ALLISON LANGDON, HOST:
All right, well, I want to take you back to the year 2001.
[Kylie Minogue “Can’t get you out of my head” plays.]
CHARLES CROUCHER, HOST:
That will do it.
LANGDON:
John Howard was Prime Minister, Kylie Minogue was top of the charts and the inflation rate was at 6.1 per cent.
CROUCHER:
That was the last time the inflation rate was as high as it is today, the Treasurer describing it as “confronting but not surprising”. And the Treasurer, Jim Chalmers, joins us now in Canberra. Treasurer, good morning. This doesn’t even include the electricity price hike that’s coming or the petrol price hike that’s coming. I mean, how much worse is it going to get?
JIM CHALMERS, TREASURER:
Good morning, Charles and Ally. One of the things I want to do today is to bring people into our confidence about how difficult we feel this inflation challenge is going to get. And you’re right that even those confronting figures that were released yesterday don’t take into account that big electricity price rise, for example, that was hidden from us during the election campaign. So, our expectation – or the Treasury’s expectation – in the numbers that I’ll release today is that we’ll get inflation north of 7 per cent by the end of the year, but then it will start to moderate after that as well. This inflation challenge is set to get a bit more difficult before it gets better but it will get better.
LANGDON:
Does it go much above 7 per cent, you reckon?
CHALMERS:
I’ll go through all the numbers around the middle of today in the Ministerial Statement. I want to speak directly to Australians via their Parliament about the specific nature of the challenges as we see them, but it will be north of 7 per cent, our expectations for inflation. It’s already confronting enough with a 6 in front of it. It will be difficult with a 7 in front of it. But what I want to tell people today Ally is not just the size of this challenge, but the shape of it, when we expect it to moderate, and also what we intend to do about it when it comes to cost‑of‑living relief in responsible ways in areas like child care and medicines, but also dealing with some of these issues in our supply chains, which are pushing prices up as well. People know this inflation problem is mostly global, but there are some domestic elements to it as well, so we’re focused on those.
CROUCHER:
The issue here seems to be inflation at 7 per cent and wages growth nowhere near that. People are going backwards and fast. How quickly can they expect to see wages rise at any rate that’s close to inflation?
CHALMERS:
Well, that is the issue, Charles, and you’re right that it’s got two parts to it. We need to see inflation moderate, and we need to get wages growing again after a decade of deliberate wage stagnation. And so our focus on the inflation side of the story is about dealing with some of those issues in our supply chains and our focus of our economic plan is all about getting those wages growing again by making it easier for people to earn more, by making child care cheaper, by training people for higher wage opportunities, by investing for a future made in Australia and those secure well‑paid jobs, by training people for the opportunities as they emerge in our economy. That’s how we get wages growing again.
I think people understand around Australia that we’ve had a lot of these challenges in the economy for some time now. They’re particularly acute right now and they’ll take a little while to solve. You can’t fix, you can’t clean up a mess that has taken nine years to make in nine weeks. People understand that. But the hard work has begun and what today is all about is painting a more accurate picture of our expectations for the economy so that people know what we’re working with and working through as we frame the Budget in their interests in October.
LANGDON:
Jim, I sort of feel like since you’ve come into power, we’ve sort of got a sense of how bad it is. People want to know what are you going to do about it, and you headed into the election promising real wages growth so people want to know: when will that be delivered?
CHALMERS:
Well, Treasury expects real wages growth in this term of parliament, and for the reasons I went through a moment ago, you know, inflation north of 7 per cent, nobody expects that wages will keep up with that kind of extraordinarily high inflation. But in time, as we work to get inflation down, as we work to get wages up through the course of this term, we expect to see or Treasury expects to see that real wages growth that has been absent.
LANGDON:
That seems quite ambitious.
CHALMERS:
Well, forecasts are notoriously difficult in volatile times and so obviously there’s a degree of caution, particularly given the history of wages forecast over the last little while. So we’re realistic and cautious and careful about these forecasts. But the choice is between bringing people into our confidence or not and as you know, Ally, we’ve spoken on this show – and Charles as well – for some time: I’d rather be blunt and upfront about these economic challenges. I don’t want to sugar coat it. I don’t want to tiptoe around it. I want people to have an understanding of what we think that we’re dealing with because there’s an appetite for people to come together around these big economic challenges, and that begins with being honest and upfront about them.
LANGDON:
Look, and I get that, Jim. I think you’ve also got to be very careful too because you’ve got people who are very scared – you talked about it yesterday – deciding between whether they buy vegetables or pay their rent each week. So when people are that scared and Australia is performing better than a lot of other countries, you’ve got to make sure that there is optimism in the message as well, that there is hope.
CHALMERS:
And I’m optimistic about the future of our economy and the future of our country. I’m very optimistic about it. What I hope to do today when I update all these figures and speak to people through their Parliament is to give them the reassurance that we expect things to get better before long, but first of all, we’ve got a difficult period to go through. I am confident that Australians will once again weather the storm, but there will be some heavy weather for the time being. The economy is growing but so are the challenges. But I am optimistic about the future of our country, the future of our economy. Some of these issues will begin to subside throughout the course of next year, and they now have a government which is focused on getting real wages growing again. For all of those reasons, I’m confident about the medium term, but first it’s going to be a little bit difficult.
CROUCHER:
In the meantime, is there short‑term cost‑of‑living relief coming – be it announced today or in the October Budget – that will provide that stopgap measure to get them to the part where wages rise?
CHALMERS:
Well, unfortunately, we’ve got a budget, which is heaving with that trillion dollars of Liberal Party debt that we’ve inherited, so some of our choices are constrained here on this front, and we’ve tried to be upfront with people about that as well. There’s not lots of cash to throw around on cost‑of‑living relief. There’s not even enough to fund what would be good ideas in normal times. So, we’ve got to be upfront and responsible about that as well. But there is cost‑of‑living relief coming, particularly for people in the childcare system, particularly for people who are buying medicines; and also, we’ve supported that minimum wage increase for low‑income workers. There will be some indexation of the pension in September to try to keep up with some of these cost‑of‑living pressures. So there is cost‑of‑living relief, but I don’t want to pretend to all of your viewers that there will be lots of cash splashing around in the October Budget. We can’t afford to do that.
LANGDON:
Just very quickly too, US – obviously Federal Reserve just increased interest rates by 0.75 per cent. Looking at what’s happening globally it’s hard to see how we’ll avoid a global recession.
CHALMERS:
People have pretty grave fears about the international economy. I think the global economy is treading a pretty precarious and perilous path right now. That’s everybody’s expectation and that has implications for us as well. One of the reasons why our expectations for growth here in Australia will be downgraded today in the numbers I release is because we’ve got that global slowdown combined with the impact of rising interest rates here at home. So, of course, that will have an impact on economic growth here as well.
But we’ve got a lot of things going for us, Ally. We are in lots of ways better placed than other countries around the world. That doesn’t make it easier for people to pay their bills here, that comparison, but it is worth remembering we’ve got a lot going for us in Australia. We’re in for a difficult period but we will get through it.
CROUCHER:
Treasurer, we’re out of time but just quickly Jacqui Lambie said this morning she thought Australia might be heading to a recession. That’s not going to happen, is it?
CHALMERS:
That’s not our expectation, not the Treasury’s expectation. But people have got legitimate concerns about slowing growth in our economy. I don’t agree with that assessment. I think what we’ve got in our economy is an economy which is growing but so are our challenges, and it’s the challenges we’re focused on.
LANGDON:
Even a Kylie Minogue track can’t brighten the news this morning, can it? Thanks Jim, appreciate your time.