CHARLES CROUCHER, HOST:
More on today’s big announcement from the Reserve Bank. It’s set to decide within hours not if interest rates will rise but by how much.
LEILA McKINNON, HOST:
Its impact, big or small, will be felt by millions of households coast to coast, with budgets already under immense strain. For more, we’re joined by Federal Treasurer Jim Chalmers in Brisbane. Thank you for coming on the show, Treasurer. Some people are saying 0.4 – can we expect a 0.4 rise today? What are you hearing? You can tell us because we will not tell anybody.
JIM CHALMERS, TREASURER:
We’ll know more at 2:30pm. I don’t have any visibility on the deliberations of the independent Reserve Bank, but it’s the universal expectation of everybody who follows the Reserve Bank that there will be an interest rate rise today. The Reserve Bank Governor flagged a number of rises when this cycle began before the last election. I think Australian homeowners do need to brace for an interest rate rise today. It’s expected. It will be difficult for a lot of people. Some people have built up a buffer in their home loans, but not everybody has, and so the impact of a rate rise on an average mortgage of $330,000, if it’s a quarter of a per cent, that’s about $43 a month. So, people will have to find that at the same time as they’re confronting spiking prices for petrol and electricity and gas, so it will be a difficult day, I think, for a lot of people.
CROUCHER:
Treasurer, you’ve just outlined the challenge. It’s not just mortgage repayments. It’s petrol, groceries, gas, electricity – I mean, what’s the solution?
CHALMERS:
You’re right, Charles. We’ve inherited a full blown cost-of-living crisis from our predecessors and it has a range of sources, whether it’s energy prices, whether it’s building supplies, groceries, a whole range of cost-of-living pressures that people are confronting. There’s some near-term relief that was implemented in the last budget that we supported in the Parliament, and when I hand down a budget in October this year, there will be a cost-of-living package which tries to get the price of child care and medicines down at the same time as we get some cleaner and cheaper energy into the system and also try to get real wages moving again.
One of the big parts of this story that I think is too frequently glossed over: when we have inflation skyrocketing and we don’t have wages keeping up with that, that means that real wages are actually falling. In this economy that’s one of the big challenges that we’ve got. We’ve got to get wages growth moving again. We’ve got to get responsible cost-of-living relief in the system. We’ve got to get a decent energy policy in place because one of the reasons we’ve got this skyrocketing inflation is because we’ve had almost a decade now of energy policy chaos. These are the sorts of things that we will be looking to implement as a new Government. I don’t want to pretend to your viewers, Charles and Leila, that there’s some form of quick fix to this cost-of-living crisis. There isn’t. But we will work around the clock to do what we responsibly can to alleviate some of this pressure.
McKINNON:
Those greener energy solutions are very, very long term, aren’t they? Are you looking at shorter-term solutions? I know that you have asked about price gouging, but will the gas trigger be pulled? Will we see more gas kept in Australia and provided for us?
CHALMERS:
Well, you’re right, Leila, to think about this in near-term and longer-term measures. In the near-term, my colleague Chris Bowen will be meeting with the State and Territory Energy Ministers tomorrow because a lot of the levers are at the state level. The regulators have done a good job of implementing price caps and guarantees in the near-term to make a difference in these energy markets. I’ve asked the ACCC to step up their monitoring of prices to make sure there’s not any dodgy behaviour going on here and so that they can recommend to me any regulatory changes based on the evidence that they collect. All of those are the sorts of steps that we are looking at taking.
When it comes to the gas trigger, it is important to recognise that that has its limitations as well. Obviously, all options are on the table. But, even if we pulled that trigger, it wouldn’t have an impact until next year, so we need to factor that in as well.
Sitting over the top of all of this is the fact that for almost a decade now we haven’t had the investment we need in cleaner and cheaper energy. There’s been energy policy chaos and uncertainty. So in the medium term, we need to address that as well. That’s what our Powering Australia Plan is all about, unleashing that cleaner and cheaper energy into the system so we can get power bills down over time.
CROUCHER:
Treasurer, I want to go back to wages because you’ve hinted that inflation may be far worse than predicted. That suggested it could be up over six, maybe even seven per cent. Now, the recommendation the Government made is for the minimum wage to increase by five per cent. So, even if you get the full five per cent, people’s wages are still going to be going backwards. Is the current system broken? Do we need something different to make sure that wages keep up with the cost-of-living? Otherwise, people are going to be simply unable to make ends meet.
CHALMERS:
Well, the central point of the submission that we made to the Fair Work Commission is to recommend that when you consider the current inflation rate of 5.1 per cent, we don’t want to see lower paid workers in Australia go backwards. In many cases, they were the heroes of the pandemic, doing it tough enough as it is. So, that Fair Work process will consider the inflation figure as it is when they come to their determination.
I’ve tried to be really upfront with people and say that this inflation problem in our economy, which we inherited, will get worse before it gets better. That is the broad expectation of all of the economists. So, it’s going to be a difficult few months for Australians – rising interest rates, obviously, on top of rising prices for groceries and energy and all of the rest of it. So getting a decent outcome for low wage workers is an important part of the story, but we also get real wages moving by training people for higher wage opportunities; by reforming child care so people can work more and earn more if they want to do that; investing in secure well-paid jobs in areas like advanced manufacturing. This is our economic agenda, and when I hand down a budget in October, that Economic Plan will be central because we’ve got to get real wages moving. That’s an important part of this cost-of-living crisis that we’ve inherited.
McKINNON:
You spoke about cheaper child care, cheaper medicine, hopefully, cheaper energy, are all those off the table if we start to see things skyrocket this year?
CHALMERS:
No, we’ll be implementing our commitments on medicine prices and child care and cheaper and cleaner energy and our plans to get real wages moving again. You’d expect to see those plans implemented in the October budget. More broadly, what we have to do here is we have to grow the economy without adding to these inflationary pressures, and you do that through child care reform, through training reform. There’s a whole range of things that we need to be doing.
But there’s no use pretending that you can flick some kind of switch and make this cost-of-living crisis disappear or make the trillion dollars of debt that we’ve inherited disappear. We’ve tried to be upfront with people and say there are some big serious challenges in the economy that we’ve inherited. We have begun dealing with those challenges to turn them around over time. In the interim, whether it’s interest rate rises or skyrocketing cost-of-living or falling real wages, this is the economic legacy of our predecessors that we’re trying to deal with.
McKINNON:
Well, it’s a big job you’ve got. Thank you for coming on the show. Good luck.
CROUCHER:
Big times ahead. Thank you, Treasurer.