Politics with Michelle Grattan: Budget fight looms on Future Made in Australia tax breaks

Treasurer Jim Chalmers on Tuesday handed down his third budget. It had a second successive surplus and sweeteners, including relief on energy bills, and tax breaks for development of green hydrogen and critical minerals processing.

The opposition will back the energy bill subsidy but oppose the tax breaks in the Future Made in Australia policy.

In this podcast we were joined by Angus Taylor, who is shadow treasurer, and Chalmers.

On the $300 household energy relief, Taylor says it’s an acknowledgement of a government broken election promise:

Look, this is an admission of failure by Labor, who promised the $275 electricity price reduction. It’s clear now that it’s not going to be delivered. So, instead, they’re giving a government handout. They’re putting a Band-Aid on a bullet wound.

On the Coalition’s opposition to the tax breaks for the development of green hydrogen and critical minerals processing:

This is the biggest-ticket item in the budget, $13.7 billion. And, it’s a huge amount of money. It is inflationary to spend that kind of money at a time like this. It is part of creating what is a sea of red ink as we go out and across the budget. We do want to see a successful manufacturing sector in this country but the pathway to do that is not to subsidise every unit of production.

Chalmers tackles criticism levelled at the universal nature of the energy rebates:

First and most importantly, we work on the implementation of this with the states who receive the funding and the retailers who provide the credit. And so we’re always looking for the best way to do that.

It would have been complex and time-consuming to set up a whole new system [to determine income and thus eligibility]. Our focus here, our priority here, is on providing cost-of-living relief to millions of people doing it tough and this is the best way to go about it.

He also makes it clear that while some people will get the rebate more than once if they are paying the energy bill on more than one property, this is not the case where properties are rented out.

It’s whoever’s name is on the bill. That’s what happened last time. That’s the principle that we apply.

On the looming Senate fight on the Future Made in Australia tax breaks, Chalmers says:

We understand that any coalition led by Peter Dutton’s first instincts are going to be nasty and to be negative, and to say no and to oppose things. We’ve seen this movie before. We play the cards that were dealt in the Senate, we do our best, but our intention is to pass the package that we announced.

MICHELLE GRATTAN, HOST: The energy rebate has come under quite a lot of criticism for not being means-tested. You say that middle Australia is doing it tough, and you also say that means-testing would have required time-consuming and difficult changes to assess income. Still, wouldn’t means-testing have freed up some funds to do other worthy things?

JIM CHALMERS, TREASURER: We are doing other worthy things, but the judgement that we came to when we decided we wanted to provide energy bill relief for middle Australia in addition to people on pensions and payments was that because we do this via the energy retailers, they don’t have income information, they don’t have the data sharing arrangements with the tax office. And so, as you rightly identified in your question, it would have been complex and time-consuming to set up a whole new system. Our focus here, our priority here is on providing cost of living relief to millions of people doing it tough and this is the best way to go about it.

GRATTAN: What about the problem of people who have multiple properties and personally get more than one bill, holiday homes and so on, they get more than a fair share of this?

CHALMERS: First and most importantly, we work on the implementation of this with the states who receive the funding and the retailers who provide the credit. And so we’re always looking for the best way to do that, to implement that. But the other thing to recognise is the person whose name is on the bill gets the rebate. And so, not that your question necessarily made this mistake, but there have been other occasions where people assume that the owner of investment properties that they rent out permanently, that they’ll receive the help. It’s whoever’s name is on the bill. That’s what happened last time. That’s the principle that we apply, and we work with the retailers and states to make sure that we’re implementing it in the best possible way.

GRATTAN: My colleague Peter Martin this morning heard a couple of talkback callers complaining that they don’t get any benefit, but they’d spent a lot of money installing batteries, so they don’t get bills. Now, you would say, well, they don’t have the cost-of-living pressures, but what do you say to them beyond that?

CHALMERS: It’s true that if you don’t get an energy bill, you don’t get the energy bill rebate, but that is typically a very, very tiny sliver of people. And I say to them that you will receive cost-of-living help in other ways in the Budget. There’s a tax cut for every taxpayer. There’s this energy bill relief that we’re talking about for every household. There’s assistance with the cost of medicine. There’s debt relief for students. There are a whole range of ways that we’re providing cost of living relief, which is substantial but responsible at the same time.

GRATTAN: You’re relying on your relief on energy and the rent assistance you’re providing to reduce inflationary pressures. But how do you counter the argument by some economists who say this will allow more spending by people, so leading to more inflation later on?

CHALMERS: A couple of things about that, and I do acknowledge, I’ve been asked about that a bit. But the very clear advice from the Treasury is that the way we designed our cost-of-living package will put downward pressure on inflation and it won’t add to inflationary pressures elsewhere in the economy. That’s partly how we designed this, because we’re getting bills down and that gets inflation down. And what we saw the last time we did this in the last budget was that it pushed down inflation quite substantially. It was part of the moderation in inflation that we saw. But the other thing, which is not always easy to convey in a sort of a quick television interview, is these billions of dollars in cost-of-living help are quite meaningful for the individual person, but we’re talking about the context of a two-and-a-half trillion-dollar economy. So, the idea that this cost-of-living relief, which is substantial for people but responsible in the context of the Budget, that it would substantially shift the dial in an economy of that size, I think that gives us some perspective too.

GRATTAN: To what extent do you expect the Fair Work Commission, which at the moment is considering the national wage case, to take into account the budget measures? In other words, could the Budget’s anti-inflation measures actually put downward pressure on wage outcomes in that case?

CHALMERS: Look, I wouldn’t have thought so. I think the Fair Work Commission has shown a willingness to provide decent wages over and above tax cuts, for example, that we are providing. They do take the whole economy into consideration and the context, but I think we’ve made it very clear, and certainly others participating in this process have made it clear that cost-of-living health provided by the government is in addition to decent wages for people in the care economy, for example, aged care and early childhood education. And we’re pretty enthusiastic supporters of better wages for people in those sectors. The care economy is a crucial part of our economy. We need to make sure that we can attract and retain workers to teach our kids and look after older people and be important parts of the future of our economy. And so we provisioned in the Budget for decent pay increases in the sector. We didn’t put the numbers as a line item because we don’t know yet what the Fair Work Commission is going to decide.

GRATTAN: Would you be making these points that you just made to the Commission before the outcome of that case?

CHALMERS: Typically, I mean, certainly in the case of minimum wage cases, but I would have to check with my colleagues, Tony Burke and Anne Aly and Jason Clare, how we’re approaching it. I think, in particular, with the early childhood educators.

GRATTAN: It does seem that serious tackling of structural deficits has been pushed into the future. At the next election, will you dare to in fact seek a mandate from the people to do more to attack these structural deficits? You used to talk a lot about the expanding spending on a range of areas; Defence, NDIS and so on. I know you’re doing a bit on NDIS, but there’s a lot of big spending there.

CHALMERS: We’re doing more than a bit. The two fastest-growing areas of Commonwealth spending are the interest on the debt that we inherited from the Liberals and the NDIS. Bill Shorten and I, and Katy Gallagher and the team have been working to make sure that while the NDIS spending continues to grow, that it’s more manageable. And on debt, one of the big, big stunning turnarounds in the Budget since we took over a couple of years ago, it’s the way we’ve been able to get the debt down and save on interest costs. And that’s making a really quite considerable difference to the structural position of the Budget. It’s saving us about $80 billion in interest over the next ten years. And so, our responsible economic management is helping to deal with some of these structural pressures in the Budget.

GRATTAN: I did ask you this question earlier today at the National Press Club, but I’m going to ask you again for our audience. Critics of the Future Made in Australia policy have said the policy needs exit ramps to protect taxpayers’ money from investments that go wrong. Now, you have outlined a framework, you’ve included a timetable for assistance, but can you give any more detail, any more assurances to taxpayers about these exit ramps?

CHALMERS: Yes, this is a really important part of the design of our policy. So, we’ve got this investment, public investment, which is designed to attract more private investment in our renewable energy superpower ambitions and to make sure that we can grasp the opportunity of the global net-zero economy. And the two big pieces in the plan that we announced last night were two sets of production tax credits, using the tax system to incentivise production and investment. And what that means with those two tax changes, they end at the end of the 2030s. So, we’ve already built in an off-ramp, an exit strategy from this assistance. The assistance is important, provided through the tax system to pay on scale and success, but with an endpoint which is clearly communicated at the front.

GRATTAN: Now, the Opposition has said it will oppose the Future Made in Australia tax breaks for green hydrogen and the processing of critical minerals. This seems to be shaping up as the real pointy end of conflict in this Budget because that will require legislation. Right. So, how confident are you that you can get crossbench support in the Senate for these measures? Could the Greens, who are very upset at the moment about gas policy, in fact, play hardball?

CHALMERS: Typically, they do. And we’re just getting more of the same kind of dead-end negativity from the Liberals and Nationals that we always get. They can’t see beyond the next opportunity to be nasty and negative. And we’re trying to show some vision and some future focus in terms of how we deliver another generation of prosperity. Like everything, there will be a contest in the Senate. We’re aware of that. All of our big policy areas are contested in the Senate in one way or another. It’s disappointing but not surprising that the Coalition has come to that view. But we will work with the crossbench to deliver what we can because this is really important to the future of our country.

GRATTAN: Do you think you can get it through the crossbench?

CHALMERS: I don’t like to be complacent about that until we see it get through. But certainly there is more willingness on the crossbench than there is in the Liberal and National parties to invest in our renewable future, which is a big, big part of the Future Made in Australia plan.

GRATTAN: But you do think this is going to be one of the big fights legislatively of this Budget?

CHALMERS: I’d imagine so. We’re pretty realistic about it. We understand that any Coalition led by Peter Dutton’s first instincts are going to be nasty and to be negative and to say no and to oppose things. We’ve seen this movie before. We play the cards that were dealt in the Senate. We do our best, but our intention is to pass the package that we have announced.

GRATTAN: Just finally, after being pressed in numerous interviews today about whether this Budget would be followed by an early election, I noticed that you went out of your way at the Press Club to say you expect to be delivering one more budget before the election. And I just wondered whether the Prime Minister was getting a bit concerned about all this early election speculation.

CHALMERS: I don’t think he’s concerned about it, but he’s made it clear that his intention is to go the full term, and I’m working on that basis. I hand down budgets when my Prime Minister tells me to. Katy Gallagher and I would be ready and raring to go to do another budget, a fourth budget, before we go to the people. But at the end of the day, whether it’s Anthony or any other Prime Minister, that’s a decision that they take. And we will work within whatever timing the Prime Minister gives us.

GRATTAN: We look forward to talking to you next year at that time of the fourth budget this term.

CHALMERS: Thanks very much, Michelle.

GRATTAN: Thank you very much, Jim Chalmers.