Once you accept that, it’s pretty liberating.
MURPHY:
Freeing, yes.
CHALMERS:
And that’s how I feel about tax. People want to talk about tax, let’s have a conversation about tax. And we don’t have to pick up and run with every idea that’s expressed, but is the national conversation improved or diminished by more people playing a part in it? It’s improved.
MURPHY:
Always. Okay, so I think the answer to the “Are you in the better bracket creep faction?” is maybe.
CHALMERS:
I think there’s an important role to play, particularly through those middle‑income areas when it comes to returning bracket creep.
MURPHY:
Okay. Interesting. And in terms of - let’s end this way, obviously, you know, you have framed, and we’ve discussed in this conversation this first Budget is obviously the start of the conversation, not the end of it. In terms of the structural problem in the Budget, will we see more in May? I’m trying to get a sense of your pacing because I know there’s a general disposition in the new Government to just not go at everything bull at a gate, even though I’ve tried to communicate this to readers you’re going like the clappers the lot of you. It’s really quite interesting, this sort of – I don’t know exactly how it’s being perpetrated, but everything looks quite serene above the water but underneath the water the legs are kicking. You are really kind of going but you’re looking more serene about it in public, which is quite interesting. Anyway, mind trick, Jedi mind trick. But so, what will we see in May? That is obviously not as ludicrous a question as it sounds. I’m not saying give us the measures now. What will we see in May?
CHALMERS:
It reminds me of one of your counterparts at the Sydney Morning Herald, Shane Wright, terrific economic commentator, and he asked me a week or so ago, “When does work on the May Budget begin?” and I said, “Wednesday”, you know, yesterday, and although I was being flippant about that and you’re right that obviously I’m not going to say what the measures are and things, we will put them together in the usual way on the usual time frame. But there is a sense of when you’ve got two Budgets so close together, there is a sense that they are pieces – you know, we talked about the jigsaw puzzle actually when I think about it; they are pieces of a whole so genuinely you start to – your mind inevitably – you wake up on the Wednesday morning after Budget and you think, a bit like that West Wing show President Jed Bartlett always saying, “What’s next?” There’s a bit of a sense of that.
I think you’re right to talk about my colleagues about how hard they are all working too. I think in Budget week there’s this sense of, like, “Oh, the Treasurer is really busy.” Everyone’s busy. It’s madly busy.
MURPHY:
But you’re very busy too.
CHALMERS:
But everyone, right?
MURPHY:
The Government is fully extended.
CHALMERS:
And one of the things I didn’t remember from working in this portfolio last time we were in Government was people hold things back until you’ve got the Budget out on the Tuesday night and on the Wednesday morning you get all of the pent‑up issues to look at. But it’s a long way of saying we consider this to be kind of a continuum, volumes of a story, rather than different stories and so we will if we can find good sensible meaningful ways to improve the structural position of the Budget then obviously, we’re going to be right into that. One of the heartening things about the last few months is whenever we’ve talked up to people, rather than talked down to people, they’ve responded. And, hopefully, that continues. Hopefully, that isn’t just a characteristic of a new Government where they’re getting used to us. I don’t have a very high profile, and as people get used to you, they start to work out what you’re about. And I’m hoping that this tolerance for real talk and straight talk continues and isn’t just a feature of something which is new.
MURPHY:
Well, it’s sort of an interesting question but that I suspect neither of us know the answer to at this point. But anyway, can’t hurt. Straight talking can’t hurt.
CHALMERS:
If in doubt.
MURPHY:
If in doubt, let it out. We could have ended on a more dignified note, but it’s Thursday night in Budget week, so we have done our best anyway. I hope you’ve all enjoyed that conversation. I have and I’m grateful genuinely to the Treasurer for making time to do that in Budget week, because I know you guys really do appreciate this more relaxed format where we can get around a few issues so thank you for that. Appreciated. Thank you to Allison Chan, who’s producing this week. Thank you to you guys for listening and we will be back next week.
