Justin Smith:
Nine from 10. So, as we said yesterday, we saw the inflation figures come through and it had a lovely 2 in front of it. It was a 2.3. The Treasurer Jim Chalmers sounded thrilled to bits at that point. But what is that going to mean for interest rate cuts possibly for next month? What is that going to mean? Andrew Leigh is the Assistant Minister for Treasury. He’s good enough to join us on the phone. Mister Leigh, thank you very much for your time.
Andrew Leigh:
Pleasure Justin. Great to be with you.
Smith:
In very real terms, when people hear that figure of 2.3 and as we said before, your boss seemed to be thrilled by this number, what does it mean for people? How does that translate to their lives?
Leigh:
We do know we need to get on top of the inflation problem, and it shows that inflation is substantially down from the numbers that we inherited from the Liberals when they left office. When they left office inflation was 6 point something and rising. Now it’s 2 point something and falling. So, we’ve got inflation down to almost a third of what it was we saw in some of the latest numbers. Automotive fuel coming down 10 per cent over the course of the year, electricity coming down 21 per cent over the course of the year. But that doesn’t take away from the fact that people are under cost‑of‑living pressure, which is why we’re doing all we can to put in place those energy bill rebates, the increases to Commonwealth Rent Assistance, the back‑to‑back surpluses that we delivered. All of that is helping take pressure off inflation.
Smith:
On that and beyond it being a political number. But how does that translate through for us now?
Leigh:
Well, it does mean that we’re seeing inflation now in the bottom half of the target band the third month in a row and that’s significant substantial progress. It’s also important to remember that this is a global challenge and that Australia in the global context is making welcome progress. We’ve seen inflation ticking up in the Euro area, in the United States and the United Kingdom, so the challenge is a global one. But Australia is making welcome progress and having inflation solidly in the bottom of the target band for a quarter now is important.
Smith:
Do you think people feel that progress?
Leigh:
Look, I do. I think people see the fuel price data when they look at the petrol prices, see the electricity price data when they look at the changes in electricity prices on their bills. But Australians are still feeling considerable cost‑of‑living pressure. There’s no taking away from that. And that is a deep‑seated sense when I’m out in the electorate talking to people and particularly those who are on fixed incomes. The real challenges of making ends meet. That’s why the work that we’ve done in increasing payments is important in providing increases in childcare, because we know the squeeze often comes in that period where you’ve just had kids. And making sure that everything we’re doing as a government really is creating the environment for the Reserve Bank to ultimately bring down rates.
Smith:
And I guess the point that I was belabouring is that people who are in that cost‑of‑living crisis at the moment look at that 2.3 and they just wonder how that translates.
Leigh:
Yeah, I understand people are under considerable pressure and that’s really what drives Jim, Katy and the economic team as we put together the Budget. The work that we’re doing there really is focused on those who are feeling the squeeze and making sure that they’re able to get the support that they need. But the fact is that we unfortunately have an opposition which has opposed so much of the cost‑of‑living relief, opposed the cheaper medicines policies, the increases in Commonwealth Rent Assistance, the electricity price rebates. And that opposition means that people would be worse off if Peter Dutton became Prime Minister.
Smith:
I’d like you to have a listen to this, if you don’t mind. About an hour ago, I was Speaking to Michele O’Neil, the ACTU President, who said this.
Michelle O’Neil:
The Reserve Bank needs to do its job and one of its objectives is about full employment, whereas they seem to be wanting to see more unemployment before they act.
Smith:
Michele O’Neil said the RBA needs to act right now. Would you agree with her?
Leigh:
Michele O’Neil is in a different position than I am. She’s a respected commentator. She has every right to make commentary on monetary policy. But as a member of the government, I’m always very careful not to be commenting on the job that the independent Reserve Bank does. Our work is about creating the conditions that allow the Reserve Bank to ultimately bring down rates. That’s what we’re all focused on there.
Smith:
Alright, ok. Is that independence currently working for us? Independence between the government and the RBA? Yeah.
Leigh:
Look, central bank independence has been a great success. Originally the New Zealanders are the pioneers of it and it’s taken up rapidly around the world. And you see the countries that provide that central bank independence do tend to experience lower inflation. That means greater stability for the economy and greater growth rates in the long term. So, central bank independence really is a cornerstone of our economic framework.
Smith:
Alright, you’re an economist as well as being a politician. I’m not using that in the pejorative, it’s just a fact. But is it time for rates to fall?
Leigh:
It’s entirely a decision for the Reserve Bank and their independence is something that is cherished by the government and understood. We understand the value of having a Reserve Bank that is not jawboned by the government, but where they’re able to make their independent decisions. There’s a lot of decisions in the hands of our government. The work we’re doing on competition policy, for example, making things fairer for farmers and fairer for families, is also about ensuring that we’ve got lower inflation over the long term.
Smith:
Ok, well how much difference is that going to make to the government? The Reserve Bank decision next month, if they jump one way or the other, I mean, that’s something you’re going to be watching closely. And you say you’re independent. Well, I’m sorry you are independent to this. But whichever way they jump, how big a difference does that make to the government?
Leigh:
Well, that’ll be up to the commentators, Justin. Really our work is ensuring that we’re taking pressure off inflation. I talked before about competition. Some of the work that we’re doing funding CHOICE quarterly grocery price monitoring allows Australians to shop around and get a better deal at the checkout. Those back‑to‑back increases in Commonwealth Rent Assistance have seen it increase by more than it has in the previous 30 years. The work that we’ve done in providing more resources to the Australian Competition and Consumer Commission to monitor supermarket prices also allows them to be a strong cop on the beat and ensuring the very best deal for shoppers. All the work we’re doing really is focused on dealing with that inflation challenge, which is the biggest economic challenge that Australia faces in the short term.
Smith:
Well, as we wait to see what happens next month, have the RBA been getting it right so far?
Leigh:
Ok, again, you’re asking me the same question. I can’t but admire your tenacity but you’re going to have to accept my strong belief, grounded in economics, that we do need to maintain that independence.
Smith:
Andrew, I appreciate the compliment, but I’m not asking what they’re doing next month, I’m asking if they’ve been getting it right.
Leigh:
No, but again, politicians commentating on Reserve Bank decisions isn’t helpful for the system. What we’ve done is to make sure that we have great appointees to the Reserve Bank and modernising the Reserve Bank. One of the bits of legislation that went through parliament at the end of last year was the biggest modernisation of the Reserve Bank structures to ensure that they’ve got the expertise in place. That’s the right role for the Commonwealth government, making sure that we’re looking after the Reserve Bank in a structural sense, but not getting in there and commentating in every twist and turn of every decision.
Smith:
Andrew, thank you very much for your time.
Leigh:
Real pleasure.
Smith:
Andrew Leigh, Assistant Minister for Treasury. It’s one to 10.