Joint press conference, Main Committee Room, Parliament House
This Budget is responsible, it's right for the times and it readies us for the future. It builds buffers against uncertainty, and it begins to lay the foundations of a stronger and more resilient economy. It's framed against the backdrop of a complex combination of a serious economic downturn overseas, damaging and devastating natural disasters here at home, war in Europe, a slowdown in China brought about by COVID - all of these issues combining at once. We are still optimistic about the future of our economy and the future of our country, but there is no use pretending that we don't have some difficulty to navigate in the near term. We go into this with some advantages. Low unemployment is obviously an advantage. The price that people are paying for our exports is something that we've got going for us as well, but there’s no use pretending that there won't be difficulties in the global and domestic economy over the course of the next year or so.
The defining characteristic of this Budget is spending restraint and that's because the primary influence on the Budget is our inflation challenge, which - as you know from the Budget papers - we expect to peak at the end of this year, but we expect now for it to persist higher for longer as well. And that's why we say that the pressures on our economy are coming at us from around the world, but they're felt most acutely around the kitchen table. That's because with the combination of these international and domestic factors, the most pressing challenge that it creates is when it comes to inflation. And inflation determines our approach to really all of the key components of the Budget. It guides our approach to cost‑of‑living relief, which is substantial, but responsible and not reckless. It guides our approach to really targeted investments in growing the economy, making it stronger and more resilient and more modern at the same time. And it guides our approach to the fiscal strategy as well, and principally when it comes to returning those substantial and welcome revenue upgrades to the Budget, especially when inflation is at its most acute.
If we briefly go to the economic forecasts - and if you look at the slide that I've put up there - it makes the obvious point that the global situation has deteriorated significantly, including since the March Budget. And what that graph shows there on the left is the change in our expectations for real GDP growth, world, China, US, United Kingdom. What you can see from that, the red bar is PEFO, and the blue bar is the October Budget. That gives you a sense of the deterioration in the conditions around the world. On the right‑hand side gives a pretty stark illustration of the role of high global energy prices in what we're dealing with right now - really quite extraordinary increases in global energy prices. And for all of these reasons, we've downgraded our forecasts for this year and for the following two years as well. I think the risks, even with this downgrade in forecasts for the global economy, are still tilted to the downside. There is an increased risk of recession across a number of advanced economies and that's really one of the main messages that I got from my counterparts in DC.
If we turn to the domestic economy, obviously this global inflationary challenge is having an impact here and it's showing up most prominently when it comes to energy prices. This is in large part due to the war in Ukraine, but a decade of energy policy chaos hasn't helped and that's how we find ourselves in the position that we're in right now. This inflation that we're seeing in the domestic economy, what we're seeing with interest rates, will obviously weigh on growth as will the situation in the global economy. And then you add to that, what have been really quite devastating natural disasters when you think about flood‑affected communities, particularly up and down eastern Australia right now, that will have an impact on the economy as well.
We expect inflation to peak at seven and three quarter per cent later this year, three and a half per cent through June quarter 2024, getting back inside the RBA's band in 24‑25. We're expecting fairly solid growth in the economy this financial year but slowing considerably to one and a half per cent next financial year. That will have implications for unemployment, which you've seen in the papers now, four and a half per cent through 23‑24 and 24‑25. We've got wages picking up, which is obviously welcome three and three quarter per cent in this financial year, but we won't see real wage increases until that inflation moderates. On current forecasts we expect that to happen in 2024.
So how does that relate to the fiscal situation? Obviously, we’ve got a lot going for us in the economy, but we've got some challenges to our economy. It hasn't been resilient enough and there hasn't been enough restraint in the Budget. And that restraint, we think, is more important than ever right now, because the best defence against a deteriorating global economy and uncertainty right around the world is a responsible Budget at home - and that's what this is. Restraint is the name of the game in this Budget. Restraint is what defines this Budget and what differentiates it from March and from recent budgets under our predecessors.
We do have substantial upgrades to revenue from high commodity prices, the high US dollar and elevated employment. And that's what makes our decision to limit growth in spending really important. We've got these welcome substantial improvements in revenue. We are returning to the Budget, 99 per cent of that over the course of the next two years, when the inflation challenge is at its most serious, but more than 90 per cent over the forward estimates. And that is quite a substantial change when you compare it to recent practice in Budgets. That is a big part of what we're trying to achieve here, that spending restraint, particularly when it comes to those temporary boosts in revenue. And we've got real spending growth averaging just 0.3 per cent right across the forwards - again, pretty substantial spending restraint. I noticed that the Shadow Treasurer was talking about how real spending growth had to be lower than economic growth - we've passed that test really quite comfortably in the Budget papers that you have.
If you look at this next graph that shows the last three Budgets compared to this Budget, it's pretty simply the net impact of policy decisions on the Budget bottom line. And you can see from that we've left almost no mark on the UCB, whereas you look at the last three Budgets under our predecessors, you can see in pretty stunning terms the difference that our spending restraint will make to the Budget. We've achieved this because we've been disciplined on new spending. We've substantially offset the impact of our new policy decisions. And as I said before, and I think this is in many ways the most important graph that I'll show you today, because what it gives you over a pretty long historical sweep, the size of the bar is the amount of upgrades to the Budget from things like the temporary boost from higher commodity prices. You can see that in the last Budget, there was a bigger tax upgrade in the last Budget, but the red portion of it is the amount of that that was spent. And so, you can see, yes, we've had a substantial increase in tax from the conditions that I've described to you and we've returned almost all of that to the Budget.
You can see how that compares historically. And the stat that I would leave you, which summarises all of this, is you think about that 99 per cent of the upgrade that Katy and I are returning to the Budget over the course of the next two years, the average under the former government was 40 per cent. So, on average they spent 60 per cent of upgrades. We're spending 1 per cent over the first two years, and that is a big part of the story when it comes to our restraint. 99 per cent returned to the Budget over the next two years, 92 per cent over the forwards. So, what that means is the deficit for 22‑23 is $36.9 billion, an improvement of $41.1 billion. There's an improvement in aggregate of 42.7 across the forwards, but as we've said to you a number of times, the pressures on the Budget from the second half of these forward estimates and into the medium term are intensifying rather than easing. And that's why you see the Budget position deteriorate over time.
Gross debt that we inherited as a share of GDP is at its highest level in 70 years. We expect it to be 37.3 per cent this year. But what we've been able to do is to make sure, because we've banked so much of these revenue upgrades, that debt over the forward estimates will be lower under us than what it was budgeted by our predecessors. Debt will be lower over the course of the next four years, but when it comes to the quality of our spending, we think that we have more to show for that debt.
The next slide is really about some of the things, again, that we've spoken about on a number of occasions. The left‑hand side is about the increase in payments since the PEFO, and what that really shows us is the big constituent parts of those spending pressures that intensify over time. You can see that a big part of that is the blue part, which is interest on debt. The other big part is the orange bit, which is the NDIS. And you can see that there are other big parts of that as well - and to illustrate that when it comes to interest payments, if you look at the right-hand side, that's a pretty stunning illustration of what higher borrowing costs are doing to the Budget. You can see the difference between PEFO, the red line, the blue line is the Budget that we're handing down today. And you can see that interest payments have blown out considerably and that's driving a big part - it's the fastest growing area of government spending - that is driving a big part of the deterioration. If you get to the next chart, what this shows is when it comes to the Budget bottom line, but also to gross debt, and what it shows is what was assumed in the PEFO.
So, the red line, the red solid line is what was assumed in PEFO. The blue line is what we're presenting to you today. The dashed red line is if you applied what we know about interest costs and the NDIS and the more realistic productivity assumption that we've built into the Budget. If you did those three things and applied it to the trajectory of the bottom line and gross debt in the PEFO, you can see that the situation would be much worse than it is in the Budget that we are handing down today. If you apply just those three basic assumptions that we have had to apply to the Budget today, that explains the difference between the medium‑term position. When it comes to policies obviously what we've done on the spending side - what Katy has been able to do - and we'll run you through in a minute on the savings side in particular. But also, that spending restraint means we can pay for the things that we really value: health care, aged care, NDIS, record investment in violence against women - a whole bunch of things in this Budget that we are really quite proud of and prouder still that we were able to create more room for some of these important investments by being restrained in other areas.
The two new things - a lot of what we're doing and dealing with today is implementing election commitments - but the two things which are new since the election that we're very, very proud of is extending paid parental leave, and Katy might want to talk more about that. But also, the brand‑new thing in the Budget today is the new National Housing Accord. And this comes from a lot of consultation and collaboration, a lot of listening to local communities. And what we're trying to do here is recognise when the economy is creating lots of jobs, as it will continue to do, even as the unemployment rate ticks up a little bit, we need people to be able to live near where the jobs and opportunities are. We've got policies for social housing, we've got policies for more affordable housing - the sliver that we want to deal with here is affordable rental properties so that people can live near where the jobs and opportunities are. I'm really proud and really pleased to have worked so closely with super and other institutional investors, but the states and territories as well, and the building industry to agree this Accord that we're releasing today. We've got everyone to sign up to this big, ambitious target: a million affordable homes over the five years from 2024. A lot of that is existing effort, but the difference maker, we think, that last sliver, the difference between what we expect and what we hope for, will be this Housing Accord. So, it's a very important part of what's new in this Budget.
These are parts of our responsible cost of living plan - cheaper child care pay, parental leave, cheaper medicines, more affordable housing and getting wages moving again. And our growth agenda is in the Budget as well, making the economy more resilient, making it more modern. Issues around skills, cleaner and cheaper energy, the NBN infrastructure, and in a whole bunch of other ways as well. So, this Budget, as I've said before, is solid and sensible and suited to the times. It does more than batten down the hatches against global uncertainty, it backs in families, and it begins to build a better future as well. And it's not just the end of something, it's not just the end of a waste a decade, it's the beginning of something new and more responsible. And it recognises that when you have inherited a trillion dollars in debt with not enough to show for it and skill shortages and stagnant wages and energy chaos and an aged care crisis, you've got to start somewhere. And I think what we're doing in this Budget today is a really important start. It's not the end of something, it's the beginning of our efforts to make the Budget more responsible and the economy more resilient. It will take more than one Budget to clean up what we've inherited, but I think this is a good start. I want to hand over to Katy now to run through some additional areas and then take your questions. I want to salute Katy, pay tribute to Katy and the work of the ERC and our Cabinet. There is a high level of understanding in our Cabinet, and I think in the country about the sorts of challenges that we are dealing with in the Budget and in the economy more broadly. And it's been a joy working with Katy and I'll throw to her now.
Thanks very much, Jim, and same to you. It's been a great moment to stand here and share the first Labor Budget in almost a decade with you today. I'm just going to make some comments on the spending side of the Budget. So, in this Budget, we're restoring honesty to Budget processes. We're delivering responsible decision making at the Budget table and we're being upfront with the Australian people about some of the challenges that lie ahead. And this has been our guiding principles since entering into that ERC room a few months ago. In this Budget, we're delivering on our election commitments, we're accounting for urgent and unavoidable expenditure. We're dealing with some of the black holes and some of the problems we inherited from our predecessor, both in terms of terminating measures, but also zombie measures that were hidden in the Budget book, sometimes hanging around since 2016‑17. And we're also starting the hard work of Budget repair. And this work will be ongoing. This is a start. In this Budget, we're giving you an honest assessment of the bottom line, some of the expenditure pressures which Jim has taken you through. Prior to the election, we said we'd do a line‑by‑line audit of the Budget books if we were to win government. And we've done that - this is phase one. We've identified $22 billion in Budget repair and reprioritisation of spending into new priorities.
This has been a really important process to get going. And as I said, it's the beginning of it, not the end. Because not only do we know we have to get the Budget repair work underway, we also needed to bring some fiscal discipline back to government decision making. So, the spending audit did. When you lift you lift up the rock and have a look, you do find other things that you didn't know about. So, it did identify some of those pressures left by the former government and we've started dealing with some of those. So, on the net spending side of the Budget, 85 per cent of the net spend is dealing with some of these legacy issues, dealing with some of these spending programs that were terminating but weren't really terminating. And the other one is dealing with sort of poorly scoped projects that we have to deal with, projects that are underway that we have to deal with. So, this is a job that we take really seriously. We thank the colleagues for the work that they have done in assisting us. It's not easy to find savings, but I think the $22 billion is a really, really good start and it shows you just how serious Jim and I take this responsibility of Budget repair.
We obviously have those areas, those growing areas - servicing debt, defence, hospitals, aged care, NDIS - that we know are pressures that are coming. So, we need to continue to do this spending audit work to make sure we are making room where we can for these pressures that we know the Australian people value and expect in terms of service delivery. We've also been dealing with the ongoing impact of COVID that's contributed to additional spending, natural disasters - unavoidable, but must be dealt with. And you'll see that flowing through. And the contingency reserve, we've taken a responsible approach there in making some provisions for some of those expenditures that we know are coming up, including in the area of aged care.
Can I just make a few comments on the Women's Budget Statement, because I also have the honour of being the Minister for Women and I think it is an important part of this Budget, not just in the policies, but the Women's Budget Statement - this little book here, if you haven't already got to it, it's a really important first step in our bringing gender equality and advancing gender equality back to the Budget decision‑making table and informing government policy. It's got some very useful analysis about some of the issues faced by women in Australia and also the policies where we've been able to undertake some early gender impact assessment of those.
I think we're putting gender or women's economic equality and women's safety as an important part of this Budget. And if you can indulge me just about why we need to do that, because sometimes I am asked this question. In terms of economic equality, women in Australia ranks 43 out of 146 countries in terms of women's economic equality. The gender pay gap remains sort of stubborn at 14.1 per cent. It's higher for First Nations women. Labour Force participation women lag men by 8 per cent, and on average, women's earnings are reduced by 55 per cent in the first five years of parenthood.
In terms of women's safety, on average, a woman is killed by an intimate partner every ten days in this country, thousands more women and children are injured, hospitalised and traumatised by violence. And we've seen important reporting on this in First Nations communities over the last couple of days. One in three women have experienced physical or sexual violence since the age of 15. And aside from those massive social costs, the cost to the economy of this violence is estimated to be $26 billion each year, with the victims’ survivors themselves absorbing 50 per cent of these costs. So clearly, something has to change, right? And this Budget statement makes a first step in raising awareness around this, but also showing how we're aligning policy priorities in childcare, in PPL, in a big investment in the National Plan to End Violence Against Women and Children in this country. So, it's an important part of the Budget. The decision making around how we address this, how we advance this, is ongoing with the Women's Economic Quality Taskforce. But it's a job that this government takes very seriously, and it too is ongoing work, and we all have a role to play in advancing it.
Great, okay, we go here and then we'll go Phill. Then we'll go over this side to Reece.
Just on the plan for building a million new homes. Where in Australia are those going to be prioritised? Are we talking about mainly in the cities? Is there any kind of allocation for regional Australia? And also, just on the definition of affordable house, is there a price cap on how much you're able to sell them for? Can you just explain some of that?
Thank you. So, first of all, when it comes to the location of these houses, our overwhelming priority is for them to be near where the job opportunities are. And clearly there are lots of job opportunities in regional Australia and we want to make the regions part of what we're doing here. There is a role for NHFIC, there's a role for state governments, there's a role for the Commonwealth and others as we continue to work together on where some of this land release can be, ideally near public transport, near educational opportunities and near jobs. So, there's more work to do there, but our intention is certainly not limited to the cities, but right around Australia. One of the things that I can recall really clearly has been in Rockhampton and talking with local employers there, their primary concern there was around housing for workers. They had a lot of job opportunities, but they are finding it hard to house people, and that's one of our motivating factors here. There will be more work to do with the really quite committed group that I've put together for this Housing Accord. A heap of funds have already signed up, the states and territories have already signed up, the building industry has already signed up, and they share our priorities when it comes to making sure that the regions get a slice of the action when it comes to this.
[indistinct] affordable housing?
So, what we want to do here is we want to find that part of the market where low vacancy rates and high rents str pricing people out of the market and making them live too far from where the job opportunities are. And so, when we think about affordable and again, there’s more work to do with the various stakeholders. But when I think about what's affordable, what I'm really talking about is creating more supply in these areas and also the role for the Commonwealth in subsidising some of these rents, which will be the difference between whether super can or can't get into it and that's what will make it more affordable. Phil and then Reece.
Treasurer, the sort of the theme of this Budget, if you like, is that the deficit, current trajectories are getting worse over the medium term, and you're saying in your speech tonight, there's hard decisions ahead. Can you, as a government, politically, wait till the next term to take measures for which you don't have a mandate - or are you prepared to do things over the next couple of years and argue for it, even if you didn't have a mandate for it in terms of tax increases, spending cuts, stuff like that, which we know are coming?
I think what we've demonstrated in this Budget is that we are prepared to take difficult decisions in difficult times. And that has been a combination of spending restraint, spending cuts, tax changes, and also making sure that where we are making an investment of taxpayer money, we can do it in a way that delivers a dividend for economic growth. And so that's been our approach here and that will be our approach, whether there's two more or three more Budgets over the life of this Parliamentary term. I've said a number of times now, and I've meant it, Katy said it too, and Prime Minister and others, which is our responsibility, is to put the Budget on a more sustainable footing. I don't think that that work can wait for another three or four Budgets. It's been neglected for too long. And so, we do hope to lead a conversation this term about how we get this Budget on a more sustainable footing, whether it's in terms of some of the spending pressures that we've identified, whether it's in terms of more restraint, whether it's in terms of finding other opportunities to trim spending. We see this not just as something that's done in one Budget after one election, but really a difficult, ongoing task. And one of the things that I found really heartening and one of the things I'm grateful to all of you for, but more broadly as well in the Australian community, is I think there is already an understanding that the Budget is not as responsible as it should be, and our economy is not as resilient as it needs to be. And that's left us more vulnerable and more exposed to some of these global economic shocks. And so, we've got work to do this term and we will include and involve the Australian people in that conversation every step of the way.
Treasurer, in response to pressures on household budgets, the Budget outlines a drastic drop in household consumption growth. What impact is that going to have on businesses, and has any modelling been done on that impact?
Yes. One of the primary reasons why the economy slows in the Treasury forecast next year is because consumption comes off and that is an inevitable consequence of rising interest rates combined with some of the other pressures in the economy, including what we're seeing with inflation. And so, I think that is a very concerning development. That is what's driving a big part of that slowdown in growth is around consumption. Consumption has been quite strong; demand has been quite strong. You see that in retail figures. But you see today in the confidence numbers, they've come off a little bit and that might be the front end of a bit of a softening in consumption. Certainly, Treasury thinks consumption will soften. That will have implications for growth, that will have implications for small business and that will have implications for the broader economy.
By the way I'm loving not yelling over each other - absolute gender lens has been put over that process, so I'm enjoying that. Treasurer you keep talking about difficult decisions and difficult discussions and the word difficult has been repeated a lot in this discussion. When are you going to start defining that yourself, leading the debate because the Australian public, I think, are really, really - they have an appetite for knowing what that might look like and putting some bold proposals in front of the public to build a consensus for them.
Look, one of the kindest things - I think we might have talked about this on other occasions - one of the kindest things that people say about this government that Anthony leads is that the adults are in charge. And part of that means having an adult conversation with people about pressures in the Budget and pressures in the economy, and that means talking up to people and not talking down to people. And we're serious about that. And I think what we've done in this Budget is we have taken some difficult decisions, some meaningful decisions, which mean that the Budget is in better nick than it would be absent those decisions. We've got less debt over the forward estimates, but more to show for it. We've got spending restraint which would be unrecognisable to our predecessors. And I assure you that when you go through the Budget, as Katy and others and all of us have been, the Expenditure Review Committee, there are no easy decisions. There is always somebody who would prefer that you didn't wind back some element of the Budget. But we're not here to take the path of least resistance. We're here to do the right thing in the Budget and in the economy. We take that really seriously; we talk about it all the time and I think we do more than talk about it. We've demonstrated in this Budget $22 billion in savings spending restraint which would be unrecognisable by the standards of recent history. These are meaningful decisions. They are difficult decisions and I think it's right to expect, for people to expect that there'll be more to come.
I guess over the past couple of months, whenever there's been talk about tax you've pointed to multinational tax avoidance and changes being made there. It looks like that is garnering less than a billion dollars in the Budget. That's not even enough to pay for all the sort of discretionary swimming pools and basketball court upgrades and things promised in the election. Is there more to come there? And also, the iron ore estimates are quite conservative. Will we see more upsides from that in years to come?
First of all, on multinational taxes, the costing for that has come down substantially, and that's a consequence of two different bodies doing the costing. But also, it reflects now the actual starting date of our proposal, and it reflects some of the other economic parameters. And we've said repeatedly that those two main measures on multinational taxes are part of a broader suite of multinational tax reforms. I've been engaged with Secretary Yellen and others about the OECD agenda, and that's out for consultation right now. So, yes, there will be more action on multinational taxes.
When it comes to commodity prices, the Treasury, for the right prudent reasons, has adopted an assumption that the iron ore price will return to more normal levels over a certain period of time. They did that for our predecessors and they're doing that now. The iron ore price has actually been quite volatile. It's come off really substantially since the middle of the year. So, you've got to be really careful and really conservative with these commodity price forecasts, and that's what the Treasury's done. And I think that's a good thing. If you think about commodity prices since the middle of the year, iron ore's come off, met coal's come off, thermal coal has come up, and gas has come up for all the reasons we're familiar with, largely because of the war in Ukraine. And so, commodity prices are volatile and we're earning a lot of money out of the last two of those in the Budget. And we've taken a prudent and conservative approach to returning that to the Budget. And the Treasury has taken a prudent and conservative approach when it comes to their assumptions as well. Clare.
Thanks, Treasurer. Household budgets are also under immense pressure. You've assumed here there will be a 30 per cent increase in power prices next year. People won't be getting a LMITO offset, there's no fuel excise. Can you imagine there will be some disappointment from Australians when they look into this and we're hoping for more direct assistance for those pressures. Are the decisions you've taken in that regard purely a short‑term thing over this two‑year inflationary period, or should Australians brace for there not being that direct household support in the longer term due to the spending pressures? And related to that is the $275 saving on energy bills, dead?
Okay, I think there are probably three parts to that. First of all, most broadly, when it comes to cost‑of‑living relief, we will always do the right thing by people and the right thing by the Budget. And our assessment, and the assessment right around the world is when you're providing cost of living relief, you need to do it in a really targeted and responsible way, otherwise you risk making the inflation problem worse. And what I don't want to do, and the message I have for Australians all around the country, is that the worst thing that we could do is to contribute to even higher inflation. Inflation is the primary influence on this Budget and that's why we've got substantial costs‑of‑living relief in there - seven and a half billion dollars in that five‑point plan but timed in a certain way and designed in a certain way to not put upward pressure on inflation. We don't want cost‑of‑living relief to be counterproductive and that's what's guided our approach there.
In the future, we'll always take decisions which are relevant to the economic conditions. If there's a need at some future point to provide relief in a different way, then obviously we will discuss that. But I think it's really clear that the best thing we can do right now is exercise restraint and provide cost‑of‑living relief in a way that's got an economic dividend as well.
When it comes to electricity prices, I'm not going to pretend that we're not worried about these electricity price forecasts. And we have said for some time now that a bigger and bigger part of our inflation challenge is going to be electricity prices combined with the impact of these natural disasters in some of the best food producing land in the world. And so, inflation, in our estimation, or the Treasury's estimation, will hang around higher for longer than we'd like. And a big part of that is electricity prices.
You asked me about the modelling that we released in opposition. I'd say a few things about that. First of all, renewable energy is not just cleaner energy, it's cheaper energy. That's understood right around the world. It's also more reliable in the medium term and the long term when it comes to some of the geopolitical issues that we're dealing with and what that means for energy markets. So, number one, renewable energy is cheaper. Secondly, a lot has happened since that modelling was released last year, including a war in Europe which is playing havoc with energy markets. No use pretending otherwise on that front either. And thirdly, a decade almost of energy policy chaos hasn't helped. We've had a decade of stuffing around with energy policy, more than 20 policies, all those false starts and stuff ups, and that's made our energy market more vulnerable than it should be. And so that hasn't helped either. Now, I've been asked going up and down the hallways today, "what will we do differently on electricity?". I think any responsible government facing these kinds of price hikes for electricity and for gas needs to consider a broader suite of regulatory interventions than they might have considered in years gone by. And we have more work to do on this and I'll do that work with my colleagues.
Thanks Treasurer, on productivity: this sort of lower expectation for productivity growth is a big part of why the Budget doesn't look so good over the next decade. And that's even with these sort of childcare pay, parental leave things that are supposed to improve productivity. So has the Government got to find more ideas for this. Or is that basically an acknowledgment that the days of 1.5 per cent productivity growth are behind us?
It's just a recognition that the 30‑year average, which is one and a half, is not realistic when a 20‑year average has been 1.2. And I conferred with Treasury colleagues within the first few days of becoming the Treasurer about what was a more realistic assumption here - I feel like our predecessors were relying too heavily on a productivity assumption that they knew was rubbish. And I didn't want to make that mistake, I'd rather be upfront about that from the beginning, and so we changed the assumption. That was a strong advice from the Treasury, and I didn't want to ignore that advice. But that has huge consequences for our medium‑term assumptions and if you apply that assumption to the PEFO debt trajectory and bottom‑line trajectory, it makes a huge difference. Now, that doesn't mean that we're raising the white flag on productivity. On the contrary, we've got a big skills agenda, big energy agenda, the NBN and digitisation. What we want to do in the care economy and the services economy, these are key to boosting productivity in our economy. The best thing in the world would be to under‑promise and overdeliver on productivity. We've had too long where the opposites happen.
Migration will increase in the Budget, it says, from 160,000 to 195,000 - mainly the focus is on skilled workers. What other measures are there to support multicultural communities in Australia and what's done on reunions, the families that weren't able to do that reunion because of COVID?
One of our big priorities - and I pay tribute to Clare O'Neil, Andrew Giles for this work - is when we came to office and there was almost a million people in the visa backlog and that was causing all kinds of angst. I know this from my own community and dealing with settlement services and people involved in the migration system that that was causing a lot of angst. And so, one of the things that came out of the Jobs and Skills Summit was funding to try and clear that backlog and we're actually making a heap of progress on it. Andrew Giles gave an update to the Cabinet or the ERC recently about the progress that we're making. So that's been our big priority in this area. Obviously, we continue to fund settlement services and all the rest of it. There's a specific initiative around people from Ukraine, but really more broadly, we think as migration picks up again from the extraordinary situation that existed during COVID‑19, then this is our opportunity, via the review that Clare O'Neil is doing and elsewhere, to make sure that our migration program is the absolute best that it can be for the conditions that we have. And that does mean net overseas migration tracks up. It does mean we're taking a different approach to the cap, including the skilled part of it and a whole bunch of other things. But migration is really important to what we're trying to do. This is our opportunity to get it right and we will.
If I can Treasurer, obviously, this program that you're foreshadowing in the Budget, the pipeline doesn't start until 2024, but you're talking about a million houses starting from that period. This will require changes to planning, it will require some constraint in the inflationary environment, it will require the resolution of capacity constraints, workforce and supply chain issues that have plagued the construction market for several years. It's also unclear to me to what extent the superannuation sector is on board with this. You say there's an Accord, but are they on board for a plan for a plan, or are they on board more substantively, come what may? Because obviously this has got to be a productive investment and consistent with their mandates. And just one more, I'll be greedy. You just said a minute ago that people in your position have to countenance a broader suite of reforms to the energy market than we would have had to have done in the past. What are you talking about?
Okay, first of all, on housing, it's very deliberate that we're starting this accord from 2024 or we're starting the target from 2024. And that's because there's a heap of activity in the sector right now. There's a heap of inflation in the sector because building costs are high, there are labour shortages. And you rightly, identify some of these pressures in that part of our economy that we need to deal with. We need to deal with the skills and labour shortages, we need to deal with issues in the supply chain. But I think most of all, what's been missing is the opportunity, or an opportunity not taken for the Commonwealth to exercise some leadership here. In social housing, crucial, in Help to Buy, absolutely crucially important. But there's part of it here that's been neglected, I think, and Julie Collins is of this mind as well.
And what it's taken is a bit of Commonwealth leadership to bring the state and territory treasurers together, which I've done, and I appreciate the work that they've done and the engagement and the industry as well. And this is where we get our understanding about the pressures on the pipeline and what we need to do in labour and skills, and how do we make sure that new homes that are built are energy efficient and how do we make sure we get the apprenticeships we want out of it. All of those things are crucially important. And superannuation is such an important part of this puzzle. And a number of the big funds, not just industry funds, but a number of the big funds - I can provide a list separately to you - have signed up, properly signed up, and we've engaged with them properly and repeatedly in the course of the last month or two. And what it will take is good planning, it will take land release and zoning, it will take skills and all of those things, but it will also take a small availability payment so that the rental return for these super funds is more substantial than it would be otherwise, because super funds need to get a return for their members. And that's what we're interested in too. So, there's a role for the Commonwealth in all of that. The last part of your question about the electricity market, as I said in response to Clare Armstrong's question, we have more work to do there, but I think any responsible government which sees the kinds of forecasts price rises in electricity and gas needs to see if more can be done. If more can be done, more will be done. And we will have more to say about that in due course.
Treasurer, just a question on manufacturing support. There seems to be a lack of detail on [inaudible] and Buy Australia Plan, and the National Reconstruction Fund seems to have a two‑year set up time. Is manufacturing support a victim of the spending restraints you've described, and also how long will we have to wait for more detail on this?
This is more my area. So, the Future Made in Australia Office has been established within the Department of Finance and it will be leading the work that needs to be done, particularly in the area of procurement and support for small business and making sure that we're procuring services. We're doing that with a view on how much more support for local businesses. So that work is all underway and we'll have more to say about that shortly in good finance style, leading the way, those costs were absorbed within the department, but we've got that that underway.
In terms of the National Reconstruction Fund, Minister Husic is very ambitious in this area. The first thing we need to do well is design the NRF, put the final design on it, get that detail right. It's a big vehicle that we want to use to drive economic growth and support a whole range of industries. And we're hoping pretty much the first step on that we'll be getting the legislation into the Parliament to establish that. We're hopeful that we're looking towards the end of this year if we can get that in. And so, you will see a number of steps of progress as we roll out the National Reconstruction Fund, but at $15 billion, we want to get the design of that right, make sure that it's got all the rigour it needs to get the best chance at success. We're very optimistic about that - but legislation, proper process - and you'll see more on it shortly.
This better be the last one because I know you’ve got to file the stories.
Treasurer, you were saying in your speech tonight that you've talked quite a lot about the need to have a national conversation about Budget repair. What exactly do you think we should be talking about, and is tax reform a part of this? Is part of it that Australians may need to be prepared to pay higher taxes to fund public services given at this stage anyway, your multinational tax plan wouldn't put much of a dent in paying for them.
I think tax needs to be part of the conversation going forward. And as I said, I think in response to one of the earlier questions, what we've done in this Budget is we've built a foundation of a more sustainable Budget, but there's more work to do and that will involve ongoing spending restraint, it will involve trimming spending where we can, targeted investments and also tax reform. In response to Katina's question, we talked about more work to do on multinational taxes. There's a big tax compliance measure in what's before you in the papers right now. I have been incredibly heartened by people's willingness to engage and take seriously the challenges in the Budget and the challenges in the economy. This is a very, very strong start that we're making tonight when it comes to being upfront with people about our challenges, but also beginning to act on them. And what you have before you is, I think, a very solid start when it comes to dealing with those challenges. But there'll be more work to do and more Budgets to hand down and right now, more stories to write.
Just the gender impact statements and study of all Budget policies, do you eventually want to put that gender impacts statement lens over all policies - is that your ultimate aim? And what have you achieved from the piloting of it so far?
So, yes, thanks for the question. The idea is that we would mainstream it into the Budget papers. My hope at the end is we don't need a Women's Budget Statement, but we have it embedded through the way we present the Budget that gender equality is part of the normal process of Budgeting. So, this is the beginning of it. I have no doubt the women's sector in particular will have views about the first steps we're taking, and we'll take that feedback seriously as we up‑skill the public service to do this sort of analysis.
One of the things we've found is because it hasn't really been done with any rigour, there aren't necessarily the skill set that exists across the APS to do this work. It hasn't really been thought of at the beginning of the policy development process. It's been ticked off at the end, like, almost as an extra add‑on at the end, rather than informing it upfront. So, the Office for Women and their skills and getting them more broadly across the APS is a longer‑term work job.
Well, I think that's probably too soon, considering we're starting, Jim tells us, next week on the Budget. But I think this is the beginning of the conversation and in every Budget, we will improve it. Thank you.