Doorstop interview, Springwood Park, QLD

Subjects: interest rates, fuel excise, tax reform legislation Jim Chalmers: Today the Reserve Bank held interest rates steady at 4.35 per cent. This is reassuring in the face of all of this global economic volatility. It’s a welcome reprieve for millions of Australians with a mortgage.

It doesn’t make life any easier for people, but it doesn’t make life harder either. We welcome this decision from the independent Reserve Bank to keep rates steady. This is the first interest rates decision since the very responsible Budget that we handed down not that long ago.

And since then, we’ve seen some very welcome developments in the Middle East as well. In Australia, we’ve seen inflation come off a bit. But we still know that those inflationary pressures are there, made worse by the war in the Middle East and its aftermath.

We’ve seen inflation come off a little bit in Australia in the most recent data, but we’ve seen it go up in Europe, in the US and Canada, and of course, we’ve just seen the Japanese central bank raise interest rates. We know that the global economic situation is still difficult despite the welcome progress that we’ve seen in the Middle East in recent days. We know that when that document is signed in Geneva, we know that when the Strait of Hormuz is open, there will be some costs and consequences of this conflict still felt in our economy and in the global economy for some time as well.

So, we’re very pleased with developments in the Middle East, but we’re realistic about how long it will take for the global economy to normalise and what that means for us. The end of this war can’t come soon enough. Australians have already paid a really hefty price for this conflict on the other side of the world.

And there are more costs and consequences to play out in the long tail after this conflict as well, you can see that in our Budget forecasts. We still expect the situation in the Middle East to put upward pressure on inflation and to weigh heavily on global growth and growth in our own economy as well. As the Reserve Bank pointed out in its statement today, the impact of this war is being felt, first of all, when it comes to global energy prices, particularly liquid fuels.

But it’s also spreading more broadly in our economy and in other economies as well. We know that Australians are still under pressure, that’s why we’re providing help with the cost of living. We’re cutting taxes 5 times in 3 different ways, making medicines cheaper, supporting increases to the minimum and award wages, strengthening Medicare, right across the board, doing what we responsibly can to help Australians with the cost of living.

This decision by the Reserve Bank today is very welcome in the context of Australians still under pressure, and these global pressures intensifying in recent times as well. So, a welcome decision in the face of all this global economic uncertainty, a welcome reprieve for millions of Australians with a mortgage, and we expect a lot of Australians to see today’s interest rate hold in that light.

Happy to take a few questions. We’ll go here, and then we’ll come to you. Journalist: The PM has indicated the government will make an announcement in the coming days about fuel excise.

What options is the government considering? Look, we’ve made it really clear that the fuel excise relief won’t go on forever, but that we will review it on a week‑to‑week basis to make sure that we’re providing the support that we can responsibly provide. We’ve always said that fuel excise relief will be temporary, it won’t go on forever.

On a week‑to‑week basis we review it, and that’s what we’ve been doing, and that’s what we’ll continue to do until the end of the month. This is a really important part of our efforts to help take some of the edge off the cost and consequences of this war in the Middle East. Now, if you think about fuel prices here in Brisbane, about $1.68 a litre for petrol at the moment.

I think that’s something like 90 cents cheaper than it was at the end of March, and cheaper even than before the war began at the end of February. And so we’ve made a meaningful difference to this cost‑of‑living challenge by providing this temporary relief at the petrol bowser. That relief won’t go on forever, but we’ll continue to review it between now and the end of the month.

Journalist: Treasurer, if you were to extend the fuel excise beyond this month, wouldn’t you be making the RBA’s job harder at getting inflation back under control? No, what we saw in the most recent inflation data is that our efforts with the fuel excise were playing a helpful rather than a harmful role in the fight against inflation. It’s one of the reasons why we saw inflation come down rather than go up as it has in other parts of the world in the most recent data.

It’s because we have stepped in in a responsible way, but also in a temporary way to take some of the edge off these cost‑of‑living pressures which are being intensified by a war on the other side of the world. Journalist: So is the government considering partially lifting the fuel excise rather than a full increase? We keep the fuel‑excise relief under more or less constant review.

We said that when we introduced it, that this is all about helping people with the cost of living, about helping people with the costs and consequences of a war that the Australian people didn’t choose, a war that can’t end soon enough from our point of view. So, it’s always been temporary, and we have always said throughout that we’ll review it from week‑to‑week, and that’s what we’re doing.

Journalist: Could there be an option where you keep the fuel excise in price for diesel but not petrol, given diesel is still quite expensive? Well, we’ve been making a meaningful difference to diesel prices as well as petrol prices. In both instances, there has been a moderation in those prices, but they are different markets, they are based off different benchmarks.

And so at different times the movements in prices haven’t been identical in petrol markets and in diesel markets. But whether it’s petrol or diesel, we’re providing this cost‑of‑living relief because we know that people are doing it tough, we know that these pressures on people have intensified because of a war in the Middle East, that’s why we stepped in in a temporary way, and it’s why we’ll keep these arrangements under constant review until the end of the month.

Journalist: All the support for One Nation’s attributed to angst about the economy. Do you think if you can’t control inflation and the RBA can’t cut rates that we’ll see even more people flocking to One Nation? Well, inflation is much, much lower than it was when we came to office.

When we came to office, it was north of 6 per cent and surging. We had made some good progress, obviously the war in the Middle East has made that challenge more difficult rather than less difficult. But we handed down a responsible budget, we’re providing cost‑of‑living relief where we can do that in the most responsible way.

And that’s because we understand that these inflationary pressures have been turbocharged by the war in the Middle East. And we understand that we can play a helpful role in alleviating some of those pressures, and that’s what we have been focused on. Now, obviously, when people are under pressure, they will express that in a range of ways, including in opinion polls.

We understand that the pace of change is accelerating in our economy and in our society. We understand that the global uncertainty is intensifying and people have got legitimate concerns about where they fit in that story of churn and change. And governments have got a choice: whether to dismiss those legitimate concerns, whether to deny those legitimate concerns or to try and act to address them, and we’re trying to act to address them.

I think one of the defining anxieties in our economy is about this intergenerational challenge in housing. Now, it would have been easier but wrong for us to leave the tax arrangements for housing exactly as they are. And that would have locked out more and more generations from the Australian dream of owning your own home.

And so we understand that people have legitimate concerns about the economy – whether it’s inflation or other areas of concern in our economy – and that’s why we are acting to address that. And the really important way that we’re doing that is when it comes to the intersection of the tax system and the housing market. Journalist: Has the parliamentary inquiry had enough time to consider those tax legislation changes?

I believe so. This is not the first time even this year that the Senate has had an inquiry into capital gains tax arrangements. This is actually the second one this year.

I think people too easily forget that there was already a lengthy inquiry when it comes to CGT. Now, when it comes to the last couple of days of evidence, I think it’s entirely unsurprising that there have been a range of views presented, that’s a good thing, that’s a healthy thing in a democracy like ours. It would be very strange if we were proposing to make these very significant changes to the tax system and for there to be unanimous agreement about them.

Tax reform in this country, economic reform more broadly is always contested, it’s always contentious, it always involves some kind of political cost. But that political cost is worth it if it means we can make life easier for first‑home buyers, cut taxes for workers, better align the tax treatment of labour and asset income, and those are our motivations, those are our objectives.

Of course, there will be a range of views about the best way to go about that but there have been a number of views put forward in the last couple of days in that inquiry, objective, well‑informed views by people who don’t have commercial or political skin in the game who have strongly supported the changes that we are proposing. Now, we know that there will be scare campaigns, we know that there will be the usual partisanship from the usual places.

But these are really important tax reforms, they’re all about making the housing market fairer for first‑home buyers, cutting taxes for workers, and also providing another $3.5 billion worth of tax relief for businesses, especially small businesses. Journalist: Treasurer, I appreciate your point about this being a [inaudible] the government’s debated this twice, the CGT changes, yet the Business Council say it allowed for just 22 days of inquiry.

Elsewhere, the government has allowed for 9 months of inquiry on tariff reforms for mushrooms. Are you able to explain what’s going on there if this is such an important change to our tax regime? Well, I engage with the BCA regularly, I’ve got a lot of respect for the members of the BCA, I get a lot out of dealing with them directly, not just through the umbrella organisation.

I try and be as accessible as I can. That was the motivation behind the Economic Reform Roundtable that the BCA was at; it was the motivation behind a whole bunch of engagement we’ve done, especially over the last year or so. But once again, we don’t expect unanimous support for contested, contentious changes to our tax system, and the BCA and others will have views about tax reform.

As I said, that’s a good thing. Our job is to represent the whole country, to make the right decisions for the right reasons. We’re engaged in consultation right now, for example, with the tech sector, the small business community, and with others to make sure that we get the implementation details right.

Don’t forget as well that whenever this country has engaged in substantial tax reform, it has involved multiple pieces of legislation, lots of consultation on implementation details. We saw that with the GST, we saw that with Paul’s reforms in the 80s. So, it’s not unusual for a government to legislate the core elements of a package and to consult on the specific implementation details, that’s what we’ve seen from governments of both political persuasions over time.

Journalist: This isn’t really about whether or not, you know, the BCA agrees or doesn’t agree with the tax reform. It’s more, you know, is 22 days long enough to debate this tax reform, given it’s a once‑in‑a‑generation change? Well, I’d make the same point again.

I engage with the BCA regularly, and I do that enthusiastically. I’m grateful for the way that we have engaged over the course of the last 4 years with the various peak business organisations, recognising that we won’t always have an identical view, and that’s because we’ve got different jobs. There has been consultation happening before the Budget, since the Budget, we flagged it in the Budget itself, there have been 2 Senate inquiries into the CGT arrangements.

I think people who oppose the sorts of changes that we are putting forward will always argue that there should be more time, but that’s because in lots of instances they don’t agree with the policy direction itself. Now, in this country, for too long, governments have left in the too‑hard basket these obvious challenges at the intersection of tax and housing.

And generation after generation of Australians have paid a hefty price for that neglect. It would have been much easier for us politically to leave things exactly as they are – as our opponents would like to do, and cling to this broken status quo – but we’re acting because this is really important. These changes are really important, they won’t be unanimously supported, but they will make a meaningful difference, and that’s why we’re acting to address these issues.

Journalist: Given the importance of the legislation, should it not have been taken to an election? Look, I understand that people have put that view to us. And in our view, having come to the conclusion, having it becoming increasingly clear that the efforts that we took to the last election – the big effort on supply which is still the main game, the big effort on 5 per cent deposits – that we needed to do more than that.

It became increasingly clear to us that that was the case, and so we’ve put forward these changes, and we’ve fronted up and explained why these changes have necessitated a change in our position. People will have views about that, we understand that, but more important to us than the politics of this is the substance of this. And the substance of this is about making it easier for first‑home buyers and cutting taxes for workers – that’s our motivation.

Journalist: Are you bringing forward the consideration of carve‑outs or exemptions for the changes to CGT? The consultation that we’re doing with the tech sector and small businesses and others is real and genuine and meaningful and so, I don’t want to pre‑empt the outcomes of that. Some of the issues that we are consulting on are more complex than others.

We’ve given the undertaking privately and publicly to move as quickly as we can on this consultation but making sure that people’s voices are heard in that consultation. I’ve been doing some of that myself, my department, other ministers have been doing that too. And what we are proposing to do is to legislate the core elements – that’s before the Senate right now, having already passed the House of Representatives – we’re consulting on the implementation details beyond that.

Some of that will be sooner than other pieces of it, depending on how complex it is, but because that consultation is really meaningful, I don’t want to pre‑empt the outcomes of it. One more question. Journalist: So you may move it forward?

The legislative timetable is the same as what we’ve proposed. We’ve got the core elements before the Senate right now, it’s passed the House of Representatives, we’re consulting on the implementation details. We’ve said privately and publicly that we’ll move as swiftly as we can on that consultation but because that’s ongoing and because it’s real and genuine.

I don’t want to pre‑empt the outcomes of that, including the timing of that. Our priority is to pass the core elements that are before the Senate right now. Thanks very much.