Economy, 23 March, 2023
Senator BABET (Victoria—United Australia Party Whip) (14:49): My question is to the Minister representing the Treasurer, Senator Gallagher. Having previously denied a link between money-printing and inflation, RBA governor Dr Philip Lowe finally admitted during recent Senate estimates that the expansion of the money supply, low interest rates and government support during the pandemic has driven inflation. Prior to the 2022 election the former coalition government ran up hundreds of billions of dollars of debt, with little to show for it but some expired PCR tests—and of course an artificially inflated property market, where it’s nearly impossible for first home buyers to get into the market. Do you believe that the irresponsible and unprecedented debt accumulated by the former government has contributed to the inflationary pressures that are currently being felt by ordinary Australians? I will remind you as well that the Labor was in agreement with most of this.
Senator GALLAGHER (Australian Capital Territory—Minister for the Public Service, Minister for Finance, Minister for Women, Manager of Government Business in the Senate and Vice-President of the Executive Council) (14:50): I thank Senator Babet for the question and also for his advice that he would be asking a question relating to debt and inflation. I would agree with Senator Babet that a lot of the significant increase in government debt under the former government—they doubled the debt before the pandemic hit—has led to the budget being in worse shape than it needed to be, that there wasn’t enough to show for the debt that we currently carry and that the fastest growing area in the budget is managing the interest burden on that debt. So, it is a big problem and it is a big issue that we are having to manage as we work our way through the decisions we’re taking in this budget.
The inflation challenge has certainly been made worse by the failure in energy policy. Nine years of failure to deal with the reality of a changing energy market and the fact that we haven’t been able to be ahead of that and have policies in place to deal with it has certainly contributed. One of the biggest contributors to inflation of course has been energy prices, impacted by the war in Ukraine but absolutely also impacted by the failure of those opposite to land an agreed energy policy—22 of them, and not one of them landed. The fact that we are now dealing with the results of that has certainly had an impact on inflation, which is why we took the steps we took at the end of last year to put caps in place, to put in place the interventions that we did, as unusual as they were, to make sure we were putting downward pressure on inflation and bills at the same time. (Time expired)
The PRESIDENT: Senator Babet, a first supplementary question?
Senator BABET (14:52): Thank you, Minister. I guess we’re in agreement now that increased government spending does indeed contribute to inflation. So, why is the Labor government not responsibly attempting to heavily reduce spending to balance the budget and to make a start on repaying our nation’s debt? Why all the big spending?
Senator GALLAGHER (14:53): I thank Senator Babet for the supplementary question. I would say to Senator Babet that the October budget banked 99 per cent of the revenue upgrades that we received through that budget update—99 per cent. It’s unprecedented. It goes to show the approach that the Treasurer, Dr Chalmers, and I take in terms of budget management. And it’s not just how much is spent; it’s the quality of the spend: are the investments you’re making driving an economic or social outcome? Our childcare investments, our investments in cleaner and cheaper energy and our investments in medicines are all about the quality of the scheme. We don’t want to pork-barrel our way around the country like those opposite did. We need to make sure every dollar that’s spent is invested in the productive capacity of our country and improves the living standards of Australians.
Senator BABET (14:54): Thank you, Minister. So, I guess it’s pretty clear that all governments lack the courage to cut spending, because it’s unpleasant to do so. Will you rule out future taxes on the family home? And will you confirm that your government will proceed with the stage 3 tax cuts to ensure that Australians can keep more of their own money and keep up with the rising costs of living?
Senator GALLAGHER (14:54): On the question around taxes on the family home, we understand the importance of the family home, and it will remain exempt from capital gains tax. I think the Prime Minister and the Treasurer have made that clear in recent weeks, and our position on stage 3 hasn’t changed. On the spending side, I think we do need to acknowledge that a significant amount—the vast proportion—of spending in the Commonwealth budget is in payments through our social security system and payments to the states and territories. These are significant parts of the budget. When people say they want to see big cuts to things, they have to understand that that means big cuts to social programs that people value or payments to the states and territories. We are fiscally responsible. We do have an eye on budget repair. But we’re going to be cautious about how we approach it, because we know people rely on services that the Australian budget funds. (Time expired)