KIERAN GILBERT:
Does today’s CPI number change your thinking at all when you’re putting together your upcoming Budget?
JIM CHALMERS:
Well, it's an important consideration as we put the finishing touches on the May Budget. But it is encouraging to see that inflation has moderated even further in the March quarter. It's now almost half what we inherited when we came to office almost 2 years ago, and it's well down on those peaks in 2022. So, inflation has gone from something with a ‘6’ in front of it, it now has a ‘3’ in front of it. That's a good thing. But we want inflation to moderate further and faster because we know that people are still under pressure. That's why the Budget will maintain a big focus on the fight against inflation and also easing cost‑of‑living pressures rather than adding to them.
GILBERT:
We're seeing some reactions suggesting that because this has come in above what economists had thought, that the RBA might, rather than cut rates, might have to hike rates again. What's your reaction to some of that commentary?
CHALMERS:
Obviously, consistent with every other conversation we've had about this, Kieran, I'm not going to make predictions or pre‑empt decisions taken independently by the Reserve Bank Board, but I think there is an important bit of perspective that we can offer here. If you think about annual headline inflation, it's actually tracking still a little bit lower than the forecast that we released in the mid‑year budget update towards the end of last year. And I think that is important perspective. If you look at those forecasts, they were expecting inflation to be around 3 and three-quarters at the end of the June quarter – so next quarter – and already we are at 3.6, substantially lower than 4.1 the quarter before. So, an important bit of perspective. Of course we'd like inflation to moderate further and faster, of course we understand that people are still under the pump, but we are making welcome and encouraging progress, and we see that again in the numbers today.
GILBERT:
You've touched on this saying you will obviously take all of these things into consideration. But, does it make you think even more about the prospect of avoiding what economists [inaudible] expansionary Budget on the 14 May and fuelling inflation potentially?
CHALMERS:
Our Budget will be designed to take the pressure off cost of living rather than add to it and that will happen in at least a couple of ways. First of all, we're aiming for a second surplus budget. If that were to occur, and we're not there yet, that would be the first back‑to‑back surplus in almost 2 decades, and that is an important way that we can continue to put downward pressure on inflation. The second thing is how we design our cost‑of‑living help. And what the ABS has said today in the inflation data is that our policies have taken something like half a per cent off inflation to the March quarter. And that's because of the way that we designed that cost‑of‑living help to take the edge off inflation rather than add to it in important areas like electricity and rent and early childhood education. And what that tells us is, of course it matters how much you spend in budgets, but it also matters the design of that investment, the quality of that investment, and the timing of that investment. And what we'll do in the Budget in May is we'll maintain a primary focus on inflation and the cost of living, but not a sole focus. We also have this growth challenge in our economy, and our investment over time in the key drivers of growth into the future will be about recognising we've got an inflation challenge in the here and now, we've also got a growth challenge unfolding before us and the Budget will be attentive to both.
GILBERT:
And I know you don't want to get into the commentary around rates and what the RBA does. Obviously there's some economics, is there politics at play here as well for the RBA as it factors in the equation, can households survive another rate rise? If they were to do exactly what the economy needs, would they be raising rates sooner rather than later?
CHALMERS:
Well, the independent Reserve Bank is not focused on the politics and frankly, nor am I. Our job as a government is to make the right decisions for the right reasons and to make sure that they are aligned with the economic cycle and not with the political cycle. That is our job. And I'm sure if you asked the Reserve Bank Governor, she would have a similar view about her own job. We recognise that these interest rate rises, which began before the last election and continued after, have put really substantial pressure on people right around the country and they've slowed our economy. We saw that in the December National Accounts with consumption flat and growth flat in our economy. And that's what happens when you have these rate rises in the system and they are still playing out. I won't be giving free advice to the independent Reserve Bank. It will meet the week before the Budget. It will weigh up all of the considerations in our economy, inflation, growth, consumption and what's happening around the world and they'll come to a decision independently. When it comes to what's happening in the world Kieran, it's also important to remember that headline annual inflation actually ticked up in the US and Canada in the course of the last week or 2. It's coming down in Australia. We want it to come down further and faster but what's happening in Australia has bucked the recent trend that we've seen in North America.
GILBERT:
Treasurer, thank you for your time, as always.