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Paul Kelly on Jim Chalmers’ dilemma · The Front

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  Speaker 1: From The Australian. Here's what's on the front. I'm christinamiot.
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  Speaker 1: Jim Chalmers says he's got the balance right ahead of
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  Speaker 1: Tuesday's federal budget, but he'll break from the Reserve Bank's
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  Speaker 1: inflation forecasts and lean on consumers to do the heavy
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  Speaker 1: lifting and reduce spending in the second half of the year.
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  Speaker 1: So what's driving Jim Chalmers and what kind of budget
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  Speaker 1: will he deliver? That's today's episode. The nineteen ninety six
• 1:23
  Speaker 1: film Jerry Maguire opens with a scene in which the
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  Speaker 1: titular sports agent played by Tom Cruise, has what I
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  Speaker 1: guess you'd call an epiphany.
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  Speaker 2: I began writing what they call a mission stepmen, not
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  Speaker 2: a memo, A mission stepan, you know, a suggestion for
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  Speaker 2: the future of our company. Night like this doesn't come
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  Speaker 2: along very often. I seized it.
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  Speaker 1: Maguire makes copies of his mission statement and distributes them
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  Speaker 1: to every one of his colleagues in the middle.
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  Speaker 2: Of the nighties. Even the cover looked like the catcher
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  Speaker 2: in a rye. I entitled it the Things we think
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  Speaker 2: and do not say, the future of our business.
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  Speaker 1: They love it. Management doesn't how long you Jim.
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  Speaker 2: About a week.
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  Speaker 1: In the run up to his second federal budget in
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  Speaker 1: early twenty twenty three, Treasurer Jim Chalmers had a Jerry
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  Speaker 1: Maguire moment. He penned a six thousand word essay laying
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  Speaker 1: out his vision for the future of capitalism.
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  Speaker 3: Well, my essay is all about how we strengthen our
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  Speaker 3: economy and strengthen our institutions in a way that strengthens
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  Speaker 3: our society and strengthens our democracy.
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  Speaker 1: It was also his vision for himself writ large. In
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  Speaker 1: taking up the mantle as Treasurer, Chalmers said he doesn't
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  Speaker 1: want to be someone who just occupies the office. He
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  Speaker 1: wants to enable major change, be a big time reformer.
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  Speaker 1: Now we've passed the halfway mark of Labour's term in government,
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  Speaker 1: the next election isn't too far off and Jim Chalmer's
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  Speaker 1: third federal budget will be handed down on Tuesday night.
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  Speaker 1: The question is if he's lived up to his own expectations.
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  Speaker 4: I think this budget will be the most important that
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  Speaker 4: Jim Chalmers has brought down as Treasurer. It's important because
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  Speaker 4: the economic challenge is really significant.
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  Speaker 1: Paul Kelly is The Australian's editor at large. He's been
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  Speaker 1: covering politics and federal budgets for fifty years.
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  Speaker 4: But beyond that, it's the third year of the first term,
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  Speaker 4: so I think this budget is going to tell us
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  Speaker 4: more about the economic character of the government and of
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  Speaker 4: the Treasurer, and it's going to outline the essence of
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  Speaker 4: the future growth strategy for Labor which it will pursue
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  Speaker 4: over the next several years. He's a gifted communicator. As Treasurer,
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  Speaker 4: he's ambitious. He sees himself operating in the poor keeping mold.
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  Speaker 4: He sees himself as a reforming treasurer. But his treasurer
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  Speaker 4: at a very difficu time, a time when the challenge
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  Speaker 4: of high inflation inhibits and constrains what the government and
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  Speaker 4: what the Treasurer can do. And the essence of this
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  Speaker 4: coming budget will be how Chalmers reconcile the economics with
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  Speaker 4: the politics.
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  Speaker 1: Looming over all. This is the legacy of another former
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  Speaker 1: Treasurer and great reformer, Paul Keating.
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  Speaker 4: Madam Speger.
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  Speaker 2: Last year, the government paid back three thoy seven hundred
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  Speaker 2: million of Commonwealth debt. This year we'll pay back even more.
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  Speaker 1: We'll be able to do so because tonight I am
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  Speaker 1: announcing a budget surplus of historic proportions. Keating's been back
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  Speaker 1: in the news recently for his frank criticism of his
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  Speaker 1: labor colleagues, but he's been a mentor to charmers, even
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  Speaker 1: a bit of a hero. The Treasurer who's actually doctor
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  Speaker 1: Jim Chalmers wrote his PhD on Keating's leadership style. It
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  Speaker 1: was titled Brawler Statesman, a nod to Keating's feisty and
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  Speaker 1: ambitious politics. But Keating's day has long since passed and
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  Speaker 1: the economic, political and social landscapes are vastly different now.
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  Speaker 4: Well, I think there's no harm in comparing them. And
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  Speaker 4: I think in one sense Jim Charmers invites us to
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  Speaker 4: compare them. I think that's probably not a smart thing
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  Speaker 4: for him to be doing, because Keating was treasurer forty
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  Speaker 4: years ago. It was a different world and it was
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  Speaker 4: a different challenge. And essentially Keating's reform credentials have been
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  Speaker 4: unmatched ever since, and I don't think they're likely to
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  Speaker 4: be matched by the current government, or frankly by Jim
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  Speaker 4: Charmers himself. And in many ways he might privately agree
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  Speaker 4: with that particular point, but there's a deeper problem.
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  Speaker 1: Their sense of destiny might match, but their agendas don't.
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  Speaker 4: The Keeping agenda was all about creating a new sense
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  Speaker 4: of Australian based productivity, eliminating in the tariff, opening up
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  Speaker 4: the Australian economy, giving more emphasis to market forces, cutting taxes,
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  Speaker 4: empowering the middle class, deregulating the financial system. Now, that
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  Speaker 4: is an agenda of enterprise based innovation, relying on markets.
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  Speaker 4: What we now see from the current labor government headed
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  Speaker 4: by Anthony Albanezi with a Charmers as Treasurer, is that
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  Speaker 4: there's a greater emphasis on government, on spending, on government intervention.
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  Speaker 4: We have a government directed new form of industry policy.
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  Speaker 4: We have a vast array of subjidies and tax breaks
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  Speaker 4: to encourage renewable energy and achieve the objective of a
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  Speaker 4: renewable energy superpower. So essentially we've got a lot of
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  Speaker 4: changes which many people would call reform, and others, particularly
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  Speaker 4: a columnists, would say their examples of the country actually regress,
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  Speaker 4: relying much more on old fashioned government's vention in government spending.
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  Speaker 4: So I think that is the paradox of the Charmers
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  Speaker 4: Keeping relationship.
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  Speaker 1: Jim Chalmers has been setting the scene for this federal
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  Speaker 1: budget for months now. A speech given at the Lower
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  Speaker 1: Institute in early May, he said this is the most
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  Speaker 1: challenging strategic environment since World War II, and he's not wrong.
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  Speaker 1: Inflation is creeping, growth is slowing, conflict is escalating, geopolitical
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  Speaker 1: tensions are rising, and climate change is accelerating.
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  Speaker 4: I think what he's getting at and in this sense,
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  Speaker 4: is completely correct. But this is a very difficult economic
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  Speaker 4: environment for the government and the reason it's difficult is
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  Speaker 4: because inflation is still not mastered. Of course, a lot
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  Speaker 4: of progress has been made, but the last mile in
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  Speaker 4: terms of beating in flam has not yet been reached.
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  Speaker 4: So essentially the problem that the treasurerffaces it's the problem
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  Speaker 4: between putting in place new expansive policies designed to define
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  Speaker 4: what this labor government stands for and help the Australian
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  Speaker 4: people on the one hand, and on the other hand
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  Speaker 4: the fact that fiscal policy has got to do something
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  Speaker 4: to assist monetary policy and contain inflation, and that means
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  Speaker 4: there's got to be a limit on how much you
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  Speaker 4: can spend. So that's the dilemma.
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  Speaker 1: Coming up. Why Jim chalmers next move is less budget
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  Speaker 1: and more balancing act, Well, I've got you, don't forget.
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  Speaker 1: dot com dot au. We'll be back after this break.
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  Speaker 1: Last week, Reserve Bank Governor Michelle Bullock sent Treasurer Jim
• 9:19
  Speaker 1: Chalmers a warning. She said the RBA would have to
• 9:23
  Speaker 1: act if services costs and soaring petrol prices send inflation
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  Speaker 1: back up, and by act she means hike interest rates.
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  Speaker 3: We're not ruling anything in or out because things are uncertain,
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  Speaker 3: but there is just the recent data of just indicated
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  Speaker 3: to us we need to be a little bit of
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  Speaker 3: vigilant on this.
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  Speaker 1: The Reserve Bank's job is to set the cash rate.
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  Speaker 1: When it wants people to pump money into the economy,
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  Speaker 1: the rate drops. But when inflation is as high as
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  Speaker 1: it has been over the past year or so, spending
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  Speaker 1: is a dangerous game because everything gets more expensive as
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  Speaker 1: suppliers and service providers work to cover their costs. If
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  Speaker 1: that's allowed to go on for too long, those prices
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  Speaker 1: could stay that way. That's called stagflation. So the Reserve
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  Speaker 1: Bank does the only thing it can do. It raises
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  Speaker 1: interest rates. So spending is diverted into mortgages and that's
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  Speaker 1: putting huge amounts of pressure on Australian households. So what
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  Speaker 1: Michelle Bullock is saying to Jim Chalmers in the nicest
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  Speaker 1: way possible is don't put too much money in people's pockets.
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  Speaker 1: Here's Paul Kelly.
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  Speaker 4: I think the treasure will present the budget as a
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  Speaker 4: middle course budget, that is, it's an effort to strike
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  Speaker 4: a compromise between the economics and the politics. Cost of
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  Speaker 4: living will be uppermost in the budget speech of the Treasurer,
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  Speaker 4: and he's made it clear that assistance to people managing
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  Speaker 4: cost of living pressures will be substantial. There's going to
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  Speaker 4: be a lot for families, for pensioners, for students, for
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  Speaker 4: young people, for ever industry, for older people. So the
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  Speaker 4: government will try and in that sense we'll look after
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  Speaker 4: the community. That's important. But on the other hand, he's
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  Speaker 4: got to ensure that he doesn't spend too much. And
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  Speaker 4: I think what we're going to say about this budget
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  Speaker 4: when we see it on Tuesday is that with this budget,
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  Speaker 4: the treasure has taken political responsibility for any future increases
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  Speaker 4: in interest rates by the Reserve Bank, because we know
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  Speaker 4: that the more spending you have, then the more that
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  Speaker 4: puts pressure on the Reserve Bank to increase interest rates.
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  Speaker 4: So the great danger for the Treasurer, the great risk
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  Speaker 4: for the Albanesi government in this budget is that it's
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  Speaker 4: going to put more pressure on demand in the economy
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  Speaker 4: and that means if the Reserve Bank does have to
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  Speaker 4: increase interest rates again, that in political terms, is going
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  Speaker 4: to be sheeted back to the government. That's the risk,
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  Speaker 4: that's the gamble.
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  Speaker 1: In other words, Jim Chalmers will be walking a tightrope
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  Speaker 1: on Tuesday night.
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  Speaker 4: I think there are probably two fundamental factors which might
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  Speaker 4: define this budget historically. First of all, how will this
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  Speaker 4: budget be judged in terms of combating the central economic problem,
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  Speaker 4: which is inflation. Now we won't be able to answer
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  Speaker 4: that exactly on Tuesday night. The answer will emerge over
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  Speaker 4: the course of the next year or two. And I
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  Speaker 4: think the second fundamental criteria is that this budget will
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  Speaker 4: probably have a strong ideological component in terms of outlining
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  Speaker 4: what labor stands for and what labor believes in. I mean,
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  Speaker 4: the interesting thing about the budget is the biggest single
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  Speaker 4: item in the budget in terms of quantum of money
• 12:57
  Speaker 4: will be the tax cuts. But the revamp tax announced
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  Speaker 4: last January, so they're old news, but in actual fact
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  Speaker 4: they'll be the biggest single item in the budget. And
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  Speaker 4: that's another item which points to the question of the
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  Speaker 4: economic character of the government.
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  Speaker 1: Peter Dutton will have his chance to respond to the
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  Speaker 1: new federal budget on Thursday, and Paul says the opposition
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  Speaker 1: leader has some work to do.
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  Speaker 4: Too, So essentially what you see is you see a
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  Speaker 4: lot of pretty busy, almost panic work over the Wednesday
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  Speaker 4: and the Thursday from the opposition leader to sort out
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  Speaker 4: how far they go and the budget apply. This is
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  Speaker 4: what it's always like and it won't change this week.
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  Speaker 4: But the big question is what does Dutton say about
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  Speaker 4: what the Dutton leadership is about and what the Liberal
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  Speaker 4: Party stands for at this point in time. What will
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  Speaker 4: he say about policies, what will he say about tax immigrations,
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  Speaker 4: about energy and so on? And this is almost the
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  Speaker 4: tactical dilemma that opposition leaders face with their Thursday night
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  Speaker 4: reply to the budget. How far do they go now?
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  Speaker 4: I think Peter Dutton's got to go some way. We
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  Speaker 4: haven't seen very much at all from the Liberal Party
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  Speaker 4: in terms of what they stand for in terms of
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  Speaker 4: their policy roll out. Now that's sensible in one sense
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  Speaker 4: because oppositions never like to do that too much. But
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  Speaker 4: on the other hand, I think Dutton's got an obligation
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  Speaker 4: to give us something and that's going to be the issue.
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  Speaker 4: How much will he give us? We'll have to wait
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  Speaker 4: and see on Thursday night.
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  Speaker 1: Paul Kelly is The Australian's editor at Large. The Front
• 14:47
  Speaker 1: will be in Canberra for the Federal Budget tomorrow night,
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  Speaker 1: and you can follow our experts, reporting and analysis live
• 14:53
  Speaker 1: at the Australian dot com dot au