JIM CHALMERS:
First of all, can I say about that horrific tragedy in Thailand, how heartbreaking, how heart‑wrenching it is to think all of those little kids dropped off at childcare that day who won't be going home. I think that every Australian heart goes out to the parents, the families and the communities impacted by what is really an unspeakable and unfathomable tragedy. I know that that community and those families will be going through a horrific time as they contemplate the loss, the thieving of those little souls and what that means for those who have survived it.
I also wanted to say that I've had the opportunity this morning to meet with Wayne Byres, the outgoing chair of the Australian Prudential Regulation Authority. I had the opportunity to thank Wayne for a remarkably long period of dedicated service to the nation as Chair of APRA and before that as well. That's not an easy job being the chair of APRA given what the financial system has been through the last couple of decades, but he's done a really quite remarkable job. We're very grateful to Wayne Byres for the contribution that he has made over a long period of time now. He's been supported and appointed by governments of both political persuasion and he's decided to move on and to do other things and I really wish him well. I'm glad that I got the opportunity today to thank him on behalf of myself and on behalf of the Government and behalf of the broader Australian community as well for all of that effort and all that dedication and diligence that he has provided regulating our financial system.
I'm here to give a speech today about the backdrop for the Budget that I'll hand down in less than three weeks’ time. And there have been two important developments overnight and this morning which feed into our considerations as we finalise the Budget for later this month. Overnight, the IMF Managing Director has pointed out that the risks of a global recession are intensifying. She has warned against the ongoing damage that would be done by a prolonged recession around the world. We share the IMF Managing Director’s concerns about the deteriorating global economy. The global economy has deteriorated significantly even over the course of the last few weeks, and that's been reflected in the increasingly concerned and concerning commentary from the IMF Managing Director overnight. The world economy is in a dangerous place right now. The storm clouds are gathering in the global economy and no responsible government could ignore that as they finalise a Budget.
This morning as well the Reserve Bank has put out their financial stability report and in doing so, they have made what I think is an obvious point, and that is that the higher interest rates go, the more they will sting ordinary Australians. Some Australians have a buffer in their personal finances, but many don't. And so six consecutive interest rate rises in six months, which began before the election and continued after the election, in expected but still difficult ways will ‑ and is ‑ having an impact on the finances of ordinary Australians. And that's the point that the Reserve Bank was making today.
The backdrop for the Budget that I hand down in less than three weeks’ time will be high inflation and rising interest rates, a deteriorating global economy and persistent structural pressures on the Budget which will not be compensated for by higher commodity prices. And in this environment of high and rising inflation, difficult global economic conditions and persistent spending pressures, we will put a premium on what is responsible and affordable and sustainable and best targeted to this complex combination of economic conditions that we confront. No responsible government can ignore the inflation in our economy, the situation in the global economy or the persistent structural pressures which are in our Budget. And so, as we finalise this Budget, working closely with Katy Gallagher and the Expenditure Review Committee and the Government more broadly, we will put a premium on what's responsible and affordable and sustainable and what makes the most sense when it comes to dealing with this complex combination of economic conditions that we confront.
JOURNALIST:
[INAUDIBLE]
CHALMERS:
The two parts of that question are not inconsistent. First of all, we've got an inflation problem not because we've got a breakout of wages growth. On the contrary, for the best part of a decade, and partly as a consequence of a deliberate government policy of wage suppression and wage stagnation, wages haven't been keeping up with the cost of living. We've been up‑front with people, we've levelled with people and said that that situation will take some time to turn around, particularly when inflation is going through the roof as it is currently. When it comes to the tax cuts, I think we've made the obvious point that when it comes to cost‑of‑living relief it should be targeted to people on low and middle incomes. We don't have an endless amount of money in the Budget, which is heaving with a trillion dollars in Liberal Party debt. And so when it comes to providing cost‑of‑living relief, like I will in the October Budget, when it comes to childcare and medicines and the cost of education, we need to make sure that cost‑of‑living relief has an economic dividend as well and that's what we're focused on.
JOURNALIST:
[INAUDIBLE] ‑ will include decisions around tinkering with stage three tax cuts?
CHALMERS:
I'm making a broader point and I think it's an uncontroversial point that you'd expect to hear from a Treasurer putting the finishing touches on a Budget, and that is that we will put a premium on what's responsible, what's affordable, what's sustainable, and what's targeted and relevant to the economic conditions that we confront. I think Australians expect that from us. I think Australians expect that from me. In less than three weeks, the Budget will be all about responsible economic management. We do have a trillion dollars in debt that we inherited. We do have difficult global conditions and rising inflation, and we do have persistent structural pressures on the Budget and no responsible government could ignore those.
JOURNALIST:
So has the Government’s position on stage three tax cuts changed?
CHALMERS:
Our position hasn't changed, as we said throughout the week. I'm making a broader point that all of the spending in the Budget needs to be defensible on economic grounds, particularly when you consider the really quite extreme pressure on our economy and on our Budget because of that combination of inflation and global conditions and persistent structural pressures on the Budget.
JOURNALIST:
You’re saying you might scale back stage three tax cuts but not actually saying anything at all. Can you categorically say you won’t scrap, scale back or change those stage three tax cuts?
CHALMERS:
I've been clear throughout the course of the week ‑ we haven't changed our position on those tax cuts. And what I've tried to do is to level with the Australian people about the complex combination of challenges that we confront as we put the finishing touches on the Budget. No responsible government can ignore the fact that the risks to the global economy are rising rather than decreasing. The pressures on the Budget in a persistent structural way are growing rather than dissipating, and the pressure on household budgets from this inflation challenge and rising interest rates is putting more, not less, pressure on family budgets as well. I've tried to be up‑front with people and level with people about that combination of challenges and pressures. They are the three defining features of the economy and the Budget that we confront as we put the finishing touches on the Budget. I think making those points should be entirely uncontroversial.
JOURNALIST:
[INAUDIBLE]
CHALMERS:
I think Australians are really smart and they understand that the global economy is in a dangerous place. They know that the storm clouds are gathering in the global economy. They know that their costs of living are rising and their real wages are falling and they know that their interest rates are going up. And they know that the growing costs of providing services that we support ‑ aged care, health care, the NDIS, and defending the nation, as well as the cost of servicing the trillion dollars of debt that we've inherited ‑ all of those costs are going up as well. And so I think Australians are up for a pretty frank and up‑front conversation about what we confront together. And what I'm determined to do, not just in the context of this Budget, but for as long as I'm doing this job, is to be up‑front with people and level with people and bring them into my confidence about the issues that we are confronting and how we navigate those issues together. That's what I've been doing all of this week. That's what I've been doing since I've been the Treasurer and that's what I'll continue to do. Thanks very much.