ANDREW CLENNELL, HOST:
Let’s bring in Treasurer Jim Chalmers live from Parliament House. Jim Chalmers, thank you for joining us. How high are you expecting the cash rate to go up this year?
JIM CHALMERS, TREASURER:
Good afternoon, Andrew. Look, we don’t pre-empt decisions of the independent Reserve Bank, but the Governor has made it clear, as difficult as today’s interest rate rise is and will be for people who are already facing skyrocketing costs of living, the expectation, really, across the board is that there will be more interest rate rises to come and that’s because this inflation challenge in our economy will get harder before it gets easier. But that’s the important thing, Andrew - it will get easier. The inflation that the Reserve Bank Governor and his board is trying to deal with, in their expectation, will begin to moderate next year. There is reason to be confident about the future of the Australian economy but first we have to navigate this tricky combination of economic circumstances that we’ve inherited.
CLENNELL:
Phillip Lowe has spoken about a normalising of interest rates post-pandemic. Is that how you see this?
CHALMERS:
The Governor can speak for himself and use his own words. Obviously, I have a lot of respect for Phil Lowe and I talk with him frequently about these issues that we confront in our economy. I think it’s self‑evident, judging by the Governor’s own comments, that he expects interest rates to go up further this year and that is difficult news for a lot of Australians. We understand that the interest rate decision taken today by the independent Reserve Bank will put more pressure on families who are already doing it tough enough having to contend with the skyrocketing costs of essentials. And so, today is a really difficult day, really tough news for a lot of Australians who will have to find a substantial amount of money in their monthly household budgets to meet these rising interest rates at the same time as they contend with some of these other price pressures in our economy.
CLENNELL:
But do you see it as normalising things? Do you concede that we’ve had lower interest rates than you would normally expect and most Australians should have expected this?
CHALMERS:
I think the fact that Australians are expecting interest rates to go up doesn’t make it any easier for them to find the money in their monthly budgets and I think it’s self‑evident that interest rates have been historically low for some time because of a combination of issues, including, of course, the pandemic most recently. But we’ve had anaemic growth in this economy for some time even before COVID‑19, and so interest rates have been especially low by historical standards. I think Australians do understand why interest rates are going up. They expect them to go up, but it doesn’t make it any easier for them to find that extra money to service their mortgages.
CLENNELL:
We’ve got people at home at the moment who can’t get certain fresh vegetables, who have food and electricity and petrol and gas costs going up, and they’re about to cop hundreds of dollars a month in extra repayments as you point out. What’s your message to them today?
CHALMERS:
We understand that this is a difficult day for a lot of people who are already struggling to make ends meet for all of the reasons that you rightly identify, Andrew. Now, at the same time as we’ve got the skyrocketing prices for groceries, petrol, electricity and many of the essentials of life, people are now having to contend with rising interest rates as well. And the Governor of the Reserve Bank made it clear when he started to lift interest rates before the election that there were more interest rate rises to come. People are bracing themselves for a difficult period ahead as all of these inflation pressures and all of these pressures on household budgets come together at once in the worst possible way. So, it will be a difficult period ahead.
Our job as the Government is to take responsibility for what we can influence. That’s why our economic plan is about cost‑of‑living relief in important areas like childcare and medicines. It’s why it’s all about growing the economy in a way that doesn’t add to these inflationary pressures so that we can have that better future and that stronger economy, where we can ease some of these pressures that people are under. But we’ve also tried to be upfront with people. There’s no switch that you can just flick to make these inflationary pressures go away or to make a trillion dollars of debt that we’ve inherited go away. This is a difficult set of circumstances that we’re all contending with together, not just governments but Australians more broadly, and the best way to get through it is to work together and to work to ensure that we have a Budget and an economy as resilient as the Australian people.
CLENNELL:
So, you’ve indicated, however, there will be some cost‑of‑living relief in the Budget, I think, outside your election promises. When Scott Morrison and Josh Frydenberg looked to do that, economists criticised them for pushing up inflation. That must be a difficult balance. Would you look at things like targeting gas and electricity bills for relief?
CHALMERS:
No, we’ve made it clear, Andrew, that we’ll implement our commitments from the election…
CLENNELL:
That’s all? No further cost‑of‑living relief in the Budget?
CHALMERS:
We will obviously evaluate the Budget position and the economic position and the pressure that people are under, but the commitments that we’ve made are in areas like childcare, like medicines. We also supported an important minimum wage rise for low‑paid workers in this country to help them to contend with these cost‑of‑living pressures because in addition to inflation going up and getting worse before it gets better, and in addition to interest rates going up, we’ve obviously got falling real wages and, at the same time, we’re being constrained by this Budget, which is absolutely heaving in a trillion dollars of Liberal Party debt. That is why our plan…
CLENNELL:
Mr Chalmers, should people steel themselves then, for a very tough Budget in October?
CHALMERS:
I think people are bracing themselves for a period of high prices and rising interest rates, and what we have told them to expect in the October Budget is really three things: to implement our commitments; to provide some cost‑of‑living relief in areas like childcare and medicine costs; and also to start to deal with this legacy of rorts and waste in the Budget, which has meant that we have a trillion dollars of debt and nowhere near enough to show for it. Those are the tasks for the Budget.
Sitting over the top of that, because we’ve had this wasted decade of missed opportunities in the economy which have left us more vulnerable to these kind of economic shocks that we’re seeing right now, our task is to make the Budget and the economy more resilient. Because whether it’s natural disasters or inflation spikes or labour shortages which come about from the failure to train enough Australians, whether it’s a decade of energy policy chaos which has made our energy markets more vulnerable, all of these things have accumulated and come together and made us more vulnerable than we would like to be. And so, our job is to start to responsibly address that. Part of that is being upfront with people about what we can influence and what we can’t, being upfront with people about our economic plan, which is about dealing with this energy policy chaos, a future made in Australia, getting childcare costs down, training more Australians, all of the things that economists would say you need to be doing in this time of high inflation and rising interest rates. That’s what our economic plan is all about and we take responsibility for implementing it.
CLENNELL:
Will you be increasing the efficiency dividend in the Budget?
CHALMERS:
Look, that’s not one of the options that we’re considering. We’re considering, obviously, as we go through the Budget line by line [indistinct] more and more of the rorts and the waste and mismanagement which have defined almost a decade now of Liberals and Nationals treating the Budget as their own personal political slush fund and not a way to invest in the future economic resilience of this country. That’s our priority when it comes to Budget repair. Katy Gallagher and I have already begun that audit of rorts and waste and we expect that to turn up some savings. In addition to that, we need to make progress on multinational taxes. We need to make sure that our economy is geared towards growing the right way without adding to these inflationary pressures. That’s what our economic plan is all about.
CLENNELL:
Will the NDIS be cut? I mean, you speak about waste. There’s clearly waste in that program. Will that Budget be cut?
CHALMERS:
That’s not our intention, Andrew. We want to make the money that is committed to the NDIS work more efficiently on behalf of some of the most vulnerable people in our country. And Katy and I have had discussions with Bill Shorten and with others about how we make sure that we are getting maximum bang for buck for every dollar invested in the NDIS. We created the NDIS. We want to make sure that it works as best as possible. That’s not about slashing spending in the NDIS. It’s making sure that it’s doing the job that it’s intended to do. We will have more to say about the NDIS in time, but we’re not trying to hack spending away from the NDIS. We’re trying to make it more cost-effective, to the ultimate benefit of Australians with a disability.
CLENNELL:
In terms of the petrol excise cut, I know you’ve said it will come off in September. Could you stagger it though, maybe chuck 10 cents back on it first then 20 later on?
CHALMERS:
Look, we’ve tried to be upfront with people, Andrew, about the prospects for that petrol price relief. The legislation that was passed before the election had it ending in September. It costs billions of dollars to extend even for six months or even in a staggered way would be very costly. So, we’ve got to weigh up all of the various considerations against the fact that we’ve got a Budget which has got a trillion dollars of debt and that debt is becoming more expensive to service as interest rates go up as well. So, we have to weigh everything up, but we’ve tried to be upfront with people and say they shouldn’t expect that petrol price relief to continue forever.
CLENNELL:
Jim Chalmers, thanks so much for your time.
CHALMERS:
Thanks, Andrew.