Leon Delaney:
Canberra, 7 minutes past 4. And yesterday we saw the latest inflation figures which came in. Well, it was a bit of a mixed bag really. We saw the headline inflation go up, but the underlying inflation go down. It is a little bit more complicated than that, but at best you’d have to say the Reserve Bank is currently receiving mixed messages from the economic data. Joining me now, the Assistant Minister for Competition, Charities and Treasury, Assistant Minister for Employment, professional economist, and our local member here in the Federal seat of Fenner, Dr. Andrew Leigh. Good afternoon.
Andrew Leigh:
Good afternoon, Leon. Happy 2025. Did you know that 2025 is 45 squared?
Delaney:
I did not know that.
Leigh:
As a mathematics nerd, I thought you and your listeners would enjoy that fun fact. Hopefully you managed to get a good break.
Delaney:
I know that now, 2025 is 45 squared. See, mathematics was never my strong subject. I managed to struggle through and achieve a pass mark. But I would never say I particularly enjoyed mathematics and I’m not that good at it. But these are interesting little novelty facts to know.
Leigh:
Probably the only square year we will ever experience in our lifetimes.
Delaney:
Thank you for the Christmas card. One of the very few I received this year. People aren’t sending them as much anymore.
Leigh:
Yes, I think it’s mostly me and fellow politicians that are keeping Australia Post letters in business at the moment. There’s not many letters doing the rounds these days, are there?
Delaney:
Well, Australia Post needs all the help it can get. So, that’s our taxpayers’ money at work right there, isn’t it?
Leigh:
Well, it’s doing good parcel business and I’m sure more of us are getting and receiving presents online than ever before, so that’s a good thing. And the convenience that comes with that is an extra bonus.
Delaney:
So, yesterday’s inflation figures. A bit of a mixed bag, wasn’t it? We’ve seen the headline rate go up, but the underlying rate come down. What are we meant to make of that?
Leigh:
The monthly number does bounce around a little bit more than the quarterly number and so that’s to be expected. It’ll be a smidgen more volatile, but it’s been in the bottom half of the Reserve Bank’s target band now for 3 months. That target band is, as you know, Leon 2 to 3 per cent. And so we’ve been at the bottom half of that for 3 months. Underlying inflation is down. We’ve seen significant falls in certain prices. Fuel prices down 10 per cent over the year. Electricity prices down 21 per cent over the year. We’ve seen a fall in prices of dairy over the year. And certainly that moderation in inflation is going to be welcomed by those who follow these things closely. Inflation now is almost a third of what it was when we came into office. And unlike where we came into office, it was rising. Now it’s falling.
Delaney:
Well, we’ll have to wait until February before we determine exactly what the response of the Reserve Bank Board might actually be. But we’re seeing an increased expectation that they might move to cut interest rates. Now, if they do, that can only help the government as you head towards an election. Have you got your fingers crossed?
Leigh:
Well, they’ve got their independent job and we’ve got ours. Ours is really about trying to make sure that we’re putting in place policies that play a helpful role in the inflation fight. So, for example, the ABS yesterday reported that without our measures, electricity prices would have fallen 1.7 per cent. With our measures they went down 21.5 per cent. If we had not increased Commonwealth Rent Assistance, then rents would have gone up 7.9 per cent. Instead they rose 6.6 per cent. And on top of that, you’ve got the back‑to‑back surpluses that we delivered. It’s really about making sure we’ve got those targeted cost-of-living measures, the competition policies which we’ve discussed extensively last year, Leon, that are all about making sure people get more for the dollar. And then also the work we’re doing and responsible budget management.
Delaney:
Ok, but the question was, have you got your fingers crossed? Surely you’d like to see an interest rate cut, wouldn’t you?
Leigh:
Well, that’s effectively a question about the Reserve Bank. And what I’m doing, Leon, is being very cautious as a politician not to step on their turf. Just as the Reserve Bank themselves are careful not to talk about fiscal policy, I’m very careful not to talk about monetary policy and not to criticise the decisions the independent experts make there. It’s about creating the conditions that allow them to cut rates when they think the time is right. And we’ve got inflation ticking up in the Euro area and the United States, the United Kingdom. So other countries are seeing inflation ticking up. Australia is seeing this steady lower inflation sitting in the bottom half of the target band.
Delaney:
Ok. Given that the rate of inflation has gradually been trending down for almost the entire 3 years that the Labor government has been in office after a peak shortly after the election, given that reality, and given the fact that we are potentially looking at an interest rate cut in the next couple of months, possibly sooner, possibly not quite so much. But against that backdrop, do you think it’s fair that all of the opinion polls are showing that voters blame the government for the cost‑of‑living crisis? They feel, according to all the opinion polls, the government has not done enough to address that cost‑of‑living crisis.
Leigh:
Well, Australians this year will face a choice between Peter Dutton, who’s opposed every cost-of-living measure we’ve put in place, opposed those energy bill rebates, opposed the work we’ve done on the Food and Grocery Code, opposed the cheaper medicine policies, opposed our measures to get real wages going again, versus a Labor government which is doing all we can to make sure that Australians get a fair deal. We know that Peter Dutton’s madcap nuclear plan would not only do nothing to produce new energy generation for more than a decade, but would push electricity prices up, with one estimate saying that it would cost households $1,200 a year.
Delaney:
Okay, now of course there is an election looming, potentially within just a couple of months. Who knows for sure exactly when the Prime Minister is going to pull that particular trigger? But the Treasurer, Jim Chalmers, has suggested that in the light of the current economic conditions, in the light of the current budgetary conditions, and you mentioned the surplus there, that surplus has evaporated. The current financial year is expected to produce a deficit. Jim Chalmers said people should not expect this election to be a big free for all of public money or a huge cash splash. How can you conduct an election campaign and not promise people things that you can’t afford?
Leigh:
Yeah, I mean, it’s all about the responsible economic management that we’ve shown since we came to office. And you’d remember, Leon, under the former government, we had $20 billion of JobKeeper going to firms with rising revenues and who were paying CEO bonuses. Under the former government we had the sports rorts and the car park rorts. We’ve set about getting the Budget under control. The deficit this year is considerably lower than what was forecast under the Liberals. The work that we’ve done on targeting those payments really is important in bringing down inflation. We’ve been fighting for a wage rise for the lowest paid workers. Peter Dutton would be very happy to see real wages go backwards. And indeed the former Finance Minister in their last government said a deliberate design feature of their economic architecture was keeping wages low.
Delaney:
We’ve seen the latest retail sales figures today with November retail sales increasing 3 per cent year on year. The Australian Retailers Association says that this is the most significant year on year sales increases for some time. What does that mean economically? Does that mean that the economy is picking up and that perhaps the Reserve Bank might be concerned that the economy is still too strong?
Leigh:
Look, the rise in retail sales I think is not beyond what you’d be expecting. It’s a 0.8 per cent rise month on month, 3 per cent rise over the course of the year. This is what you’d be expecting and certainly you look at the trend there and it’s consistent with a lot of other estimates. We’re seeing in the economy fairly soft spending. Not surprisingly you’ve got growth in clothing and department stores. But areas like ‘other retailing’ are much more modest in their growth over the course of the year. Household goods retailing increasing in a very moderate way.
Delaney:
How well do you know Michael Keating, the former Secretary of the Department of Prime Minister and Cabinet?
Leigh:
He used to have the office next door to me at ANU.
Delaney:
Well, he’s written an article for Pearls and Irritations asking the question which party is the more competent economic manager, Labor or Liberal? Because the conventional wisdom and the coalition loves to push this line is that they are better economic managers. Michael Keating has written this article indicating that the evidence suggests that is not true. And according to Michael Keating, Labor is clearly the better economic manager based upon the evidence that he presents in his article. Did you send him a Christmas card? Because if you didn’t, you really should have.
Leigh:
Look, Mike Keating is somebody who has been a thoughtful economic commentator. He’s worked for both sides of politics. He calls it as he sees it. He and I have had different views on a range of issues, but he’s always been somebody who’s gone where the numbers lead. If Michael Keating says something then you know that he has come to a considered view. He never forms a view quickly. One of the things I noticed in chatting with him is that he’d always look at the full weight of the evidence, go through it, come to his own decision and he enjoys myth busting. In this case he’s busted one of those big myths of the coalition of a better economic manager.
Delaney:
And yet it is a belief that persists, isn’t it? Why is that?
Leigh:
Oh, who knows? I mean there’s all kinds of mistaken beliefs that persist. But what you need is good, careful evidence. And that’s what Mike Keating’s brought in this piece for Pearls and Irritations.
Delaney:
Andrew, thanks very much for your time today.
Leigh:
Thanks, Leon.
Delaney:
Dr Andrew Leigh, the Assistant Minister for Competition Charities and Treasury. Assistant Minister for Employment and, of course, our local member right here in the federal seat of Fenner.