Topics: Budget 2022
Will Goodings: Now though, our focus is on the federal budget that was handed down by Treasurer Josh Frydenberg last night. And this morning we’re chatting with South Australian Senator and Finance Minister Simon Birmingham. Minister, good morning to you.
Simon Birmingham: G’day, Will. It’s great to be with you. Good morning to you and your listeners and best wishes to Pembo out there at home.
Will Goodings: Yeah, I notice there was no sort of special dispensation for radio stations, a man down at the moment in the budget. I feel like that was that might have been an oversight.
Simon Birmingham: Well, I’ll buy you a cup of coffee next time I see you.
Will Goodings: I’m not asking for a handout. That’s all right. I want to talk big, big, big picture on the budget before we sort of drill down on some of the specifics to it. So measures like gross debt to GDP ratio that continues to climb through to 2025 is a measure of, you know, how we’re doing managing the bottom line of the budget. We got big spending over the course of the pandemic. I think because people needed support, they weren’t going to quibble about that. But it continues to rise even in the years thereafter. There’s the whole concept of budget restraint that you guys used to be champions of not exist anymore?
Simon Birmingham: No, Will. In fact, what you’ve got at present is that the rate of government payments this year is coming down about 6% compared to last year and next year comes down closer to 5% compared to this year. And this reduction in the level of government spending is actually the biggest in 50 years of data. So we are coming down off of the steep COVID support that was provided-
Will Goodings: How much of that though is the people that the unemployment rate being so low and you’ve got fewer people on benefits?
Simon Birmingham: Some of that is and certainly a big part of the overall improvements in the budget, particularly in the revenue side, is a function of having more people in work and therefore more people as taxpayers. But the payments coming off are largely about the fact that the extraordinary COVID supports we gave, be it in terms of additional elements of the health support or particularly most notably the economic support there the things where we turned the tap on to get the country through it. That saved an estimated 40,000 plus lives. It saved an estimated 700,000 plus jobs and it saved many thousands of Australian businesses from going under. It was money well spent. If you compare our economy to others around the world where our economic growth and recovery has been faster and stronger. But we’re turning that tap off, as we said we would. The scale of payments is coming down because the economy is growing stronger and we’ve got more people in work. The budget position is significantly improved on what we’d previously forecast as well-
Will Goodings: You haven’t turned the tape entirely off though, have you? Because, I mean, the slash to the fuel excise is costing tens of billions of dollars. You’ve got payments to low and middle income earners, carers and others that are trying to get us through this period where cost of living is going up. It doesn’t paint a picture of winding back. If anything, it looks like a pre-election budget splurge.
Simon Birmingham: Well, actually, the vast majority of the improvements in the budget we’ve banked to having lower deficits more than $100 billion worth of improvements in terms of what were projected to be budget deficits to what are now forecast to be budget deficits. We’ve taken more than $100 billion, lowered those deficits, lowered the level of future debt. And so debt now peaks at a lower level than previously forecast sooner than previously forecast, giving the country greater resilience. And that’s us being true to the liberal principles there, that whilst there was a much greater dividend from more employment in a strong economy that could have been spent, we’ve chosen instead to squirrel away more than $100 billion of that towards lower deficits and lower debt. But, yes, you know, moving on from COVID, we now face war in Ukraine, oil price spikes caused by that. And we know that they’re having a real impact on Australian households and that getting to work, getting the kids to school, getting to the shops, getting to weekend sport. All of those things cost money when you’re hopping in the car. Those oil price spikes are not expected to be with us forever. The war in Ukraine is a big, big driver of that. And it’s why we’ve followed the COVID model of providing temporary and targeted support that is responsible, carefully targeted. $0.22 a litre coming off of the fuel excise for six months now. That’s about seeing us through these spikes in the oil prices and making sure that people who are doing it tough right now get that benefit of about 15 bucks off the cost of filling up their car, as well as some targeted payments to those on low and middle incomes or fixed income payments.
Will Goodings: Political risk in the fuel excise cut. Both, I think in the short term and the long term. The long term is obvious because at some point in time the government is going to have to say fuel’s going to go up by $0.20 a litre and it’s going to be fuel excise. But in the short term, do you think there’s a risk that the benefit might almost go unnoticed, given the dramatic the volatility in the oil barrel price at the moment is something quite exceptional, and it’s not entirely unimaginable that we could see a circumstance when it shoots up again and people barely notice that you guys have shaved a lot off the cost.
Simon Birmingham: Look, Will. I mean, those political factors will be debated by others. We’ve done it because we think it’s the right thing to do to maintain consumer confidence, to help households who are doing it tough. That that given the scale of increase we’ve seen in such a short period of time, real spikes to those prices, it’s the right thing to provide this assistance where we can if we hadn’t had such strong economic growth and our economic plan wasn’t working as well as it is, then the country may not be in a position to undertake this type of action, but we have had a really strong period of economic growth. We’ve bounced back out of COVID. Our plan is working and whilst we are saving the vast majority of the dividends. From our plan working we want to make sure that Australians who are doing it tough at present feel the benefit of that and $15 per fill up of your car. That’s going to add up pretty quickly over a six month period to particularly those who have lots of running around to do well, longer distances to travel.
Will Goodings: The $7.1 billion regional new frontier spend doesn’t contain a cent for regional South Australia. Why is that?
Simon Birmingham: Well, it’s just one program out of many, many different programs in the budget. South Australia, elsewhere I’ve read in other states, has been criticised for doing disproportionately well out of the amount of infrastructure spending that we’ve secured. Finishing the North South Corridor is is a big, big project, more than four and a half billion dollars worth of funding flowing through to that. But of course we’re also supporting regional roads projects such as the Horrocks Highway upgrade, which is going to be crucial to have people getting safely to and from the Clare Valley in the mid-north and all of those projects, if you think about the North South Corridor or Horrocks Highway linking in to more effective freight networks for farmers and regional SA to get their goods to market, you know, manufacturing space, the investment we’ve announced in the Plant Protein Manufacturing Initiative-
Will Goodings: The new frontiers is about job creation too, though, isn’t it?
Simon Birmingham: Sure. And so too is plant protein. It’s about creating a new industry that says we don’t just grow grains and legumes in South Australia and then export them overseas, but we actually process and manufacture goods in South Australia that can then be exported at higher value with more jobs and greater payments flowing through to South Aussie farmers and others.
Will Goodings: And just lastly, Finance Minister, there’s a bit of this that affects absolutely everyone. It’s always difficult to project in the budget and it’s real wage increases. Now, the budget shows that we won’t be getting back to pre-pandemic levels of wages until 2025 because inflation has eaten up a lot of the gains that we’ve had in recent years. The budget does inject a whole heap of money into the economy. How do you balance out in the coming years the risk of inflation with the desire to see wages continue to increase? While you’re providing support to some of those areas you’ve already talked about that are right now going through a difficult period.
Simon Birmingham: It’s another reason why so much of the dividend from a stronger economy we’ve chosen to put against having lower deficits so that we don’t add to inflationary pressures. By reducing fuel prices, we’ll actually bring down pressure on inflation for that period of time. But what we’ve also seen is that by getting unemployment across the country down to 4% forecast to go to 3.75%, that’s going to be the lowest rate of unemployment in your lifetime or mine. It’s an historic achievement, but it does also then help to drive wages growth going forward so that what we forecast is that from the 1st of July this year, the wage price index is forecast to grow at three and a quarter per cent, rising to three and a half per cent, providing for real wages growth. But in the interim, these cost of living measures to support households, be it the fuel price or the $250 or $420 payments to different individuals or the enduring benefits of cheaper medicines that we’re providing to 2.4 million Australians. They’re all about making sure that we, we help people as best we can while maintaining a responsibility around the way we manage the budget.
Will Goodings: Federal Finance Minister and South Australian Senator Simon Birmingham, thanks for joining us on 5AA Breakfast this morning.