G'day Treasurer,
I'm glad I've caught you in time. I know you have a Budget to hand down in a few hours. And I know it's already printed, so it's a bit late to make changes.
But I know you're a good man, and you want to make sure you've left no stone unturned, or to have accidentally forgotten to include anything important in the Budget papers.
So I'll just run through a few things that I'm sure you already have covered, in the interests of completeness.
(Also, thanks for continuing the tradition of reading it in Parliament, and exposing your decisions to full public glare. While some people find it boring, you and I agree it's a wonderful reminder of our democratic traditions.)
First, obviously you've made more changes to the Stage 3 tax cuts, right? I mean we both know that, even as amended (and I think you pulled the right rein there, fairness-wise) these tax cuts simply make the Budget deficit worse, and add to the national debt.
So, while you haven't yet announced whether you'll fund them with other tax increases elsewhere, or spending cuts, I'm sure you've done one or the other, or a combination of both, right? Surely, you wouldn't give out tax cuts and just put them on the proverbial national credit card, would you?
Next, let's chat about the broader Budget settings. Apparently, you've wrangled a $9.3 billion surplus according to the news this morning (is there anything that isn't pre-announced these days?). That's a positive – it'll pay back a tiny smidgen of the national debt. But then, the reports say you're planning to run almost a decade of deficits thereafter.
I have to say, I don't quite understand. I mean, almost everyone agrees we should spend up big in the tough times to support an economy, say when we have a pandemic, or when unemployment rises. It makes sense to use the so-called 'automatic stabilisers' to put money into the economy with higher benefits, say, even when we have lower tax receipts (for the same reason) and run some deficits as a result.
But obviously, running a balanced Budget over the economic cycle means we pay back that 'bad time' spending with big surpluses in the good times, doesn't it? I mean, you wouldn't to keep adding to the debt, increasing the interest bill, and meaning there's less dry powder next time it's needed?
Yes, I know we're not as bad as some countries, but our mothers told us both that just because someone else is doing something, it doesn't mean we should do it, too – so I'm sure you won't use that excuse. I look forward to hearing how you're returning the Budget to 'structural balance' so the bad times and the good times cancel each other out.
Actually, Treasurer, on that topic, we do have gross Federal government debt somewhere near $1 trillion at last count. Along with that structural balance, I'm looking forward to seeing your plans to meaningfully reduce that debt. It wouldn't just be kicked down the road, would it?
Let's turn our attention to the future for a second. I know you know how valuable our mining industry is. After all, the tax receipts from strong commodity prices are a very important part of this year's surplus. But I also reckon you have one eye not only on your personal legacy, but the future we're leaving for our grandkids and their grandkids. So I'm sure you'll agree with me that when we dig up the minerals and drill the hydrocarbons (oil and gas) that were our inheritance from our forebears, we should make sure we have something lasting to show for it.
Yes, I know we usually just spend all of that money in the year it's earned. We're all a little greedy, and your fellow parliamentarians have plenty of worthy causes (and future elections) to think about. But I know you realise that's not a good enough reason to squander the proceeds of that extraction. It's why I'm sure you'll be announcing a brand new Sovereign Wealth Fund (SWF), modelled on Norway's $2 trillion SWF, and which injects cash into their government Budget every year. It is a stonkingly great asset for the Norwegians, `and I'm sure you'll make sure we start to build something similar.
Speaking of which, I'm sure you've done the same mental exercise as me: If we gave Macquarie Group Ltd (ASX: MQG) all of the future cash flows from our minerals and hydrocarbons, I think we can be very sure they'd put up those resource rents and royalties, reasoning that the miners and drillers aren't going anywhere. And I'm sure you've realised that, as the asset owners, Australians are getting a relative pittance for those resources. As a bonus, that gives us even more money to put in the Sovereign Wealth Fund. How good is that?
(And as I said, because you know how valuable our mining industry is, you, like me, aren't doing this because mining or the miners are bad, or as some sort of ESG thing… but rather just because we're simply not getting full value for those assets we inherited from our forebears. And we should be.)
Now, it's not a big leap from mining to manufacturing, so let's quickly cover that off. I know 'Future Made in Australia' tests well with the punters. We all, deep down, want to 'make more stuff here', but I know you know that's not sensible. We should do the things we're best at, and let others do the same, benefitting from selling them our exports and importing stuff that would be more expensive if we did it at home. So sure, keep going with the slogan if you feel you need to, but don't forget to cancel those multi-billion dollar plans to throw subsidies and tax breaks at stuff we don't have a hope in hell of doing better or cheaper than our trading partners. Otherwise it'll just cost the taxpayers more (did I mention the debt?) or mean Australians are paying higher prices for things unnecessarily. And that just means lower living standards.
While we're still on the big picture, Treasurer, I know this isn't your bailiwick directly, but you are the money man, and you have to make all of the policies make add up, financially, so let's chat about housing for a second. We both know it's too expensive, and there are increasing numbers of people living in tents and cars. And I know you hate that, as I do. I also know you and the PM have got the Premiers together to come up with some housing targets. But, between you and me, let's be honest: that target is probably (almost certainly, according to people who know these things) not going to be met. And even if it was, it'll be years away.
That's the supply side. Now let's turn our minds to the demand side. The problem, right now, is that we have an absolutely tiny vacancy rate for residential property (some estimate it's as low as 0.7%, on recent numbers). But it gets worse. See, the combination of new births and immigration means that our demand for housing is growing at a faster rate than the (as mentioned, constrained and insufficient) supply.
And, Dr Chalmers, I know this gets uncomfortable pretty quickly, especially as there are some on the political spectrum who use immigration as a barely-there fig leaf for racism and xenophobia. We must – as I know you know – loudly condemn any such bastardry. But we also need to grasp the nettle: unless we dramatically lower immigration, the housing situation is going to keep getting worse.
Yes, I know that's uncomfortable. And I know business and the education sector will scream blue murder. But that's the poisoned chalice of government: sometimes you just have to do the right thing, and gird your loins against the self-interested squealing. Because we can have housing affordability and availability, or we can have significant immigration… but we can't have both. Yes, you've made some announcements, belatedly, but demand for housing is still growing faster than supply. I'm sure you agree it's unconscionable for more people to be unable to find a home – or pay even more for housing – just so we can have a given level of immigration. And I'm sure you can and will loudly condemn the bigots, and at the same time very meaningfully reduce our population growth until residential vacancies are closer to, say, 3% or so.
Now, that's some of the big long term structural stuff taken care of. The legacy stuff, if you like. Call it the Chalmers Plan. You're a humble man, but you deserve the credit for making the big decisions in the long term national interest.
All that remains is to turn our attention to the year ahead.
Again, we've talked about the Budget balance, but we don't yet know what it's made up by.
Obviously, the key thing here is to make sure any new spending announced is offset, so you don't add to inflation. I'm not sure if you're planning new taxes or spending cuts to go with any of that new spending, but I'm sure it's one or the other.
Because while I know you said on the weekend that inflation would return to the RBA's target band by Christmas, but that seems optimistic. I hope you're right, but I'm also sure you're doing everything you can to make sure that nothing in the Budget adds to that inflation rate, and thereby keeping interest rates higher for longer than absolutely necessary. And while you've repeatedly said you're doing everything you can to bring inflation down, that's not strictly true, is it? You added to spending last Budget.
(And I know the PM has been saying that cost of living relief will lower inflation, but I trust you asked the Treasury Secretary to set him straight on that, given that any savings will just be spent on other things, meaning aggregate demand will be unchanged?)
Ideally, you'd reduce total expenditure in the year ahead. Or, at the very least, make sure that, as I said, any increase is offset elsewhere. So I'm sure that's what you've done.
Speaking of which, I have to say we're putting the unemployed through the wringer at the moment. And you know, as I do, that while there are already bludgers in any program (man, have you seen the NDIS blowout?!?!), the vast bulk of welfare recipients, like people with disability, are genuinely in need. Given how incredibly low the unemployment benefits are, I'm sure you've found some savings (or additional revenue) to help this group out a little, given the social and economic benefits (starting with healthcare costs) of making sure unemployment benefits are meaningfully higher.
Anyway, Treasurer, as I said, I'm sure you've already got all of this stuff covered. If you did forget, though, you can always make changes in the weeks ahead.
Speaking of which, I've also flicked a note to the Shadow Treasurer, Angus Taylor. I know you guys have some ideological differences, and I know politics is a blood sport sometimes, but I've asked him to think of the national interest and make sure he gives full-throated support to the above policies. I'm yet to hear back, but I'm sure he'll agree.
You blokes will need to take some time to explain it to the Australian public. Especially when we're used to not trusting our pollies to act in the national interest, and when you guys have been cynically criticising each others' policies, even if they're good, in the hope of grabbing a few votes.
But people will come around. You both just have to tell it to them straight, using logic and reason, and asking them to put the national interest first. Australians are decent people and will support good policy, when it's well explained and well understood.
You owe them no less. And they owe the country – and future generations – the same.
Good luck tonight, Treasurer. And seriously, thank you for serving our country to the best of your ability.
Fool on!
