Topics: Budget 2022
Mike O’Loughlin: Josh Frydenberg handed down the Morrison Government’s 2022-23 Federal Budget last night, as we know. So what’s in it for Tassie? Let’s find out. Federal Finance Minister Simon Birmingham joins me on the line now. Minister, good morning. Good to talk to you again.
Simon Birmingham: Good morning, Mike, and good morning to your listeners. Great to be with you again.
Mike O’Loughlin: Now, we don’t have much time as you’re a busy man. I know. Let’s get straight to it. Can you talk us through how Tasmania benefits from last night’s Budget?
Simon Birmingham: Well, it’s a Budget that continues our long term economic plan to keep jobs growth going and of course across Australia we’ve got unemployment down to 4 per cent. In Tassie it’s down to 3.9 per cent and we want to make sure that investment in jobs growth continues. So in the long term, additional support to hire more apprentices for small businesses, to invest in skills training and to invest in their digital and technological capabilities, all about making sure that whether it’s in manufacturing, agriculture or other sectors, we see that continued growth of Australian businesses and jobs. But also it’s a Budget where we’re yielding the dividends of our success. We’re making sure that we reduce debt levels from what they were forecast to be, have smaller deficits going forward to the tune of more than $100 billion in smaller deficits than had previously been forecast, but also respond to the cost of living pressures Australians are facing. That as we are coming out of the shocks from COVID, we’re now facing the shocks from Russia’s war on Ukraine and the impact that’s had in spikes in oil prices around the world. And so just as we did with COVID in temporary and targeted supports like JobKeeper to keep people safe, we’re doing the same in terms of recognising that whilst we’ve got this short term spike in oil prices, we’re going to provide a bit of relief to Australians through petrol prices and through payments to pensioners and to those on low and fixed incomes.
Mike O’Loughlin: Now we know that $250 payment to low and middle tax offset with that. But let’s face it, $250, that’s not even a week’s rent for most Tasmanians.
Simon Birmingham: So the $250 payment is for pensioners and those who are recipients of government payments. It comes on top of what was about a similar increase in aged pensions that only occurred in the last couple of weeks. So together it’s around a $500 boost for the incomes there of pensioners. There’s a $420 boost for income earners in the form of a tax offset that will flow through to around 10 million Australians overall and about 220,000 Tasmanians who will receive that boost. What that’s a recognition of is the fact that the $0.22 a litre cut in fuel excise that will save people about $15 every time they fill their car up is a help, while these oil prices and petrol prices are high. But we also know that people have been feeling the pinch as those high fuel prices have flowed through to supermarkets and elsewhere. So the support there, seeing of course, a return to real wages growth from the first of July this year, too.
Mike O’Loughlin: And Simon, it does look it does honestly smell of a very early election budget because the main issue impacting Tasmanians at the moment is the rising cost of living pressures you’re touching on. You’ve got the six months cut to the fuel excise tax, the one off payments, but these are all very temporary fixes. I can’t see much at all addressing the structural issues that are creating these cost of living pressures on Australians, Minister? Cost of living seem to be the three words said by every Minister ten times.
Simon Birmingham: The issues there that we’re responding to firstly are the temporary nature of the oil price spikes. That what’s happening as a result of the war that’s occurring right now is seeing huge spikes in oil prices. They are forecast to stabilise and to come down. And just as we did with COVID, we’re doing a temporary, targeted and responsible approach in responding to that. We can’t bake in cuts to government revenue forever that would make deficits and debt worse and leave us with less money to invest in roads or critical infrastructure. But we can respond in a targeted and temporary way. More generally in terms of addressing broader pressures, it’s about keeping the strength of our economic recovery going, with the strong labour market record numbers of Australians in jobs and more job creation forecast in this Budget, we can see a strengthening of wage price increase forecast that wages are forecast to grow by three and a quarter per cent in the next financial year starting one July this year, just a few months away with that growing over the next couple of years to three and a half per cent wages growth. That’s the dividend of getting unemployment down close to levels of full employment and down to levels not seen in more than 50 years or around 50 years of record keeping.
Mike O’Loughlin: But if I can say CEO of the Tasmanian Council of Social Services, Adrienne Picone, said of the Budget, quote “This Budget is a squandered opportunity to demonstrate that poverty is not inevitable. The pandemic proved that poverty exists in this country because Federal Government policy allows it to. For a short time the Government ensured all Australians had an adequate income and we saw the impact. Families no longer needed food hampers, debt repayments increased. People told us they could finally afford to see their dentist and GP.” Australia faces major challenges in the years ahead and we need a government that is prepared to act by investing in our people and our communities.” What’s your response there, Simon?
Simon Birmingham: Mike, my response is that ours is the only side of politics to have instigated a significant increase in JobSeeker payments. And we did that in keeping higher levels for JobSeeker even coming out of the pandemic. Ours is the only side of government to have put more generous indexation arrangements in place for increases in the aged pension or increases in veteran’s payments as well. So we’ve absolutely responded over time to those sorts of pressures, but we also have to make sure that we keep the budget management responsible. We can’t run huge deficits forever. It’s why we have taken more than $100 billion worth of dividend out of a stronger growing economy and put it towards having lower deficits and lower debt so that we’re better able to respond to future emergencies. And we have to, in an economic plan, bank on the fact that the success we’ve had to date can continue into the future with the policy settings right, such as support for small businesses to skill their workforce, support for small businesses to create, to be more effective and efficient through technology investments, support for more apprenticeships. We’ve got a big piece in in this Budget around support for apprenticeships, all of that tying in then to more than $1 billion of new investments in manufacturing, more than $2 billion in efforts to drive research and commercialisation of that research in Australia and a record infrastructure pipeline that’s all about continuing economic growth in Australia that has been faster than the United States, faster than the United Kingdom, faster than most European countries or Japan in recovering from COVID-19. And that’s what enables us to then really put pressure on wages growth in a way that is affordable for the nation into the future.
Mike O’Loughlin: And Simon, there’s been allegations, obviously, these short term fixes are just the Morrison Government buying votes ahead of the election. If we talk health, there’s reportedly record investment in this space like a $7.3 billion increase in Medicare funding, a $9.8 billion increase in hospital funding. But the Australian Medical Association has said, and I quote, “the Medicare and hospital funding in tonight’s Budget amounts to little more than usual recurrent spending and planned growth, not the new injection of funds our health system desperately needs.” Your response?
Simon Birmingham: Again Mike, you can’t keep spending all the time and in endless ways. And so what we’ve got here is, is growing funding in support for health and hospitals and particularly for state governments around the country. In Tasmania, there will be more than $600 million in support for health and hospitals that will flow through over this year in this Budget. But we also see an increase in terms of GST funds flowing to Tasmania, an estimated $3.2 billion in payments in 2022-23 to Tassie. That’s an increase of $175 million, a 5.8 per cent increase in untied funding going to the Tasmanian Government to support the health system. All of that’s complemented by more than $640 million for education and skills support across Tassie. And that’s without starting to factor in infrastructure and other investments, also more than $660 million there in infrastructure. So we are trying to make sure we get the balance right there. The fact that we have some people criticising us for not spending enough and other people criticising us for spending too much, and that we are able to do this Budget while having lower debt levels and lower deficits than previously forecast says to me that we’re hitting about the right sweet spot.
Mike O’Loughlin: I need to get a couple more questions in, I know we don’t have much time. I mean, there is additional funding for mental health services. But we know a lot of mental health issues are increased by financial struggles and the budget papers assume wages will grow above inflation in the next few years. So where does that assumption come from, given wages have been lagging behind for years?
Simon Birmingham: Well, that’s driven by having such a strong labour market that we are now well and truly pushing into the territory of being close to full employment in Australia. If we look at the analysis of the Reserve Bank, the Federal Treasury or many other economists, they’re saying that getting unemployment below four per cent does become a driver of increased wages and those wages are forecast to get growth of, I think I said before three and a quarter per cent growing to three and a half per cent. Real wages growth is a really important part of helping to ensure for Australians that they can keep up and indeed be ahead of those inflation impacts in the future. And that’s why we continue to invest in the job creation activities across the economy through small business, through manufacturing, through agriculture, through infrastructure, because they’re all the ways that we can then get that stronger wages growth flowing through to which when wages are growing more strongly, it has a positive dividend in terms of faster indexation of aged pensions and the like as well.
Mike O’Loughlin: Can I ask you about the infrastructure investments for Tasmania? Can you tell us about those?
Simon Birmingham: Certainly can. So as I said, more than $660 million of additional infrastructure projects in this Budget for Tasmania. That includes a roads package, stage two of what’s called the Northern Roads Package, $336 million there, $100 million for the Great Eastern Drive. A particular focus there really on supporting tourism access and such a crucial part of today’s economy and job generation there. $96 million for the Tasmanian Freight Rail Revitalisation Programme, it’s tranche four of an ongoing investment there and altogether there’s some $4.6 billion committed to Tasmanian infrastructure projects that we’ve committed and delivered since coming to office. And, and it’s all about modernising that infrastructure so that freight moves faster and more cost effectively. In Tassie we’ve seen that by extending the Freight Equalisation Scheme in ways to make sure that business costs are lower. And that’s good news for many Tasmanian sectors.
Mike O’Loughlin: How can you justify borrowing almost $15 billion over the next four years, almost $19 billion since 2021, in order to give the same amounts to WA, the only government, by the way, in the country which is running budget surpluses because it’s swimming in iron ore royalty revenue?
Simon Birmingham: Well, Mike, what you’re alluding to there is the agreement we struck in relation to GST funding, that that no state should get back less than $0.70 out of every dollar that they contribute in in GST funding. Now I’m sure if Tasmanians were seeing a situation where they were getting less than $0.70 out of every dollar back to support schools, hospitals, essential services in Tassie, they’d think it was a pretty raw deal. It had been a pretty raw deal for Western Australia and what we negotiated was an arrangement to put a floor there, not a particularly generous floor, it’s still only $0.70 out of the dollar. And that means that for every dollar of GST that West Australians are paying $0.30 of that gets redistributed elsewhere around the country, including in additional support for Tasmania.
Mike O’Loughlin: Look, one last question. I know you have to go, Simon Birmingham, Federal Finance Minister, and a good news story for first home buyers?
Simon Birmingham: Absolutely. The First Home Guarantee, which is a vehicle we use to save people from having to keep paying rent while getting to the 20 per cent deposit level. Government, if a bank approves you, will help you get in with lower levels of deposit 5 per cent or in some cases particularly for single parents as low as two and a half per cent deposit. We’re providing a doubling of places under that scheme to 50,000 per annum and that’s just going to help many, many more people get into their first home sooner, spend less time paying rent while trying to save for a deposit and more time being in the home, paying off their home sooner and faster.
Mike O’Loughlin: Well, I appreciate your time. I know you’ve got to go. I’m getting a bit of a wind up here, but thank you for what we could get. Well, there’s probably a thousand more questions we could ask, so I look forward to a chat in the near future. Simon Birmingham, Federal Finance Minister, thanks for your time.
Simon Birmingham: Thanks, Mike. Always happy to chat and look forward to doing so again soon.