James Glenday:
And the news that the Reserve Bank has lifted interest rates to a 15 year high of 4.6 per cent. The Assistant Treasurer is Daniel Mulino and he joins us here on the couch. Daniel, nice to see you.
Daniel Mulino:
Thanks very much for having me.
Glenday:
Your government’s spoken a lot since it was elected 4 years ago about helping people with the cost of living. We’ve seen moves on childcare, we’ve seen things on the fuel excise, among others. Have you inadvertently made life harder, though for mortgage holders by spending too much and not crushing inflation earlier?
Mulino:
So, I think if you look at the Reserve Bank Governor’s statement yesterday explaining the reasons for the decisions, the 2 major things that were identified were the longer than expected duration of the war in the Middle East and the fact that it has had a greater than expected impact on world energy prices. And also pointing to the fact that greater than expected global demand for AI had pushed up technology prices. When it comes to what government controls and our spending we have put in place measured and targeted cost‑of‑living supports. But in the last Budget, for example, we put in place $64 billion of saves over the forward estimates. We’ve really pulled back on government spending so that we are doing all we can to support the measures of the Reserve Bank in pulling back inflation.
Emma Rebellato:
The Governor, though, also mentioned domestic capacity pressures. So, surely the government has to take responsibility for the situation we’re in now too.
Mulino:
Yes, so she did point to ultimately, no matter what the causes of inflation impulses, that it comes down to aggregate demand and aggregate supply in Australia. And so if you look at aggregate demand, which was something the Reserve Bank did look at, if you look at final demand spending in Australia, of the $5 in final demand spending, $4 have been coming from the private sector and one from government. So, government is not what’s driving this. And, and as I mentioned, we are doing what we can in a sustained way to pull back on our impact. We’ve had 2 budget surpluses delivered and we have also, in the last Budget, had the biggest saves and reprioritisations that any government’s delivered so these are major moves. These were tough decisions. You know, we pulled back on NDIS spending totalling $40 billion over the forward estimates. These were difficult decisions done in a way that will mean that the scheme can continue to help those who most need it. But we’ve really lent in on reform that will help with the fight against inflation.
Glenday:
I mean, just on this, this is a complicated issue. You’ve got a PhD in economics from Yale University, a prestigious Ivy League university, just a basic question for us and our audience: is a government budget deficit which you’re running at the moment inflationary by definition because you’re putting more money back into the economy than you’re taking in taxes.
Mulino:
Well, I think the way I would think about it is we last year had a $22 billion deficit. It was originally forecast to be $28 billion, so that’s $6 billion better. That improvement helps with the fight against inflation.
Glenday:
But still more money is going into the economy than coming out at a time of persistent high inflation. I mean that is inflationary by definition right?
Mulino:
Even more substantially than that $6 billion shift is the fact that the $22 billion is just over half what we inherited. So, if you go back to the situation in 2022 and you forecast forward what the previous government had left us, we have really brought down government spending substantially. So, if you look at debt where it is now, total government debt, it’s about $200 billion better off, which is the work over 4 Budgets. So, that work is fighting against inflation in that we’re substantially improving the situation. Now you’re right. We do have a deficit forecast at the moment, but the fact that those deficits are far smaller than had been forecast is helping with that.
Glenday:
We now have interest rates at a 15 year high though there are warnings there could be one to one and a half rate rises more to come. Is the government going to have to change approach and really, really pull back?
Mulino:
Well, look, we’ve been really pulling back in ways that are very substantial in historic terms. So, $64 billion in the last Budget over the forward estimates. They’re the highest nominal savings that governments have achieved. And as I mentioned, they’re very, very substantial cuts in areas like the NDIS in ways that are responsible. We’ve also made sure that our cost‑of‑living supports are very targeted so that they’re responsible, they help the right people, but they do so in a responsible way.
What I would also say is that, and this is something the Governor talked about is that we do need to lift productivity. She talked about the capacity constraints. We’ve put in place a number of reforms coming out of that 3‑day Economic Reform Roundtable, including passing the EPBC Act, freezing the NCC, a bunch of measures in my portfolio. These productivity measures sometimes do take a bit of a lag to take effect. So, they’re in the system now. They’ve been passed, they will benefit the economy.
Rebellato:
When, when are we going to see it take effect?
Mulino:
Well, it depends on the measure and it depends on how long it takes to diffuse throughout the economy. Some of the measures, such as cutting red tape, should have a faster effect. Other measures, like passing the EPBC Act, which is something that experts from right across the board had called for, business, environmental experts, everybody was calling for that. It had sat with the previous government for years. That will take time because it then can allow for projects to be delivered. So, it will take a bit more time. But the EPBC Act is measured to deliver billions of dollars in improvements to the regulatory environment and to the economy.
Glenday:
In hindsight, should’ve the RBA cut rates 3 times last year? Did it need to hold for longer?
Mulino:
Well, I don’t want to second‑guess what the RBA has done in the past, and I don’t want to try to forecast what they’re going to do in the future. But what I can say is the government’s very focused on what we have control of, so we’re focused on our spending. We’re also focused on what we can do to turn the productivity dial. And on both those fronts, we’re really leaning in.
Glenday:
Sorry to interrupt, but why? I mean, the RBA is independent, but it’s not above scrutiny, right? And when you look at this, you go, really they probably should have been holding longer last year.
Mulino:
Well, I think those kinds of matters, trying to look back on macroeconomic decisions in the past, end up in very complicated debates, where quite often you find macro economists who are all credentialed, coming to a range of positions. I think the most useful thing for the government at the moment is to focus on what we know is important. And that is that we need to continue to be fiscally responsible and we need to continue to lean in on the productivity front.
Rebellato:
On another topic, and that’s AI, artificial intelligence as a result of the breach. So, OpenAI yesterday apologised. It also offered to provide funding to the Australian Government and other companies to strengthen cyber defences. Is the government open to that offer? Will it accept funding for this?
Mulino:
Well, look, I think the minister responsible will have a look at that offer, but I do know that the government, quite separately, is prioritising an audit of our cybersecurity arrangements right across the board, and that’s important.
Rebellato:
Is it too late, though? Should we have done this already?
Mulino:
No, I think this is a matter of constant strengthening systems, both in government and the private sector. So, I’m responsible for the financial services sector. That includes the banks, insurers and superannuation. They are constantly monitoring their systems and strengthening their systems for cyber threats. The same is true for government. So, this is a constant work in progress. It’s almost a battle on both sides. There’s AI being used in terms of creating cyber threats and there’s AI on the defence side. So, it’s a constant process that we need to undertake.
I think that what was highlighted with the Medicare breach is that we do need to lean in more in this area. Fortunately, no sensitive data was stolen, but I think the fact that AI, sorry, OpenAI has apologised is a very good sign. They’re going to engage with the government on our cyber preparedness. And they’re also going to engage with our parliamentary inquiry, which I might say is really important because it shows the government is bringing AI right to the centre of decision making and the coordination of policy.
Glenday:
Before we let you go, you are a Melbourne local. Why doesn’t Melbourne have a train to the airport? When on earth is this going to happen? I mean, this has been discussed for decades and decades and decades.
Mulino:
Well, look, you’re talking about something in my electorate, so I’m actually really thrilled that today there’s going to be a stand up with both the Prime Minister and the Premier at Tottenham. I think something like 80 per cent of the Melbourne Airport rail link will run through my electorate. I’m really happy that works will commence very soon. So, what has occurred over the last few years is that preparatory works have occurred at Sunshine Station. So, there’s been a lot of investment in that station as the real hub of the Melbourne Airport rail link. But I think it’s thrilling for the community that we’re going to see digging in the ground very soon.
Glenday:
And just one other infrastructure question in your electorate. The ABC 7.30 had a big story about power poles going through a residential part of your electorate in Yarraville. They are to make sure that a data centre can be powered. Have you personally got involved in this issue? Does it undermine support broadly for the boom in AI when you see things like this?
Mulino:
Well, what I can say is I’ve certainly heard from the community, they’re very concerned. From what I’ve seen, I think that the consultation, the community consultation by Jemena has been inadequate. I’m going to be working very closely with the state member, Katie Hall on this and she’s been a very strong advocate. We’re going to be meeting with the managing director of Jemena later this week. So, this is something that involves regulation at state and federal level, but I think at the very least, what we need to ensure is that the company involved engages properly and in good faith with the community.
Rebellato:
Assistant Treasurer Daniel Mulino. Thank you.