HOST:
Thank you, Treasurer. Such an engaging and insightful speech. So, thank you very much. So, the Treasurer has agreed to take some questions from the floor, and I’ll wrangle these as best I can. But we have a couple of microphones in place.
Can I start off – well done on the fund. It’s a great idea and something the BCA has advocated for for a very long time. I’m wondering if it’s a really great success and the states sort of absorbed the 900 million very quickly, is there a chance to scale it up?
JIM CHALMERS:
First of all, I do acknowledge the forward leadership of the BCA and others. This is an idea that has been put to us in pretty compelling ways over a period of time, and we’re pleased that we can advance it. I think that is one indication that we are listening, and we are doing our best to work together with business to deliver these sorts of outcomes.
I don’t want to make $900 million seem insignificant. This is a big fund, this Productivity Fund, and we’ve got an open mind to what happens after it, but let’s make this one work first before we think about what its magnitude might be in the future.
I’m really looking forward to engaging with my state colleagues on it. Those conversations with state colleagues are sometimes fruitful, sometimes not especially fun, but I’m really confident, even the messages I’ve got in the last few days when we’ve indicated to them that we wanted to discuss this with them at the next meeting have been very positive. I’m confident that there’s a lot of aligned interest here. We all want to make our economy more productive, and we want to work together – Commonwealth and states, business community and others – to make sure that we grab the opportunities that we’ve got, and we think this fund will.
PAUL BOXHAM:
Paul Boxham from HSBC. Thank you, Treasurer. That was a very interesting speech. I applaud the focus on productivity, of course, it is what we really need to get going in Australia if we’re going to continue to get – improve our living standards. I guess one of the questions I have is you gave a long list of things that have already been delivered, things that are already in progress and already in train for achieving a lift in productivity. You’re 2 and a half years into this first term already.
I wondered whether there are any areas you can point to where productivity is already lifting, and I guess one of the things that’s a challenge to that is if I think about the numbers, the RBA at the moment is forecasting – or its working assumption at the moment is that labour productivity by the end of this year will be down 1 per cent year on year. That’s their working assumption for productivity. And I guess to draw a counterpoint, if you look at the US at the moment, productivity growth over the past year has grown by 2.2 per cent, so we don’t seem to be faring particularly well yet. Is there any evidence yet that progress is starting in any particular area?
CHALMERS:
Thanks, Paul. We were saying at the table a moment ago that as I look around the room, there’s a number of people here whose names are very familiar to me because I read all of the notes that everyone produces. And I wanted to thank you, Paul, and everyone. Zain, who’s here today, puts together a big pack of all your work at the end of every weekend, so your work is very familiar to me, Paul. Because of that I know that you understand that almost all of the evidence in our economy and in our data points to the fact that we’ve got a lot of ground to make up. We’ve got a lot of work to do collectively.
And there have been little blips in the past year or so where we’ve seen quarterly productivity growth a little better than what we’re used to. And we always try not to get carried away by that, whether it’s quarterly outcomes or whether it’s some element of the productivity growth carve up. Our assessment broadly, which is your assessment – and I’m assuming the assessment of everyone here – which is that we’ve got a lot of work to do, we’ve got a lot of ground to make up. The Americans are performing relatively well at the moment, but this productivity challenge is not new, and it’s been global, and I’ve tried to set out the ways we hope to turn that around.
But I also want to manage everyone’s expectations. I don’t think they need to be managed, but if there was a switch that you could flick to turn around what has been decades of weak productivity growth and turn it into a few years of very strong productivity growth, somebody would have flicked it already. What I’m trying to lay out for you is the medium‑term plan we’ve got to turn things around.
HOST:
I’ll go to one of the students here, very courageous student stepping up there.
SPEAKER:
Thanks so much for your speech, Treasurer. First of all, just on behalf of Canberra Grammar School, thank you so much for having us here today and giving us the opportunity to listen to your talk. Just extending on the point you made about the National Reconstruction Fund. What other strategies and initiatives are there to further attract foreign investment in the long run?
CHALMERS:
Terrific question and thank you for making a pretty long trip. I came here from Brisbane today and you came by road, so I want to acknowledge that. That’s commitment. We appreciate you being here. I’m sure everyone appreciates you being here.
Foreign investment has been a big focus for us, so whether it’s single front door that we’re talking about here, which will have an element of foreign investment, whether it’s our Foreign Investment Review Board reforms, whether it’s the way that we’re trying to better design and inform our capital markets so that investors, foreign and domestic, can better compare different types of investment to make sure that it’s consistent with the returns they need but also the values that they hold as investors, these are all important parts of the work.
So, I’ve covered the single front door and I’ve covered, in part, the better designing and better informing of these markets. The Foreign Investment Review Board reforms have taken a lot of time. You don’t read about them a lot, but they’ve taken us a lot of time. And what we’ve tried to do with that is recognise Australia is a very attractive destination for capital. There is this global tug‑of‑war over capital. We’re dealing with the biggest transformation in the global economy since the industrial revolution, which is the net zero transformation. Every country is trying to work out what’s the most effective way to attract, in our case, the hundreds of billions of dollars that we’ll need to make that transformation work for us, not against us.
So we sat down some time ago and we worked out what would we do differently in the foreign investment screening to streamline the bids where we know that they are consistent with our national interest from investors we trust, maybe they’ve got a record of good behaviour in Australia or some other way that we measure trust. So what we do now with foreign investments, we triage into 2 categories: the less risky stuff, much quicker. And we’re making really substantial progress. The stuff where it’s about critical minerals, critical infrastructure, critical data, some of those trickier areas, that’s getting more scrutiny. If you’ve got a finite level of resources, we’ve increased our resources for foreign investment screening, but when you recognise you’ve got some resource constraints, it makes a lot of sense to spend less of your time and effort on the non‑risky stuff so you put more time and effort and focus on the riskier stuff. And we think that will make a difference to particularly the faster path, streamlined path of the investment that we look at.
Terrific question, thanks so much.
ROB HENDERSON:
Rob Henderson, independent economist, Treasurer. Thanks for that very comprehensive rundown on productivity. My question is related to the one that you’ve just answered, and I notice you haven’t made any mention of the economic impact of President‑elect Trump’s victory. I did notice that he has put forward the idea that he’ll cut the corporate tax rate to 15 per cent. That’s half of what Australia’s corporate tax rate is now. And at an ABE function a while back I can remember Guy Debelle, former Deputy Governor of the RBA, talking about the Inflation Reduction Act and how that had caused a massive inflow of global capital into the US. I can only imagine that cutting the corporate tax rate to 15 per cent is going to have a similar effect in America. So, I guess my question is: you haven’t really mentioned the impact of tax reform on investment in Australia. I mean, surely this is a wake‑up call that Australia needs to proceed, not with just corporate tax cuts, but I think they’ve got to be on the agenda but also, you know, more general tax reform that will allow that to happen.
CHALMERS:
Thank you, another great question. I appreciate it. Our focus on tax reform as you know, as I touched on briefly in my speech, but I will happily go on and on about it has been on the income tax side, you know, cutting a couple of rates, lifting a couple of thresholds, the participation benefits that that brings. That’s been our focus. We don’t have any planning underway to cut the company tax rate, the headline company tax rate.
But there’s a heap of reform that we’re doing when it comes to the tax system and business. The production tax credits, parts of our Future Made in Australia policy, the investment, the instant asset write‑off for smaller businesses – there has been an element of reform, but I understand and accept that we haven’t been proposing anything like what President Trump has been proposing.
When it comes to the impact of changes in American policy, we anticipate that they will be substantial. I gave a speech about this in Canberra on Monday night about our expectations for policy changes in the US and what it means for us, including some of these questions that you are asking me today. I think the first thing to recognise is that there’s an element of uncertainty. So, there’s the 15 per cent company rate, there’s the income tax cuts which expire in the middle of next year in the US. Congress has to extend them if they want to, and there are other elements around trade and tariffs which have been a big part of the conversation here as well.
There’s an element of uncertainty about how much of the agenda talked about in the campaign will become policy passed by Congress. But we obviously are prepared for a whole bunch of outcomes and scenarios. We’ve done a heap of work. Well prepared, well placed, but not immune from policy change in the US, which we expect will be substantial.
When it comes to our headline tax settings – and here I acknowledge as well that the view that you put is not dissimilar to the view that’s been put by the BCA and others – we believe that Australia has a lot that is attractive which goes beyond our headline company rate. I meet with international investors all of the time. It’s a big and enjoyable part of my job as Treasurer. And frequently, what people want to know is about the stability of our laws, the quality of our human capital, our technological base, all of the sorts of things of things that I’ve covered today in one way or another.
So I think we need to be careful, even acknowledging your view and the view of BCA and others, not to assume that that is the only binary choice that investors are making about where they invest their capital. In my experience, it’s not.
SPEAKER:
Good afternoon, Minister – good afternoon, Dr Chalmers. It is very exciting for us to be here today with ABE. We hope you’re doing very well.
HOST:
That’s quite nerve wracking. It’s put me off here.
CHALMERS:
Imagine what it’s like for me, mate.
SPEAKER:
So, our question is a bit sideline, but it’s inspired from an IMF report that suggested that 60 per cent of jobs are being effected by artificial intelligence in advanced economies, which is Australia. Our question is: what will this mean for employment in the future for young Australians like us? Thank you.
CHALMERS:
Yeah, what a terrific question. If you think about the big things that will matter most to us in your career as a chief economist at one of these places – the net zero transformation, global, biggest transformation since the industrial revolution. I think that’s the main thing that I would encourage you to be across. But as part of that or alongside that, the way that our labour market, the way our jobs will change as we shift from information technology to artificial intelligence, that will be such a profound game‑changing, economy‑changing, nation‑changing phenomenon.
I think it’s a sign of the times, particularly a sign of the pace of change, that when I wrote that book with Mike Quigley about this 7 years ago – and from time to time I flick through it and I think about all of the thinking that’s happened since then and all the developments that have happened since then, particularly when it comes to AI and machine learning, a fascinating part of what we’re trying to do. And one of the reasons why one of our pillars is data and digital and technology is because we think this change will be profound, as you do by making it your question.
A big element of this is being able to teach and train people to adapt and adopt technology. I’m largely an optimist when it comes to technological change. I think it can enhance work rather than necessarily just replace work, and that’s really one of the main conclusions of the book that I wrote with Mike Quigley. But we need to make sure that people have the skills. And part of that is making sure that we can continuously upskill – catch up and then keep up with the pace of change in our labour market.
You know, in 2017 when we wrote the book, we talked about the idea that when someone like yourself finishes high school with full marks, they might have anticipated once that they would go and do some further education for 3 or 4 years if they wanted to, and that would sustain them until they retired at 65. And in 2017, we cited some research that said you’re more likely to have 17 different jobs across 5 different types of career. And so, what we need to do in our part of the shop is make sure that our teaching and training allows you to catch up and keep up with the pace of that change because it will be so profound, so influential.
SPEAKER:
Thank you.
DAVID TAYLOR:
G’day, Treasurer.
CHALMERS:
We like to keep them waiting sometimes.
TAYLOR:
It’s David Taylor from ABC News.
CHALMERS:
Hi, David.
TAYLOR:
G’day. Does the Albanese government have any further plans for tax relief for workers – not corporations, workers? Because Peter Dutton made it clear this morning on RN Breakfast that, you know, he was potentially walking back from it because of the obvious inflationary pressures. So, is there any more relief for workers?
CHALMERS:
Well, a couple of things about that. One bit enthusiastically, one bit reluctantly. Our focus is on the big change that we made to the tax cuts. You look at the impact that’s had on take‑home pay; you look at the impact that’s had – modest but meaningful impact that’s had on recent reads of consumer confidence, the way that that’s helping households navigate a very difficult patch, we’re very proud of that.
We’re proud of that because we took the right economic decision for the right reason, and it was politically difficult. But we changed those tax cuts. They came in from the 1st of July. That’s been our focus. We haven’t been working on kind of a whole new raft of income tax changes. We just cut a couple of rates and lifted a couple of thresholds only – whenever it was – 5 months ago, 4 months ago.
Now, I want everyone to know that I’m reluctant – in terms of the political debate today – I’ve tried to focus almost entirely on the economics, but it was, I think, notable what Peter Dutton said this morning about income tax cuts. You will recall the history of this when we said that we wanted to change the tax cuts, Peter Dutton wanted an election over it. He called for an election over it. That’s how angry he was about it. Then you had Sussan Ley say that they were going to wind back our changes. Then you had some combination of Angus Taylor, Sussan Ley, I think Jane Hume, from memory, and Peter Dutton said they are going to take to the election a policy to reinstitute Stage 3 – the old Stage 3 – either in full or in part.
And today, as you rightly identified David in your question, Peter Dutton told Patricia Karvelas that that was no longer the intention. And that would be news to Angus Taylor, who has told us repeatedly that he’s working on a policy for this election which reinstates Stage 3 in whole or in part and the principles of – I mean, they are hopelessly divided on this.
They are all at sea on this question of income tax, and we’ve made our policy clear. We legislated it. We explained why we came to that view. We’re very pleased and proud that those tax cuts are rolling out in our community right now, because people desperately need them. And I think that is put at risk by the fact that Peter Dutton and his colleagues are casting an element of uncertainty over those tax cuts. Will they or won’t they change them? Will they roll them back at Sussan Ley said or not? Will they come to the election with a different policy to reinstitute Stage 3 or not? That is very unclear.
The final point that I’d make about that is we are now deep into the third year of a 3‑year term. And our Liberal opponents don’t have a costed or credible or coherent policy on the economy. They don’t have any policies on the economy that are credible, coherent and costed, and you can put Stage 3 tax cuts into that pile. They are hopelessly divided on that today. And they need to clear it up because we don’t want to see the Liberals and Nationals risk the tax cuts that we legislated, and people have a right to know, are they going to blow out deficits even further by borrowing to give people on higher incomes bigger tax cuts? These are the sorts of questions which should have been answered well and truly by now.
TAYLOR:
Thanks, Treasurer.
PHIL O’DONOGHUE:
Treasurer, Phil O’Donoghue from Deutsche Bank. Thanks so much for your remarks today. I wanted to step away from productivity briefly and just about the RBA reforms, very important, of course, for us that work in the markets. Specifically, the new board. Now, stuck in legislation. The Coalition made –
HOST:
I got your CV, Phil. I got it. You only had to send it once, mate.
PHIL O’DONOGHUE:
Yeah, stuck in legislation. Is the government thinking about perhaps changing the form specifically of the new monetary policy committee? Australia stands out when I look at peer economies in having this idea of externals outlaying the internals in a voting model? Are you thinking about changing that to get it through Parliament?
CHALMERS:
There’s a couple of things about that, let me try and be efficient with it. I could talk all day about the RBA reforms. First of all, the proposals recommended to us by the independent panel do not change the internal‑external balance of the decision making of the committee, whether it’s the monetary policy committee that we’re trying to create, whether it’s the existing board. It’s 6–3 and I’ve heard people who should know better pretend that it’s all of a sudden going to shift the balance from internal to external, that is – excuse my bluntness – rubbish. It goes –
PHIL O’DONOGHUE:
The new board will have an explicit vote. I mean, that’s a big difference.
CHALMERS:
I beg your pardon?
PHIL O’DONOGHUE:
The new model will have a vote. I mean, that’s a big difference.
CHALMERS:
Well, technically they have a vote now, they just don’t publish it. And so, I’m not being disrespectful to you, I’m referring to others. There’s been a misunderstanding, let’s be charitable about it. It goes from 3–6 internal‑external to 3–6 internal‑external, so that is not a revolutionary change.
Now, more broadly on the RBA reforms, if it were up to me, they’d already be bedded down, they’d already be legislated. We were under the impression that that would’ve happened, it is very disappointing to us that it hasn’t happened. I’ve tried to be as bipartisan as I can with these – lots of briefings, the panel briefed the Opposition, I briefed the Opposition, the Treasury briefed the Opposition. Lots of meetings over a long period of time, a lot of respectful inclusion, but unfortunately, it didn’t go the way that we’d hoped in terms of the 2 major parties agreeing this in the Senate. And we’ve got to play the cards that we’re dealt in the Senate.
And so, we are working through our options. Our preference is still to bed this down as soon as we can. We’re working to that end, but we recognise that there are some pretty substantial political constraints. But in terms of the substance of it, the composition of the board, the changes that we intend to make – and I welcome Governor Bullock’s enthusiastic support for these changes – we don’t see them as revolutionary changes, we see them as ways to modernise the central bank, to make sure it draws upon national best practice and in the process makes great decisions.
O’DONOGHUE
Thank you.
ALEXI DEMETRIADI:
Thank you. Thank you, Treasurer, for your address, and thank you to the ABE for hosting us as well today. Alexi Demetriadi from The Australian newspaper. The government has been very concerned about allegations against corporations like Coles and Woolies. The Deputy Chair of ASIC stood up earlier today in Sydney and – to address the media, to address everyone about the allegations surrounding CBUS. Given that, do you hold the same concerns about the allegations against CBUS and their charges, and you have confidence in its chairman, Wayne Swan? Should he stand down or should he stand down if the allegations are proven?
CHALMERS:
Well, first of all, we think it’s really important that the regulators do this work and where it’s appropriate that those conclusions and allegations are tested in court. That shows, in my view, that the regulators are doing their job and they do that across the economy and that’s a good thing.
Now, those ASIC allegations are before the courts now and the standard practice – which I’m adhering to today again – is that we don’t comment on matters before the courts. That would be an inappropriate thing to do. But I’m a strong supporter of our regulators. Where they find issues that concern them, they should test them, and that’s what’s happening now.
DEMETRIADI:
Thank you.
HOST:
We’ll go to Tapas and then, sorry, that will have be to the last question because I know the Treasurer has to travel directly after this.
CHALMERS:
I’m going to take Peter’s, too, because now he’s just walking back to his chair in a disappointed fashion. Can we take 3 more?
HOST:
Of course.
CHALMERS:
Let’s go.
TAPAS STRICKLAND:
Thank you, Treasurer. Tapas Strickland from National Australia Bank. And we’re talking about collective nouns for economist. I’d probably put gaggle of economists up there. We’d probably have very divergent views on where things are going. And talking about a collective noun, there’s been a plethora of productivity reforms over the past 2 decades and none of it has really hit the policy agenda, none of it has really been implemented. I remember Gary Banks giving many, many speeches, former RBA Governor, saying in reply to what can we do for productivity, just go ask the Productivity Commission and do those reforms. What do you think has prevented those reforms being implemented in Australia, both from an electorate point of view and also from a state government point of view? And why do you think your competition agenda, why do you think your productivity agenda has a greater chance of being implemented by your government or future governments? Thank you.
CHALMERS:
Thank you. I think the focus has been too narrow. One of my frustrations – and many of you would have heard this in kind of boardroom briefings over the years – is that we shouldn’t pretend – and we don’t pretend – that the only way to boost productivity in our economy is to focus narrowly and obsessively on industrial relations.
My view – my economic view, not just my values – tell us that we should look more broadly than that, that we don’t want to make our economy more productive by making people work harder and longer for less. We want to make our economy more productive by better adopting technology and net zero and the care economy and skills and all of the things I talked about today. Productivity comes from competition and dynamism, all those sorts of things. And so, I think the focus has been too narrow.
And I also think that we need a more sustained focus on it and what I’ve tried to convey to you today is inflation is our biggest challenge, we accept that, trying to maintain the gains in the labour market, I’m okay with that so far, the soft landing is, at the moment, looking pretty good. But what I want to assure you – all of you, not just you – is that as we think about those near‑term pressures, trying to land this thing in a way that is the best combination of outcomes, that we haven’t lost sight of the longer term. We need a sustained focus and I think the focus in the past has been too narrow and not sufficiently sustained.
Both of you are looking at each other. I promise I’ll get to you Julie. I’ll finish with you, okay. Why don’t we go, Peter, and I’ll finish on you because you’ll be kinder than him.
PETER HANNAM:
Peter Hannam from The Guardian. So, look, you showed the real wages data just then, and there were some promising numbers out today, so we’ve had 4 quarters in a row of positives. But the previous 7 or 8 were quite negative. And I’m wondering, given that the US also had real wage gains towards the end of the current administration but that didn’t cut through in the recent election, I’m wondering how will you, I guess, frame a message for people who didn’t have such a soft landing perhaps in the past couple of years as you approach the next election?
And just as a quick one as well, you talked about the great fragmentation. And it seems like, on climate policy, the Trump administration might bring the greatest fragmentation. And I’m wondering, how do you think the Australian people will be reminded why it’s important to stay the course on net zero, particularly if the US decides it’s not interested?
CHALMERS:
The change to administration in the US does introduce another element of uncertainty in the global net zero transformation but the weight of the world’s direction more broadly encourages us and convinces us that we’re on the right track. No one, I think, can really argue against the role that cleaner and cheaper energy will play in our own industrial and economic development or, indeed, more broadly.
We take seriously what President Trump has said about this. We obviously had a range of conversations at our end led by Minister Bowen and others about this, but the direction of travel is pretty clear in the world, in the global economy. We’ll factor in changes in international developments, of course we will, but overall, this will be the defining change and challenge in our economy over a longer time frame than governments in either country.
On real wages, a great outcome today on real wages – 4 quarters in a row where we’ve seen real wages growth. Very, very encouraging. Real wages growth is one of the things I focus most on, it’s one of those indicators I care most about and when we came to office, real wages were negative 3.4. You all know that real wages is 2 things: it’s inflation and it’s nominal wages. Wages are growing and inflation is falling.
And I read a lot of stuff over a period that said you couldn’t have strong wages growth and have inflation moderating. We’ve shown it’s possible. We’ve shown it’s happening. There is not a whiff of a wage price spiral in our economy and that’s a good thing. We have turned around real wages. We know we’ve got a lot of ground to make up. We don’t pretend that people are all of a sudden doing it easy, they’re still doing it tough, but getting real wages growing again in a sustainable way has been a really, really big part of our agenda, and we’re pleased to see the progress being made today in that data. Julie, over to you.
JULIE TOTH:
Julie Toth from PEXA Group.
CHALMERS:
I already introduced you to everyone, Julie.
TOTH:
The first female economist to ask a question I believe. I wanted to ask you about allocative efficiency. You mentioned it a couple of times in your speech. It’s all about, you know, encouraging flexibility and mobility. Where do you see or, you know, what’s your initial thinking on the role of infrastructure and particularly housing policy in encouraging greater mobility and flexibility?
CHALMERS:
First of all when it comes to housing, we’ve got a huge agenda and some of the things we’re looking at in the National Competition Policy work, whether it be about pre‑constructed homes and the like, is about that. Obviously, the workforce issues are extremely challenging – extremely challenging – there’s an element of mobility in that but also capacity. We’re seeing a little bit more capacity in the construction pipeline, but that’s been a perennial challenge for a little while now. And so, a huge chunk of our efforts, whether it’s our competition policy, our work with the states on planning and zoning, whether it’s our skills policy – and we’ll have more to say about that in the next half of the year or so – all of these things are about recognising that we have industries which are not set up to succeed.
And right now, construction as a really crucial part of our economy, is not what we need it to be because of some of the issues you raised, some of the issues that I raised.Our skills base is not sufficient, our planning and zoning is not sufficiently fast, we have a whole bunch of changes and challenges that we’re addressing right now. We’ve got a huge amount of Commonwealth investment, we’ve got a big target to build 1.2 million homes over the next 5 years – that’s going to be hard, it will only happen if we all do our bit, we’re prepared to do our bit.
HOST:
Please thank the Treasurer again.