E&OE TRANSCRIPT
RADIO INTERVIEW
ABC RN BREAKFAST
THURSDAY, 19 SEPTEMBER 2019
 
SUBJECTS: Final Budget Outcome; Liberals underspending on the NDIS; Global and domestic economies; US Federal Reserve rate cut.
 
HAMISH MCDONALD: The country will today find out if the federal Budget is finally back in balance after deficits stretching back more than a decade. The Government will release the Final Budget Outcome for the last financial year which could even show a modest surplus. In a pre-emptive strike Labor is warning that the improved bottom line will be built on the back of a big underspend in the National Disability Insurance Scheme. The Shadow Treasurer is Jim Chalmers. He's on the line from Canberra this morning. Good morning to you. 
 
JIM CHALMERS, SHADOW TREASURER: Good morning, Hamish.
 
MCDONALD: And thank you for being the person that was willing to stump up the morning after the Midwinter Ball. 
 
CHALMERS: Happy to do it.
 
MCDONALD: At best a small surplus, at worst a budget that's at least in balance. That's what we're expecting to hear today. Will you give the Government any credit for fixing the budget?
 
CHALMERS: We'll know later on today whether it is a small surplus or a small deficit. If it's a small deficit that'll be the sixth consecutive deficit since the Government came to office. We don't know exactly where that will land, we'll find out later today. But what we do know is that a big part of the improvement in the budget will be the underspend on the National Disability Insurance Scheme which short-changes Australians the services that they were promised and that they need and deserve. We think that will be a multi-billion dollar underspend and the Government should detail that later today. But there are other contributions too. There are other reasons why the budget has improved a bit in this Final Budget Outcome. Another one is the iron ore price has been much higher than they expected, the dollar has been much lower than they expected against the US dollar and both of those things boost profits and boost the budget bottom line. None of those things - the iron ore price because of issues in Brazil, or the low dollar - none of those things are anything to do with the Government.
 
MCDONALD: So you'll give them no credit for budget repair?
 
CHALMERS: No. I think that the two big movers will be one, which is the underspend on the NDIS which is clearly not a good thing. And the other thing is completely beyond their control so I don't think what we see today, later this morning, will be an indication of good budget management. It will be, if it's a deficit, will be the sixth one in the row. It will also show that net debt has more than doubled under the life of this Government so I don't think they deserve a pat on the back.
 
MCDONALD: But they have resisted pressure in plenty of other areas of budget spending to rein things in, so you're not even crediting that?
 
CHALMERS: No I think the big movers today, Hamish, will be those things that I mentioned. I don't think that's because of Government action. That's because of an underspend on Australians with a disability and because of some other things outside their control. I don't think in this case - I'm prepared to give credit where it's due, but I don't think in this case what we see in the Final Budget Outcome will be because of good management from the Government.
 
MCDONALD: The Treasurer is resisting pressure to sacrifice some of next year's forecast surplus of at least 7 billion to try and stimulate the economy now. Do you agree with that approach, or should he be preserving the surplus at all costs?
 
CHALMERS: Well I think right now, and I've spoken to you before about this Hamish, I don't think the Government has to choose between the two things. They want to pretend that it's a choice between some responsible stimulus or keeping the surplus and I think what we will learn today from the Budget Outcome from the year before is that the things that do drive the budget - profits, resource prices, the level of the dollar, those sorts of things - they are actually helping the budget so the Government doesn't have an excuse not to have a plan to turn the economy around. 
 
MCDONALD: So what's responsible stimulus? Precisely what would a responsible stimulus be in your view?
 
CHALMERS: Some combination of, they could bring forward some of their tax cuts; they could have a responsible increase to Newstart where 100 per cent of that would be spent in our economy; they could bring forward some of the infrastructure investment; they could have an incentive for business investment; there are a whole range of things that they could do which would be responsible, which would be affordable, which wouldn't jeopardise the surplus but would give them some prospect of turning around this economy which is floundering on their watch.
 
MCDONALD: If we accept what you're saying that you know one of the primary drivers of where we're at currently is actually global factors, there is also a lot of global uncertainty. Things like US-China trade war, the threat of military confrontation in the Gulf, Brexit obviously a factor as well in the in the sort of medium-term outlook. Isn't it the right thing for a Government to just try and insulate the economy as much as possible while we ride things out for a while?
 
CHALMERS: Yes Hamish, but insulating the economy means having a plan to turn things around. One of our criticisms of the Government is refusing to have a plan means that we are unnecessarily exposed, if not dangerously exposed, to some of those issues that you rightly identify. We can't withstand the sorts of things that we're talking about in the global economy if we accept that annual growth of 1.4 per cent - which is the lowest it's been for a decade - is enough. We need to get the place growing again. We need to get wages growing again. There are a whole range of issues that have been left unattended for so long and that means that these global issues that you do rightly identify - they are concerning - but they will have a greater impact on us if the Government doesn't have a plan to strengthen our own domestic economy.
 
MCDONALD: Well one of the things you are pointing to is bringing forward the second tranche of income tax cuts. Would that achieve anything given that we know certainly from anecdotal evidence that households are not actually feeding the extra money that they've already got back into the economy, that people are holding onto the money?
 
CHALMERS: Look, we expect the tax cuts that are already in the system will help. It may be that they don't help enough but I think any aspect of those ideas I just put on the table a moment ago whether it's tax cuts, or Newstart, or infrastructure, or business investment, it wouldn't hurt to have a settled energy policy the absence of which has been a handbrake on growth. There are a whole bunch of things that they could choose. Our criticism isn't that they're not doing every one of those, our criticism is that they're not doing any one of those.
 
MCDONALD: But on that particular point I mean, there would be doubt in anyone's mind making a decision about whether to bring them forward about whether it would have the desired impact that you're describing. If people are actually just going to pay down their own debt or their mortgages that's actually not going to produce the result that you say is needed.
 
CHALMERS: I think it's clear Hamish, that it would help. What's not clear is how much it would help. We'll know in the coming months what the tax cuts which are already in the system, how much they've done to help the economy and help turn things around. It's my view, it's my expectation, that they have helped but not enough and that the Government needs to do more.
 
MCDONALD: You have mentioned the NDIS a number of times. Your claim is that the Government has been able to save money by underspending on the NDIS. The figure that we've seen I think, is about 1.6 billion. Is that where you believe it stands?
 
CHALMERS: We think it's 1.6 billion as the expectation for the year that we're in now. We think last year it was much bigger than that. It may be around $3.4 billion and that's because the Government has been incompetent in getting these packages out the door and so when they stand up today and Josh Frydenberg gives himself a big pat on the back for the improvement in the budget position I think Australians do need to know that a big chunk of that is because they haven't got these services out the door to the people in Australia with a disability who desperately need help, who were promised this help, and aren't getting it fast enough.
 
MCDONALD: The assertion of course from the Government's point of view is that it's a demand driven system. So doesn't that tell us something?
 
CHALMERS: That is their excuse Hamish but one of the issues they've got is they've got this absurd staffing cap on the NDIS which means that they can't get the packages out the door. In my community in Queensland a lot of people aren't getting access to packages. And the people that do have packages, they aren't able to spend the full amount. That comes back to the Government. I think the Government actually welcomes that outcome because it does prop up their budget bottom line.
 
MCDONALD: Alright. The US Federal Reserve has cut interest rates by another quarter of a percent. Do you see that placing pressure on the Reserve Bank here to cut the official rate again? We're currently at 1 per cent.
 
CHALMERS: I think the Reserve Bank here, and right around the world, and all of the economic commentary widely anticipated that move from Chairman Powell and his board today. That interest rate cut in the US, people have been talking about it for some time so it won't come as a shock to anyone. Clearly central banks around the world are looking to ease monetary policy and that's been the case in Australia as well. The point that I'd make about the Reserve Bank in Australia is they're starting to run out of runway. We've already got interest rates a third of what they were during the Global Financial Crisis. They are 1 per cent now and a lot of people in the markets expect at least one, maybe two, additional cuts so we're running out of runway here and the point that we make which relates to our earlier conversation is that our monetary policy can't do all the heavy lifting here. We need a Government which is prepared to use the budget in a responsible and affordable way to do its bit as well.
 
MCDONALD: Jim Chalmers, thank you. 
 
CHALMERS: Thank you, Hamish.
 
ENDS