S1: From the newsrooms of the Sydney Morning Herald and The Age.
S1: This is inside politics. I'm Paul chuckle, filling in for
S1: Jacqueline Maley. It's Friday, March 21st. Just as Treasurer Jim
S1: Chalmers puts the final touches on his pre-election budget, the
S1: local threat emanating from Donald Trump's global trade war is
S1: becoming clearer. Labor is boosting Australia's subsidised medicine scheme, but
S1: US big pharma companies want to boost their profits Down Under. Meanwhile,
S1: Peter Dutton is under huge pressure to set out a
S1: clear platform before the election in May. And in his
S1: budget in reply speech next week, it will be one
S1: of his last big chances. Joining me to discuss are
S1: chief political correspondent David Crowe and our senior economics correspondent,
S1: Shane Wright. How are you?
S2: Good day, Paul, and good day Shane. Lovely to see
S2: both of you gentlemen.
S1: You've both covered more budgets than I've had hot dinners.
S1: How many is that for? You two.
S2: Combined. Combine them. But I've really lost count And it
S2: hurts a bit to actually think back at how many
S2: there have been. I wish they were getting better.
S3: It tests my mathematical ability to count them all up.
S3: Give us a ballpark. Um, 27 ish. Because we're in
S3: the weird situation. Jim Chalmers is going to give his
S3: fourth budget in three years. The last time a treasurer
S3: did that. It's even older than I am. Ben Chifley
S3: did it during the war years, so it's very unusual
S3: the situation.
S1: So have they retained their importance in terms of the
S1: the political moment they represent in a in a term
S1: of parliament, the budget, or does the kind of new
S1: media cycle and the speed at which we move on
S1: from things.
S2: It's true. There was this, um. Well, that's a fair point,
S2: because Howard brought in this idea of the constant campaigning. Right.
S2: And so it wasn't just the budget, you know, there
S2: was a lot of constant work through the term. Um,
S2: and so I do think that's been a factor. And
S2: now you get what what is really like a drop
S2: a thon before a budget where they hand out information
S2: about what's going to be in the budget for a
S2: good two weeks before the budget dropping it out the
S2: drop a thon. So I think you should.
S3: Trademark that term drop a thon. I've never heard that
S3: one before.
S2: Extends the media focus on all the budget measures. And
S2: I also think another thing is happening, which is there
S2: used to be a lot more focus on deficit surplus.
S2: It was a test of a government's capability surplus or deficit.
S2: And during the Howard years there were continued surpluses and
S2: surprise surpluses because the going was good on iron ore
S2: and so forth. And privatization made a big difference as well.
S2: I don't think there's the same focus on that. Now.
S3: I think I'm going to challenge you a little bit
S3: on this. No, I don't think.
S2: It cuts through to voters in the same way. And
S2: so that so the, the, the big moment of the
S2: budget isn't quite the same.
S1: What do you think?
S3: Well, budgets up until Paul Keating were beer and cigars
S3: up like they weren't big things. And Keating and Hawke
S3: really consolidated the importance of them as a major political event.
S3: And Keating wasn't dropping out stuff. It just coalesced everywhere.
S3: It was coalescing. Everyone was really focused on what would
S3: be the big agenda. And that's where you get the
S3: focus on surpluses. Because Keating delivered surpluses, and then you
S3: get through the problems through the early 90s, the recession,
S3: then and then numbers in politics like John Howard really
S3: faltered as a shadow treasurer in the is it the
S3: 87 or 90 campaign where he actually miscalculated all these numbers?
S3: And they had a huge hole going into an election campaign,
S3: and it really cost them dearly. But the change now,
S3: because economics has accelerated as well as politics over the last. Well,
S3: since these bloody iPhones got created. Yeah. And social media,
S3: the acceleration that you see in the media has come
S3: to big political set events like a budget.
S1: Yeah. And I wonder what the Covid pandemic meant for
S1: the idea of debt as well.
S2: Yeah, people became accustomed to spending, and the importance for
S2: the election campaign is we haven't we don't know yet
S2: how both sides will line up on who's got the
S2: better budget. Bottom line. That's been a big issue in
S2: the past. I'm not sure it's really going to cut
S2: through in the same way in this election because let's
S2: face it, we've had two years of surpluses. We know
S2: we're going into a deficit. So really between labor and
S2: the coalition, it's a question of who's got a slightly
S2: better deficit.
S3: Angus Taylor is not going to be promising. I'll deliver
S3: budget surpluses within four years, which is where Joe Hockey
S3: got himself into running into 2013.
S1: He has committed to, I think, one of the only
S1: things he's really put as a, as a point of
S1: clarity is that they will have a better budget bottom
S1: line than labor. How much better how they get there?
S1: Who knows? Yeah.
S3: And what what does a better budget line mean? Like
S3: we I remember 2016, which is when Scott Morrison announced
S3: robodebt like the element of robodebt was announced as this
S3: big saving that would improve the budget. Chris Bowen was
S3: the shadow treasurer, had gone out with this idea of
S3: putting out budget estimates out over ten years, and the
S3: Liberal Party said, oh, what stupidity. We've focused on four years,
S3: not ten years. Get to the 2019 election. Are the
S3: Liberal Party endorsing embrace ten year forecasting? So in terms
S3: of the politics and the focus of those budget bottom line, yes,
S3: I think it is. It's really important to the state
S3: of the economy, the state of the budget, the nation's finances.
S3: But politically, like I think we've become a bit more
S3: insular into what the what voters are actually looking for.
S1: Well, Shane, you're well known around these parts for wearing
S1: a tie with pigs flying on them during budget week,
S1: which I am.
S3: My.
S1: Friend symbolises kind of the heroic assumptions that usually underpin
S1: budget forecasting. What do you expect from the treasurer, Jim Chalmers,
S1: on Tuesday next week when he stands up in the
S1: House of Representatives, what kind of spin are we likely
S1: to see? What's the government likely to say?
S3: Well, let's see, they are going to produce deficits. Like, remember,
S3: we've come out of two budget surpluses, which Jim Chalmers
S3: puts on his on his breastplate and proudly thumps it
S3: and says how fantastic spinning back into right, we're going
S3: to have a deficit maybe this financial year, around 20 billion,
S3: around $40 billion. That's a lot of money that's going
S3: out the door, which normally would be a death knell,
S3: like in terms of if we went back into the, oh, say,
S3: the noughties for an election campaign, no opposition could come
S3: up with those sorts of numbers, or a government can
S3: come up with those sorts of things.
S1: A lot of luck involved there, right?
S3: Revenue upgrades and downgrades, I think. So the numbers are
S3: almost secondary because people just go glaze over. Oh, there's
S3: another few billion dollars. We've already seen the spin about
S3: Cyclone Alfred or Alf, depending on where you're coming from.
S1: 1.2 billion, 1.2 billion.
S3: In an economy that's 2.6 trillion. Yeah. It's barely it's
S3: barely touching the knees. So you'll get that spin. And
S3: then how? And this week he gave a speech, a
S3: really interesting speech in Brisbane where he talked about Australian
S3: exceptionalism because this is lining up to the election. So
S3: they're going to focus on interest rates are falling. Unemployment
S3: is the biggest success story of this government by some margin,
S3: like a million jobs created almost on their watch. The
S3: fact that interest rates have gone up so far, but
S3: the jobs market is still strong. Real wages growth, which
S3: we weren't having previously.
S4: For a moment, what Australians have achieved together in our economy. Inflation,
S4: a third of its peak, are now in the lower
S4: half of the target band, the lowest average unemployment rate
S4: for any government in 50 years. Stronger employment growth.
S3: He will focus on those positives and then tie it
S3: up with a bow, saying it's all because of our
S3: great budget and economic management. Why would you risk that.
S1: In that speech, Shane? The treasurer effectively say that there
S1: might be some new cost of living announcements, but a
S1: lot of what the government has to say between now
S1: and the election in terms of new policy will be
S1: announced after the budget in the election campaign.
S3: Yeah. And I think for David and myself, one of
S3: the biggest things will be just how much they expend
S3: in terms of energy supplements or some sort of cost
S3: of living payment. We've already seen some of the speculation.
S3: Last year it was $300, which everyone got. I think
S3: that'll be for David and myself. That'll be a key
S3: part of it. It's the politics and the economics of
S3: giving money to people to try and reduce their cost
S3: of living pressures.
S4: It'll be a responsible budget, which helps with the cost
S4: of living, builds our future, and makes our economy more
S4: resilient in this new world of global uncertainty.
S1: Well, I wanted to ask you, David, this will be
S1: the last big set piece before the election campaign. We
S1: expect it to be called possibly the Sunday after the budget,
S1: or maybe the week after that. I think more likely
S1: the Sunday right after. It puts Jim Chalmers, who's the
S1: best communicator in the government, according to lots of analysts
S1: right at the center of the government's message over the
S1: next week. What's the opportunity here for the government and
S1: how does how could this be a nice pathway into
S1: an election campaign for them? And what are the risks?
S2: Yeah, the bigger opportunity for the government, the most important
S2: opportunity is to convince Australians that they've got everything under
S2: control and that they've got better times ahead, and they've
S2: got a frame that as the best choice at the election,
S2: compared to the risk of choosing a different government, the
S2: risk of Dutton versus all these good things that the
S2: budget shows. But as we've mentioned, it'll show a deficit, right.
S2: So it's not that rosy. However, they will be able
S2: to point to unemployment. That's not too bad. Real wages
S2: that are actually getting ahead of inflation, inflation being lower
S2: than it was when they came into government. And the
S2: growth forecasts for the economy being pretty reasonable in the
S2: circumstances in time of terrible global volatility and interest rates
S2: being lower after 12 rate rises on their watch, they've
S2: got to convince people about those better times ahead. And
S2: in a sense, that is the most important thing, more
S2: important than individual measures, even like the cost of living.
S2: So they will have energy bill relief and some other
S2: cost of living measures, I think. And we've also seen
S2: they're acting on the cost of medicine, for instance, straight
S2: to the to the hip pocket. So that is the opportunity.
S2: And they will be focusing very strongly on something which
S2: is part of budget week every year. But this time
S2: even more important. And that's Peter Dutton's budget reply on
S2: Thursday night.
S1: Huge.
S2: That sets up a very big contest on the economy,
S2: and we haven't seen a very high quality economic debate
S2: from the coalition yet. So the acid test is that
S2: Thursday night budget reply and then the government will want
S2: to really go after Peter Dutton on his budget reply.
S2: The morning after on Friday of budget week. And I
S2: expect that to get really serious about, you know, the
S2: election the morning after Peter Dutton's budget reply. I think
S2: it's the Friday morning, the news cycle on the Friday morning,
S2: the breakfast television on the Friday morning that would maybe
S2: be owned by the coalition because they would get to
S2: talk about everything that Peter Dutton said on the Thursday night.
S1: They've got a big idea.
S2: If they've got a big idea, they better have a
S2: big idea. I think I think we're getting to a
S2: real stage of the of the, of the political debate where,
S2: you know, the coalitions have has got to have something
S2: on the economy that's significant. But then I think the
S2: task for labor will be to throw everything at it
S2: on the Friday and to make the weekend after the
S2: budget all about whether the coalition idea flies or not
S2: and what the what the choice is for voters.
S1: We'll get back to policy in a second. But now
S1: that we're on politics in the election, I just wanted
S1: to talk about the Coalition and Peter Dutton. He's set
S1: the agenda so much in this term, and he's so
S1: often leading the media cycle and shifting the narrative to
S1: where he wants to get it. And the government's often
S1: on the back foot in this term, particularly on culture
S1: war issues, on national security, energy. The last three weeks,
S1: he's looked a bit out of sorts. Peter Dutton, we've
S1: had this period of time post the cyclone when we
S1: thought the election was going to be called, where we're
S1: effectively just waiting for the budget. The coalition was expecting
S1: to go to a campaign. They were in their campaign office.
S1: Labor had announced most of their policy and Peter Dutton
S1: seemed a bit aimless. He's had some missteps on back
S1: to work on insurance company breakups, this idea of a
S1: referendum clamouring for more economic policy from his backbench. Personally,
S1: I'm surprised he had no policy to announce in this
S1: period to react to the fact that there were three
S1: new weeks that were effectively time come out of thin air. David,
S1: do you think the wheels are falling off the opposition,
S1: or is this a minor blip that we're noticing more
S1: than the general public because we're paying close attention.
S2: Yeah, we are paying close attention to it because we
S2: find it so interesting. We find that the coalition is
S2: not working as smoothly as they have at other times
S2: in this term, and we find really curious moments where
S2: shadow frontbenchers are at odds with Peter Dutton on whether
S2: insurance companies are going to be broken up, or whether
S2: there should be a referendum on tougher laws on citizenship
S2: to cancel citizenship of criminals. These things have been missteps
S2: for the coalition, which are things we haven't seen before.
S2: On working from home, Peter Dutton went hard, realized that
S2: that was probably a really bad message for a lot
S2: of women who like working from home, and he seemed
S2: to be against working from home, so they softened the message.
S2: This is a really interesting sign. And I and I'm
S2: hearing this from people inside the coalition. I know that
S2: others here, you know, Paul, you've reported on it. They
S2: don't seem to have their machine working smoothly. We're getting
S2: signs of sand in the gearbox. And if they don't
S2: get it together, they'll be very scrappy. During the election campaign,
S2: you would expect better and a smoother operation at this
S2: stage of the cycle.
S1: Shane, some changes in polling the last few weeks.
S3: Now, this is where the political pollsters and the economic
S3: nerds like myself, are slightly at loggerheads and not at loggerheads.
S3: But I have always maintained that what we get good
S3: measures of consumer sentiment, of consumer confidence, and it's a
S3: great leading indicator for polls, always has been.
S1: This is how people are feeling about the economy and
S1: how much they can buy.
S3: So the RBA cuts rates in mid-February okay. Consumer confidence
S3: has stepped up like it had been in the doldrums,
S3: and it has demonstrably stepped up since that point in time.
S3: It was. And the government knew if the RBA didn't
S3: cut that cut rates, then it was going to be
S3: a really hell of an issue. But you can see
S3: that the fact that consumers happy consumers mean happier voters
S3: always have, and consumer confidence always has led what shows
S3: up in opinion polls. It's up to a month ahead,
S3: even six weeks. But you can see that the consumer
S3: confidence surveys and the ANZ and Westpac have different ones,
S3: and they're both showing the same thing is also and
S3: we'll come to the orange man in the white House.
S3: They are worried about Donald Trump. It's hurting consumer confidence
S3: in the United States because they are looking like they'll
S3: have a recession through the first 3 or 6 months
S3: of the year, but people are aware of Donald Trump
S3: and the damage he poses, that risky challenges to Australia.
S3: And they're not blaming the government for that.
S5: Well, Aussies will be able to access cheaper medication under
S5: a re-elected labor government, pledging a $25 cap on medicines
S5: under the Pharmaceutical Benefits Scheme. But the PBS.
S1: David, you reported a story about the risks from the
S1: Trump administration for our PBS scheme. Can you tell us
S1: what you found out and what you reported?
S2: What I found was the formal message from a very
S2: powerful lobby in the US, the pharmaceutical companies, all the
S2: big brand name pharmaceutical companies telling the Trump administration, formally
S2: the Australian Pharmaceutical Benefits Scheme is a problem. We want
S2: that addressed. And this was in the argument for reciprocal
S2: tariffs by the Trump administration. The US trade officials are
S2: fielding these submissions to then enact reciprocal tariffs from April 2nd.
S2: So this is very, very real. It's not just an,
S2: you know, a theoretical argument. In Washington DC, we've got
S2: a very unpredictable and powerful president in the white House.
S2: We don't know how it's going to hit us, but
S2: I think it's going to hit us in some way.
S2: They don't like the PBS. And just to cover the
S2: basics on the PBS for a moment. It's a government
S2: scheme that basically decides which drugs are worth subsidizing. And
S2: when the experts in Canberra decide on those drugs, they
S2: can delay the entry of a US drug, which really
S2: irritates the US drug maker because they're locked out of
S2: the market and they call that a denial of market access.
S2: But it also dictates terms on pricing to those American companies.
S2: And they don't like that either. But the net effect
S2: is fantastic for Australian consumers, because it means they get
S2: this check by the government to push down the price
S2: of the drug and to subsidise it, so that it
S2: costs Australian patients much less than it would in a
S2: totally open slather free market. And so the message from
S2: the pharmaceutical companies in the US is that they don't
S2: want that delay to the introduction of their drugs into Australia,
S2: they want a free market. So they just come in
S2: and sell what they want when they want also, they
S2: don't want this price setting mechanism, which sets a price
S2: below what they think they should be getting for their
S2: new drugs. Now, that doesn't mean that they can force
S2: change on the PBS. All of that comes down to
S2: whether Anthony Albanese or Peter Dutton would be willing to
S2: change the PBS, and they would be mad to do that.
S2: But it does highlight this pressure on Donald Trump to
S2: find other ways to punish Australia. It's been very interesting
S2: that Anthony Albanese and senior leaders in the coalition have
S2: all said the PBS is not on the table in
S2: any negotiation, so that's an assurance for voters that they
S2: will get subsidised medicine here.
S6: We will do everything again we can to protect the PBS.
S6: It's simply not up for negotiation, whether with America or
S6: any other country for that matter.
S5: What does that look like?
S2: But just bear in mind that that powerful lobby group
S2: in Washington, which dines with Donald Trump and donates $1
S2: million to his inauguration, will be influencing his thinking about
S2: what to do about tariffs on Australia. So it's a
S2: very live situation and it works in a very interesting
S2: way domestically because Anthony Albanese, you know, is very firm
S2: in his public remarks in the wake of that story
S2: backing in the PBS. But so is the coalition. So
S2: it's not really easy to see which way it might
S2: pan out, but it could have that rally around the
S2: flag kind of effect that we're talking about here.
S3: I think it suits the incumbent.
S1: It's got to say the same thing.
S3: Well, great minds think alike or fools never differ. One
S3: of whichever one you want to take.
S1: Quicker on the buzzer.
S3: But yeah, I think that's the PBS because like PBS
S3: starts under Ben Chifley, like, labor went down this path many,
S3: many years ago, and now both sides see it. I
S3: think James Massola, our colleague, said it best when he said,
S3: if either side gave up on the PBS, it's like
S3: it's like a bucket of warm sick. Like that's the
S3: sort of impact it would have if you gave up. Like,
S3: I think you'd be consigning yourself to opposition for a
S3: very long time.
S1: Why would anyone do that?
S3: That's right. And the fact is, Canada has its own
S3: central pharmaceutical system. Japan. Does everyone in the Western Europe, British.
S3: This is this is the US pharmaceutical industry looking to
S3: increase its profits at the expense of Australians and everyone
S3: else's healthcare.
S2: Just quickly, there's probably one way in which to alleviate
S2: a bit of concern. If American drug companies want faster
S2: approval and bigger profits for their new drugs. One way
S2: to achieve that is even more money into the PBS
S2: to approve more drugs and to subsidize them with even
S2: more public taxpayer funds in Australia. So it would be
S2: a very expensive option for an Australian government. It still
S2: doesn't resolve the key American complaint about the PBS, which
S2: is that it is a single buyer in the market
S2: because it minimizes the market power of those big drug makers,
S2: because there's one buyer, the Australian government, and it sets
S2: the terms and it sets the pricing deal and they
S2: hate that and they'll always hate it.
S1: And Shane, final one what effect is Trump's trade war
S1: and the potential upside risk to global inflation going to
S1: have on the budget.
S3: Well this is one of the biggest questions. And we
S3: actually saw it this week from the Federal Reserve, the
S3: central bank of the United States, where their chairman, Jerome Powell,
S3: actually said Donald Trump's tariffs are going to push up
S3: inflation and they had to downgrade their economic outlook. Um,
S3: they they've wiped 0.4 percentage points of economic growth this
S3: year for the US. They are right at the at
S3: the heart of it. But this is the ripple effect.
S3: And so we've seen like even the early drops out
S3: of this budget suggesting a 0.1 percentage point effect to
S3: GDP over just from steel and aluminium, just from something
S3: as small as steel and aluminium, like it's about $1
S3: billion of exports. if it ends up in pharmaceuticals, if
S3: it ends up in beef, it ends up in almost
S3: everything else that we that we send around the world.
S3: Then whoever wins the next election is going to face
S3: a really tough time. And you will see Chalmers pointing
S3: to a bit of that in his budget speech on
S3: Tuesday night.
S1: Thanks for joining us, guys.
S2: Thank you all.
S3: It's been lovely.
S1: Today's episode of Inside Politics was produced by Julia Carcasole
S1: with technical assistance from Debbie Harrington. Our executive producer is
S1: Tammy Mills. Inside politics is a production of The Age
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S1: Thank you for listening.