ANDREW CLENNELL:
Joining me live from his electorate in Queensland is the Treasurer Jim Chalmers. Jim Chalmers, thanks for your time.
Let’s get to your cost‑of‑living relief in a second, but first I wanted to ask you about a monthly inflation figure of 4 per cent out this week. Should the Reserve Bank lift rates to get this under control? And should people be alarmed if they do, or realise it just might be necessary to prevent further pain down the track?
JIM CHALMERS:
Good morning, Andrew. As you know I don’t pre‑empt or predict or give free advice to the independent Reserve Bank. I am focused on my job which is to get on top of this inflation challenge which persists in our economy.
Inflation is still too high but it’s much lower than what we inherited and our policies are helping. The Reserve Bank Governor made it clear that turning those 2 big Liberal deficits into Labor surpluses, having those 2 surpluses is helpful in the fight against inflation and we’ve also designed that cost‑of‑living relief to put downward pressure on inflation rather than be part of the problem.
We know from last week in the inflation numbers and also with a report from the ACCC that things like our energy bill relief are actually taking the edge off inflation rather than adding to it.
CLENNELL:
You’ve made comments in recent days sometimes the last part of getting inflation down is the hardest part. Is your 2.75 per cent inflation prediction by the end of the year from your Budget too optimistic there?
CHALMERS:
It remains to be seen but we’re confident about the future trajectory of inflation but we’re not complacent about it – I think we’ve made that really clear. And when you compare us to the rest of the world, it’s really important that you remember that our inflation peaked later and lower than most of those other countries but our experience has been very similar otherwise. And both the Reserve Bank Governor and the Deputy Governor of the Reserve Bank have said in recent days and weeks that our experience of the downward trajectory of inflation is pretty similar to what’s happening around the world. We saw in the US, for example, that inflation ticked up a couple of times earlier in the year before it ticked down again. We saw in Canada, last week in fact, that core and headline inflation both ticked up. It’s ticking up in the Euro area as well.
And so our experience is not different to what’s being seen around the world. Inflation has moderated in welcome and encouraging ways, but it doesn’t always moderate in a straight line – it zigs and zags on the way down and that’s what we’re seeing.
CLENNELL:
Indeed. I noted that figure in Canada. Could it be too optimistic then, 2.75?
CHALMERS:
As I said, Andrew, we’re confident but not complacent about those forecasts. One of the major changes to the forecast in the Budget as a consequence of our responsible economic management, combined with the design of our cost‑of‑living relief is that the Treasury did bring forward their forecasts for a return to the inflation targeting band. Obviously that remains to be seen, there’s always an element of uncertainty around that but we think the way that we’ve designed this substantial, meaningful but responsible cost‑of‑living relief will put downward pressure on inflation rather than upward pressure on inflation and it will help us get back to band in the estimation of the Treasury perhaps by the end of the year.
CLENNELL:
Given there’s low unemployment at the moment, could Australia withstand a recession without experiencing that 1990 style recession which had high unemployment? Why is it important to avoid that technical recession? You obviously would feel it is politically, but is it in the way it used to be?
CHALMERS:
Well I think whether you’re the government or the Reserve Bank, our job here is to get on top of this inflation challenge without smashing the economy. Obviously the labour market is one of the most important considerations, it’s been incredibly resilient. Unemployment around 4 per cent is a pretty remarkable achievement given all the pressures coming at us from around the world and around the country. So we want to get on top of inflation without seeing a big blow‑out in unemployment, without seeing our economy go backwards. What we saw in the March quarter earlier this year was that growth is already incredibly flat. We know from retail figures, we know from savings ratios and we know from the labour market that the interest rate rises which are already in the system are already hammering consumption, particularly discretionary consumption and having a big impact on the economy already.
And so for the bank and for the government, our goal is to continue to grow, to keep as many people in work as we can at the same time as we get on top of inflation, which remains the big primary challenge in the economy.
CLENNELL:
And have you told Michele Bullock that, as I think’s been reported, that you want to get on top of inflation without unemployment rising?
CHALMERS:
I think Michele Bullock has made it clear, to her credit, that the job here is to factor in all of these considerations and the Deputy Governor said only a few days ago that the inflation fight is the primary fight. But they factor in, as do we, a whole range of considerations, in the labour market, in the economy more broadly, what’s happening around the world and I think the Reserve Bank and the government have got a similar view, which is we’ve got to get on top of inflation without smashing the economy. That involves a series of fine judgments and for me, that means getting the budget in better nick – those 2 surpluses are really important, but also designing this cost‑of‑living relief so that we can put that downward pressure on inflation and help people who are doing it tough.
CLENNELL:
You’ve argued for months now the stage 3 tax cuts about to flow to all Australians from tomorrow are not inflationary. But it’s $23 billion this financial year alone that you’re pumping into the economy. How are you going to pour that money in and have no effect on inflation?
CHALMERS:
Well a couple of important things about that, Andrew. You’re right that from tomorrow every Australian taxpayer will get a tax cut, every household will get energy bill relief, millions of people will get a pay rise if they’re on an award, there’ll be cheaper medicines and there’ll be an extra couple of weeks of paid parental leave. As I said before, this is the best combination of substantial, meaningful and responsible cost‑of‑living relief.
Now when it comes to the tax cuts, when we changed those tax cuts at the start of the year, the Treasury made it clear that they didn’t expect it to put additional pressure on inflation beyond what was already factored into their forecasts and that’s because we used the same envelope as before, but we made them fairer, made sure everyone got a tax cut rather than just some people. And beyond that we’ve designed the energy bill relief and the rent assistance which comes in in September to take some of the edge off inflation rather than to it. So I am confident that the Budget settings are right. We’re providing cost‑of‑living relief in a substantial and meaningful way, recognising people are doing it tough but we’re also doing it in the most responsible way that we can.
CLENNELL:
So one of your arguments is that you produced the surpluses, you’ve done the right fiscal thing, there’s argument as to whether government spending, especially at all levels of government, isn’t still way too high. Do you think state governments might be hurting the economy and inflation with their budgets? I’m thinking particularly of Queensland with their $11 billion of relief.
CHALMERS:
No, I welcome the assistance from the state governments, including here in the great state of Queensland, because they recognise, as we do, that people are doing it tough, and we have a responsibility to help where we responsibly can. I’m confident that they’re doing that the right way.
I engage of course with Treasurer Cameron Dick here in Queensland and other Treasurers to make sure that we’re providing that relief, doing it in the most responsible way that we can, conscious of all the other pressures in the economy.
CLENNELL:
Your former boss Wayne Swan the other day said the NDIS growth was unsustainable as it presently is. Do you agree with that assessment? And what do you make of the Opposition kicking Bill Shorten’s reforms down the road?
CHALMERS:
Well I do agree with Wayne. Wayne’s 70 today by the way, so happy birthday to Swanny. But I do agree, and that’s the motivation behind so much of the work that myself and Katy Gallagher and Bill Shorten and the Prime Minister and the Cabinet have been doing. And our motivation here is really about getting maximum value for money for the people the scheme was designed to help. That’s the motivation behind our changes and the motivation behind the legislation and this unnecessary delay imposed by the Liberals and some of the crossbenchers will be an incredibly costly delay. It will cost more than a billion dollars by Bill’s estimation, but it will also mean that we are further away from making the scheme as good as it can be, sustainable as it can be so that every dollar in the scheme is justifiable and goes to helping people who need it.
CLENNELL:
Just briefly, do you think you’ll get your superannuation tax change for tax increases for those who have more $3 million up through the Senate?
CHALMERS:
Oh, it remains to be seen. I’ve learnt not pre‑empt outcomes in the Senate but that’s certainly our intention. It’s an important change. It’s about getting the budget in much better nick, still providing very generous tax concessions to everybody in the super system but slightly less generous for people with the biggest balances. It only impacts about half a per cent of people and so I would have thought the Senate could see sense in this regard and pass this modest but meaningful change in the superannuation system but we’ll keep having the necessary conversations and consultations to see if we can get that through.
CLENNELL:
And just finally, I wanted to ask about Fatima Payman and her decision to cross the floor. What are your feelings about that, and do you appreciate some of your caucus colleagues aren’t too happy?
CHALMERS:
I do understand that. I don’t have a lot of time to focus on the internal issues in our team. I respect every single member of our Labor team and I share Penny Wong’s view, frankly, that we get much more done when we work collectively rather than individually. And I support the party’s policy on an enduring 2‑state solution in that fraught part of the world.
CLENNELL:
Treasurer Jim Chalmers, thanks so much for your time this morning.
CHALMERS:
Thank you.