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September 29, 2025
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MELISSA CLARKE: For more reaction to the latest figures, I was joined by the Shadow Minister for Finance, James Paterson, a short time ago. Senator, thanks very much for joining us on Afternoon Briefing.
SENATOR JAMES PATERSON: Thank you for having me.
MELISSA CLARKE: So the final budget outcome shows the deficit for the last financial year was $10 billion, around $17 billion, $18 billion better off than had been forecast at PFO. What do we put that improvement down to?
SENATOR JAMES PATERSON: The Treasurer has told a story since Labor came to office that it's because of his brilliance and hard work that Labor's been able to deliver surpluses. But we now know that that's not true. We've got perfect evidence. They could have delivered a surplus this year if only they'd made different decisions. In fact, we know that because of $22 billion of net-spending decisions by this government, they've driven the budget into deficit in what otherwise could have been a surplus. So it clearly wasn't the brilliant management of Jim Chalmers or Katy Gallagher who delivered those first two surpluses. It was the surge in post-COVID revenue to the tune of $370 billion, which is responsible for those surpluses. And now it is going away, and that's why we've got a decade of deficits to come.
MELISSA CLARKE: The government would argue that it did save the vast majority of the revenue gains that we've seen over that period and that it has a better record of putting away that money towards the budget bottom line than previous governments. Do you give them some credit for the amount of money that was put towards budget repair?
SENATOR JAMES PATERSON: Not spending an unanticipated revenue surge is hardly something to be proud of, particularly because now they have started to spend that money, and it is driving us into deficit. This could have been a $12 billion surplus this year had they not proceeded with those $22 billion of net spending instead of being a $10 billion deficit.
MELISSA CLARKE: Some of that spending was on things like cost-of-living relief, which households have certainly benefited from at a really difficult time. There are lots of choices governments have to make.
SENATOR JAMES PATERSON: You're absolutely right, but one of the disciplines that the previous Coalition government imposed on themselves, which allowed us to get the budget back to balance in 2019, was that every dollar of new spending had to be offset by a saving elsewhere. So we're not necessarily quibbling with the spending that Labor has done, not every single one of those things we disagree with, some of them we might, but had they found the savings elsewhere, they could have delivered that cost of living relief and a budget surplus, and they've made choices which have prevented them from delivering a budget surplus. This is a Labor deficit, and we've now got a decade of Labor deficits to come and $1.2 trillion of debt at the end of the next term. Now that's a huge burden to leave the next generation.
MELISSA CLARKE: Part of the reason we're seeing these revenue upgrades is because we're getting higher company tax, and we're getting higher income tax revenue. Is that a sign that the economy and wages are improving?
SENATOR JAMES PATERSON: Well, the primary reason why we're getting higher income tax revenue is because of bracket creep. Australians' wages have gone up due to inflation, but they're not any better off because their cost of living has risen even faster, and now they're paying more tax because they've been pushed into a higher tax bracket. And so the secret behind Jim Chalmers' surpluses has come off the backs of the hard work of Australians and their living standards, which have gone backwards on his watch. Yes, it's true company profits are up, and that's a good thing, and that is partly related to elevated commodity prices. The iron ore price, for example, has been much higher than the very conservative forecast that Treasury has been making. And so Jim Chalmers and Katy Gallagher get to play this trick at the end of every financial year and say, oh well, the budget is in a better position than we forecasted it would be. Well, of course, if you have very conservative commodity price assumptions…
MELISSA CLARKE: I mean, that's something that just about every Treasurer in the Australian Government has done.
SENATOR JAMES PATERSON: Indeed. And so I'm not singling that out as a particularly egregious public policy issue, but let's not pretend, let's play the game that some brilliant decision-making by the government has got us to this place. Actually, it's just conservative forecasts on revenue and people paying higher taxes.
MELISSA CLARKE: When it comes to income tax and bracket creep, the Government has introduced income tax cuts for the lowest tax bracket. It's going to go from 16%, down to 15%, down to 14%. So it's addressing the very issue you're identifying here, aren't they?
SENATOR JAMES PATERSON: Only partially, that gives back a tiny fraction of the tens of billions of dollars extra that Jim Chalmers and Katy Gallagher are taking from Australians in higher taxes. They're patting themselves on the back for giving Australians cents on the dollar back on the higher taxes they've paid. If they're really serious about bracket creep, they would do something like indexing income tax thresholds to inflation.
MELISSA CLARKE: Is it something you'd like to do?
SENATOR JAMES PATERSON: Well, this is the start of the parliamentary term, and I can't make policy pronouncements at this stage, but at the back end of the term, we'll absolutely be looking at tax reform that returns to Australians the hard money that they've worked hard for and earned.
MELISSA CLARKE: Market expectations are that the Reserve Bank is going to keep interest rates on hold tomorrow. What does that tell us about the state of the economy?
SENATOR JAMES PATERSON: There have been two worrying prints of monthly inflation data over the last two months that have indicated that inflation is higher than the Reserve Bank had forecast it would be. I don't want to overplay it because they are just monthly numbers, and they can be volatile, but we will get the quarterly numbers at the end of next month, which will give us a better idea of how we're travelling. But it does appear that either there is the last mile of sticky inflation, which is being very difficult to eradicate, or there may even be a tick up in inflation. Now, if that's true, what it means is that the interest rate cuts that many Australians were banking on may not come, and that elevated household financial pain will continue, which would be really troubling. And it is another reason why prudent fiscal management from Canberra is very important, because that does take the pressure off inflation.
MELISSA CLARKE: Does that mean a prudent approach from the Reserve Bank in waiting a bit longer for better quality data might be the right way to go?
SENATOR JAMES PATERSON: I think there's a good practice of politicians not becoming commentators on the independent Reserve Bank's decision-making. I'll happily respond to it once they've made it, but I don't want to forecast what they might do.
MELISSA CLARKE: Fair enough. There's a review of the GST distribution underway. I don't think there's much in politics more hotly contested between the states and the federal government about how GST money is distributed. But would you support any changes to WA's GST top-up deal?
SENATOR JAMES PATERSON: Well the short answer is no we don't support any changes. But I think it's very interesting that Jim Chalmers is seeking to review this arrangement because of course Labor has run terrible scare campaigns including prior to the last election that the Liberal Party had a secret plan to change the GST distribution and now it is a Labor government that is reviewing it. So I think he should be clear, is that on the table? Will he take away WA's GST? Will he make it different arrangements to accommodate his Labor Treasurers in places like New South Wales, who have been very vocal about this, or is this just a review for no purpose at all? Is it going to make any change at all?
MELISSA CLARKE: You've been very clear that you think the government needs to be very careful in its spending and that unnecessary spending should be limited. Surely the WA GST top up deal is exactly the kind of spending program you should be looking at if you want a more prudent budget.
SENATOR JAMES PATERSON: Look, I certainly understand why economists are critical of this policy, but actually it's not just for WA, it applies to any state that would fall below 70 cents in a dollar of GST, and it's based on the principle…
MELISSA CLARKE: But realistically, no other states are in that category, are they?
SENATOR JAMES PATERSON: They might hope to be in the future if they have WA-style economic success, maybe there's some other states that, if they took advantage of their natural resources like Victoria has but has chosen not to, would be in a better fiscal position that would benefit from a policy like this. We're not proposing to change it, though, because we think the principle is important - that you should get back a reasonable amount of what your state pays in GST, maybe not every cent in the dollar, but 70 cents in the dollar is a reasonable floor that states should be getting back in return for what they pay.
MELISSA CLARKE: When it comes to the Federal government and State governments working together to support industry, we've seen a fair bit of bailing out already when it comes to Whyalla, when it comes to Nyrstar we now have conditions in the Tomago smelter, also in Mount Isa, where the Federal government is looking at what role it may need to play to keep those industries going. What's the principle the Coalition takes here, how would you decide if you think a Commonwealth bailout or a role in a bailout would be worthwhile?
SENATOR JAMES PATERSON: It's not a coincidence that the companies that are receiving bailouts or have their hands out for bailouts are in energy-intensive industries. It is primarily the increase in energy costs that is putting them in a precarious financial position. And so I think Labor has to take some responsibility here for the energy price disaster on their watch that has caused these previously profitable companies to become unviable or potentially unviable. We think they're strategically important industries. I would much rather reduce their energy bills than bail them out with taxpayers' money. But I think it would be damaging for Australia if we lost them simply because of higher energy prices. So I think we have to look at what we can do to get them through these difficult periods, but then I'm much more interested in solving holistic problems, whether that's with red tape or regulation or high energy costs, to make sure that they can be internationally competitive and don't require an ongoing taxpayer subsidy.
MELISSA CLARKE: But would you recognise that for a lot of these circumstances, the crunch time is in the next year or two? So bringing down energy prices through market mechanisms is probably going to be pretty hard to achieve in that time frame. Does that make a Commonwealth and State government bailouts necessary?
SENATOR JAMES PATERSON: Sadly, I think you're right. I don't think we can solve this energy market mess overnight, and Labor doesn't have any plans to do it anyway. So unfortunately, I think it is going to be necessary to get these companies through that period with taxpayer assistance, although I think we should set a high bar as to who qualifies for taxpayer assistance because we do not want to be in a position as a country where, in perpetuity, we are subsidising the existence of these companies. We want them to be competitive, and we want to provide them with the environment to compete on their own merits.
MELISSA CLARKE: Just one last topic before we let you go. The Prime Minister has been over in the UK, has had quite an extensive travel trip in the last week or so. He did address the UK Labour Party Conference while he was there. Do you have any problems with that?
SENATOR JAMES PATERSON: I do. I'm not aware of any precedent of a Prime Minister travelling overseas to speak at a party political conference, a partisan political conference. And I think that the Prime Minister had legitimate business in New York. He had legitimate businesses in the UK, including his meetings with the government. But this side trip to a political conference is inappropriate. And frankly, I think the Labor Party should be picking up the tab for that, not taxpayers, because it starts to look like this is a taxpayer-funded victory lap for a Prime Minister on a partisan basis. I think that is reckless for our foreign policy and not a fair and proper use of taxpayers money.
MELISSA CLARKE: We've seen Labor MPs point to Scott Morrison being with Donald Trump at a busy plant in Ohio back in the first Trump administration, which was effectively a MAGA rally and saying Look, Scott Morrison did it, how is this any different. Do you think they're materially different circumstances?
SENATOR JAMES PATERSON: Well, except that all those Labor MPs the Prime Minister included were highly critical of Scott Morrison to do that. So at the very least, they're guilty of gross hypocrisy here. The Prime Minister is personally guilty of that. But at least in Scott Morrison's case he wasn't addressing the Republican National Convention while Donald Trump was being nominated as a Republican candidate. That would have been a closer analogy. This was a joint event for an Australian company investing in the United States. And it was a way of building rapport with a Republican president who had important things to decide about our relationship, as we do now. There's no justification of that with Sir Keir Starmer or the UK government. This is a political intervention in UK politics, trying to bail out a mate.
MELISSA CLARKE: If you take out Anthony Albanese's objection at the time to Scott Morrison's appearance with Donald Trump, are they effectively any different because we know the way that Donald Trump has campaigned is not really through the machinery of the Republican National Party, it's been through his own generated rallies. So they're fairly analogous situations, aren't they?
SENATOR JAMES PATERSON: I think there's something objectively different about a party political conference. I wouldn't expect any foreign head of government to come and speak at a Liberal Party conference. They might do an event with our leaders while they're in our country. But doing it at a party political conference is very different. I think it was an explicitly political speech. Everyone knows that Keir Starmer is in a difficult domestic political situation. And Anthony Albanese effectively came to rally the troops behind a mate who's suffering domestic political stress. Now, how does that help Australia if there's a change of government in the UK in the future? How will they judge their relationship with the Albanese government based on this partisan domestic intervention? And how should we judge our taxpayers' money being spent for that purpose?
MELISSA CLARKE: He met with Kemi Badenoch when he was there, the head of the Conservative Party. Should he have met with Nigel Farage?
SENATOR JAMES PATERSON: Look, that's a matter for the Prime Minister. He says there wasn't a request. And at the moment, in the parliamentary terms, Nigel Farage is not a big player but is obviously polling very well in the UK. An election is some years off. Certainly, I think it's appropriate for political leaders when we travel internationally to have bipartisan meeting schedules. I always try to do that when I go to the United States, for example, because we have no control over the foreign political systems of our allies, and nor should we seek to. So I think that it is important to have those relationships across the board.
MELISSA CLARKE: All right, James Paterson, thank you for going through a number of topics for us this afternoon.
SENATOR JAMES PATERSON: My Pleasure.
ENDS