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RUBY:

From Schwartz Media, I’m Ruby Jones. This is 7am.

Since the budget dropped on Tuesday night, the Coalition and some of the media have begun to pick a very strange fight. It’s over whether some of the most vulnerable in the community should really get more help than middle-class Australian households with two incomes. It pits the two against each other, and ignores a much bigger cost coming down the pipeline: tax cuts that will benefit the wealthiest Australians the most.

Today, columnist for The Saturday Paper, Paul Bongiorno on the strange politics at play and why there are bigger questions we should be asking.

It’s Friday, May 12.

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RUBY:

So, Paul, this week the Treasurer Jim Chalmers, handed down the budget. On Tuesday he was talking about it in Parliament and then on Wednesday he was at the National Press Club where he was able to be a bit more informal about it. So what did he say at that address? What did we learn about how he sees this budget?

Archival Tape –Jim Chalmers:

“I started knocking around here when Peter Costello was the Treasurer and I've always found it a bit strange that budgets get individualised as much as they do. It's true that there's only one of us at the Dispatch Box on the night, but there are two names on the budget. There are 23 Cabinet ministers who decide it. The work of thousands of people behind it and the aspirations of millions of people wrapped up in it.”

PAUL:

Well, one of the things we've learnt right off the top was how grateful Jim Chalmers was that all the work over the last few months has finally finished and I think he was so happy with the reception, certainly within the government, that he spent the first few minutes thanking everybody profusely and he particularly thanked Anthony Albanese. And you know what? I think that's got something to do with the fact that people are looking at Chalmers and saying, Oh, I wonder if he's a bit better than Anthony Albanese. And I think the Treasurer is pretty keen to knock on the head that he's after Albanese's job for a while yet. Now having said all of that, it does give, as you say, the media, the parliamentary press gallery, the chance to try and get behind some of the budget numbers.

Archival Tape – Andrew Clennell:

“Treasurer, Andrew Clennell, Sky News.”

Archival Tape –Jim Chalmers:

“You've got a big grin on your face, Andrew, That troubles me.”

Archival Tape – Andrew Clennell:

“With unemployment at three and a half per cent…”

PAUL:

But I've got to say one of the things that I found absolutely gobsmacking was the attack from the coalition, but also picked up by elements of the media that this budget was doing too much for the poor.

Archival Tape – Andrew Clennell:

“…so why do people on the dole get more money from the government out of this budget, but not a household on more than 160k who, for example, don't get the electricity bill relief?”

PAUL:

Well, this did take Chalmers back a bit, although he…I guess he'd be ready for it, because Angus Taylor had already run a very similar argument. And the Treasurer did point out that there was a lot in the budget for all Australians.

Archival Tape – Jim Chalmers:

“So much of what we're doing in strengthening Medicare is about middle Australia. You know, so much of what we're doing in making medicines cheaper. So much of the benefit from the price caps in the energy market are flowing through to middle Australia.”

PAUL:

But the thing that most caught the Treasurer's breath was that the shadow Treasurer's attack claimed that what worried him about the changes in Social Security was that it meant that the broader Australian community...

Archival Tape – Jim Chalmers:

“…would be finding help for the most vulnerable. Well, that is the whole basis of Social Security. I mean that is the whole basis of Social Security.”

PAUL:

And well, Chalmers pointed out, that's the whole idea of a fair society. That's… that's what it's all about. It's actually called distributive justice.

Archival Tape –Jim Chalmers:

“And I think that our country is better, frankly, than the kind of downward envy that we hear about from time to time from people like Angus Taylor.”

PAUL:

The Treasurer said that Angus Taylor was missing the whole point of Social Security. And you know, Ruby, when you think about it, it's just not regrettable…it's contemptible. Jim Chalmers didn't say it, but I'm happy to.

RUBY:

Okay. And in terms of the actual assistance that was delivered in this budget poll, it was fairly modest. There was some income support and there was some rent assistance. A big focus actually appears to be on bringing down the bills that vulnerable Australians are paying through things like bulk billing incentives and other schemes. But there will still be people left vulnerable and left below the poverty line. So how has the government responded to that criticism?

PAUL:

Well, this is the other side of the coin, isn't it? This is the criticism from those who point out that the government isn't or wasn't doing enough. And of course, the most strident voice in this criticism was Greens leader Adam Bandt.

Archival Tape – Adam Bandt:

“Well, it's not even enough to buy a loaf of bread. Labor promised that no one would be left behind. Labor's budget leaves millions of people behind, giving tax cuts to the politicians and billionaires while everyday people on Jobseeker are left in poverty.”

PAUL:

Now, Bandt, and I'm quoting, says “A big reason that Labor refused to lift people out of poverty is that they're committed to stage three tax cuts for the wealthy while everyday people get next to nothing.”

Archival Tape – Adam Bandt:

“And for a government that says it's concerned about debt and sensible spending, they can still find a quarter of a trillion dollars to give tax cuts to Clive Palmer and Gina Rinehart.”

PAUL:

Now the Treasurer and the Prime Minister, well, they were very unimpressed with this line of argument. The Treasurer pointed out that, well, the tax cuts aren't being paid for yet because they're not due. They haven't been legislated to come in till next July. But I have spoken to, you know, several inner city Labor MPs and they have no doubt that Bandt's attack is because he has a clear eyed view of focus and a target on their voters. Although it has to be said that stage three tax cuts are already figuring in the forward estimates because they're due to come in next year. That is within the four years that the budget has a good look at.

RUBY:

Okay. So the stage three tax cuts, they don't come in until 2024. But if the government had chosen to ditch them at this budget, surely they would be in a better position over the forward estimates and perhaps could have afforded to be a bit more generous this year without blowing out those forecasts about the budget position.

PAUL:

Well, Ruby, that's essentially the argument of Adam Bandt and people from the Australian Council of Social Security. Now, when you looked at the budget papers, you couldn't find any line item for the stage three tax cuts. There was just no mention of it. And News.com.au's political editor, the indefatigable Samantha Maiden in the budget lockup news conference. While she tackled the treasurer about this, she says she couldn't find a revised estimate of the cost. And why weren't they mentioned? She said, is this the Voldemort - you just want to hide this in the cellar somewhere because you're a bit ashamed of it. Well, the Treasurer claimed, no, no, no, it was legislated years ago. It's not a a new spending, so we don't outline it. And he was happy to give us what the new four year, the revised up four year cost of the stage three tax cuts would be and it was a staggering $69 billion. And Maiden in her report and the outlet she writes for is Australia's most read commercial news site. The headline read “Tax Cuts for Rich Australians worth five times the handouts to the Poor”. But Albanese's senior colleagues tell me that the Prime Minister is almost paranoid about not breaking his election commitment not to raise taxes in this term of government. But everyone's aware, of course, that if they did that, Peter Dutton would be sure to scream from the rooftops that Albanese broke his promise. And you can't trust him. And I think the whole strategy, the basic strategy of Labor in this term of government is to lay down a credible foundation so that it can be more ambitious in its second term. And the fact is that these tax cuts are baked into the forward estimates. In fact, if you have a look at the projection for the budget deficit in 23/24, $13.9 billion, whereas in 24/25 it's $35.1 billion. That $20 billion leap can only be explained by making room to pay for the stage three tax cuts. That means that to give millionaires or indeed billionaires like Rinehart and Palmer their $9,000 a year tax cut, the Treasurer is going to have to borrow even more money. And you know, in fiscal terms, this is beyond silly. It's actually absurd.

RUBY:

We'll be back in a moment.

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RUBY:

So, Paul, after the budget this week, it's clear that the federal government remains in a position where over time spending is growing too fast. While they're committed to these enormous tax cuts. So what does the government need to do to avoid the situation?

PAUL:

Well, to avoid the situation, there is no doubt that we need tax reform. And that means getting rid of overly generous tax concessions. And it means targeting people and corporations that the public has a bit more sympathy for than the ones that the Treasurer identified in this year's budget. I mean, gas producers, everybody thinks they're just price gouging. Very wealthy superannuants will like they can afford the trimming that Chalmers has inflicted on them and smokers, well these days, if you're a smoker, you're a pariah. So taxing smokers everybody sees is doing them a favour anyhow. But Daniel Wood from the Grattan Institute says, No, no, the Treasurer is going to have to be a bit more courageous and he's going to have to look at a whole mix of taxes, indirect taxes and tax concessions if he wants to put the budget on a sustainable basis going forward and giving the Australian people the sorts of services they expect from their government.

Archival Tape – Danielle Wood:

“What we know is that the budget will still be in structural deficit when you sort of strip back some of those short term economic cycle effects.”

PAUL:

The Grattan Institute's done a fair bit of work analysing all of this, and Wood says she's not calling for stage three to be abolished or abandoned rather, but for stage three to be trimmed.

Archival Tape – Danielle Wood:

“What we know is that we have baked in higher spending this year and over the next ten years on things like NDIS and aged care and defence and we haven't really worked out how we're going to pay for those things yet.”

PAUL:

She thinks that the 37% tax rate should be left in place because this will significantly pare back the overly generous tax relief given to people earning $200,000 and more. That's the $9,000 figure that we speak about.

RUBY:

So Paul, it sounds like next year is when some of the toughest decisions are going to have to be made in the next budget. At the same time that we've got the Treasurer Jim Chalmers, hosing down the idea of another surplus.

PAUL:

Yes, Jim Chalmers, I'm sure has learned a big lesson from Josh Frydenberg. Remember he was back in the black and he never got into the black. And even Wayne Swan, his former boss when he was Treasurer, Swan forecast four budget surpluses only to deliver huge deficits. Well, Chalmers is dead sure he's going to get his surplus this financial year because the final outcomes are forecast or are given rather in September. That's only a few months away and already two thirds of the revenues in. So are someone like Chris Richardson, one of Australia's most respected economists. He said. When he has a look at the commodity price forecasts from the Industry Department, they see these exceptionally high prices we're getting for, you know, gas and coal and iron ore. They're going to hold up longer. And Richardson thinks we will even see a budget surplus in the following year. Well, if that happens, that'll make Jim Chalmers look very good indeed.

RUBY:

And as for the politics of this budget surplus, Paul, I mean, that's something that might take a little while for us to see play out fully. But it's significant, isn't it? The Labor Party, they were in opposition for a decade on the back of a tax over the debt and deficit. So do you think that Chalmers and Albanese are still a bit haunted by that attack and is that why they're so determined to stay in surplus now, even if it does mean giving less than they could to those who might need it most at this moment in time?

PAUL:

Yes, I think that that in the broad is the context we're dealing with here. Chalmers and Albanese, they want to bury for good the idea that the Coalition are better money managers than them. Of course, they've been given a running start there because they have inherited approaching a trillion dollars worth of gross debt. And there is no doubt that whilst some of the debt involved in that was contributed by the previous Labor governments, the lion's share of it did come from the way in which the Morrison government handled its term in office. The fact of the matter is historically most governments haven't had budget surpluses and I think that the claim for budget surpluses is a bit overblown in the sense that it's how you manage the debt and how you use it for productive purposes. But we do need to be able to manage the debt. And you can't have a situation where the biggest outlay for the budget every year is paying off the interest on the massive debt that the budget has accrued. So people say that Chalmers and Albanese are approaching their task here in a low risk way to encourage people to have confidence that when they do get around to doing things that aren't all that popular, people will be more inclined to think that the outcomes will be better. But look, the test of all of this, one of the reasons why Keating as Treasurer and Costello as Treasurer are considered to be, you know, among our best is because while their time in government was quite bumpy, there were ups and downs, even a recession for Keating, the economy did grow and Australians wealth, the overall wealth of Australians did grow. So the country in that economic sense was much better off. That's going to be the test for Chalmers and the test for Albanese, and they're determined not to fail their own test.

RUBY:

Paul, thank you so much for your time.

PAUL:

Thank you, Ruby. Bye.

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RUBY:

Also in the news today…

Nearly half of all tobacco company lobbyists have held positions in Australian government.

That’s according to a new study by the University of Sydney and Cancer Council NSW, which found the tobacco industry enjoys a quote ‘revolving door’ relationship with policymakers.

Researchers say the findings raise questions about industry influence when it comes to public health.

AND

The two major campaigns for the ‘No’ side of the Voice referendum vote have joined forces.

The Recognise a Better way campaign, led by Warren Mundine, and Fair Australia, with Minister Jacinta Nampijinpa Price, are now the one entity called Australians For Unity.

Mundine said it ‘made sense’ for the two to merge, and has told the media they have quote ‘37,000 volunteers and several million dollars in our bank’

7am is a daily show from The Monthly and The Saturday Paper.

It’s produced by Kara Jensen-Mackinnon, Zoltan Fecso and Cheyne Anderson.

Our technical producer is Atticus Bastow. Our editor is Scott Mitchell.

Sarah McVeigh is our head of audio. Erik Jensen is our editor-in-chief.

Mixing by Andy Elston, Travis Evans, and Atticus Bastow.

Our theme music is by Ned Beckley and Josh Hogan of Envelope Audio.

I’m Ruby Jones, see you next week.

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