CHRIS O’KEEFE:
Treasurer, thank you for your time.
JIM CHALMERS:
Thanks for having me back on your show, Chris.
O’KEEFE:
So 6 per cent, pretty good result really?
CHALMERS:
I think it's as you described it in your intro: it's heading in the right direction, but it's still higher than we'd like it to be. It's moderating, but we'd like it to moderate faster. And we understand that people are still under the pump, which is why really the government's main focus is rolling out the cost‑of‑living relief that we've had in the Budget so that we can take some of the edge off these cost‑of‑living pressures that people are still feeling without making this inflation challenge worse.
O’KEEFE:
It kind of reminds me of Morris Iemma's 2007 election pledge: more to do but heading in the right direction.
CHALMERS:
Not everybody remembers that, Chris, that's a good piece of political history. I think most of the states have had a version of that jingle in one way or another.
O’KEEFE:
Julia Gillard had one too. Now, it was lower than the RBA forecast themselves so that is good news but why is inflation taking longer to come down than in other countries? Like in the US and Japan, it's all happening a lot quicker.
CHALMERS:
It's largely because in some of those countries that you quoted, the peak in inflation was much earlier than ours. So our inflation in an annual sense peaked around Christmas time but the worst quarter was actually March last year. But in annual terms, the inflation number peaked around Christmas, whereas for some of those other big economies, it peaked around the second or third quarter. And so they've been moderating for longer and some of those countries peaked higher than we did as well. There's a timing issue there, you can't kind of directly compare them. But what we're seeing in our economy again, as you rightly said in your intro, is it's coming off. I think everybody would like to see it come off quicker but the numbers that we got today are pretty welcome. We welcome them but at the same time, we recognise that people aren't out of the woods. People are still feeling this pressure, we understand that. It's really still the primary challenge in our economy and that's what makes it the main focus of the government.
O’KEEFE:
And whichever way you cut it, inflation is still being driven in part by higher gas and electricity prices. So a 10 per cent rise in electricity and 22 per cent with gas, that's not something you can solve.
CHALMERS:
It's something that we can take some of the edge off. And, yes, those energy prices are part of the challenge here but what we've been able to do with the price caps and with the bill relief is to take some of the edge off that. The increase in energy prices would have been worse if we hadn't taken the action that we've taken. And really, there's a bigger story there to explain to your listeners, which is what we've tried to do is because you can't spray around tens of billions of dollars in every direction because that makes inflation worse. What you have to do is try and work out, how do you target it and one way to target it is for people who need it the most. But another way that we're trying to target it is to say `okay, where are the spikiest parts of this challenge?' So rent - and so we've got this rent assistance coming in. Electricity - so we've got the bill relief, working with the states and doing the price caps. Out‑of‑pocket health costs - so we've got the changes to Medicare and cheaper medicines. That's how we're trying to target it so that we can take some of the edge off these pressures but without having to spray around hundreds of billions of dollars in ways that could be inflationary.
O’KEEFE:
I call this power bill welfare - isn't it better to deal with the structural issues? And at what point do you say: `you know, what we've tried but our energy mix and the platform that we're looking at how we're doing renewables and getting them into the system and the challenges we're having with the infrastructure, it ain't working'?
CHALMERS:
Doing the structural stuff shouldn't prevent you from easing some of the pain in the interim.
O’KEEFE:
But I just wonder how long that interim will be. How long will we have power bill welfare for?
CHALMERS:
In this case, when it comes to the bill relief, that will flow for people's winter bills largely. And that's a one‑off in most states, some states it's a two‑off but in most states it's a one off - and that's for the winter bills and so that's not an ongoing subsidy that we're providing. So that's that piece of it. The price caps, there's an ongoing regime. But the structural issues are real. We're trying not to use these near‑term pressures as a reason not to do some of the structural stuff. We are trying to introduce more cleaner and cheaper energy into the system. That's one of the main policy objectives that we've got and that will make a difference over the medium term.
O’KEEFE:
It's not cheap at the moment. I just want to speak about food prices. So still high - 7 per cent. Now, I raised this a couple of weeks ago on the show and I've had many, many listeners come to me saying, `you know what, I reckon some of these supermarkets are keeping prices high, even though inflation is coming down.' Will we see deflation on the supermarket shelves?
CHALMERS:
I get asked about this a bit too, as you can imagine, Chris, as I move around communities around the country. And what we've got is we've got the ACCC, the competition watchdog, making sure that they are monitoring these prices -
O’KEEFE:
Sorry to interrupt, it's funny you say that Treasurer because I reached out to the ACCC and they said it's not our remit, people can sell apples and sell washing detergent for as much as they want.
CHALMERS:
Well, that's not strictly true. I'm not sure how much you are paraphrasing the advice you got. They have a role to play in the economy to make sure that people aren't gouging and profiteering. But the point that matters most here is the inflation challenge, which has been with us for some time, the composition of this inflation is changing and so a lot of these supply chain issues that affected our supermarkets were a big part of the story last year, but they are less of the story this year, some of the shipping costs have come off, some of the fuel costs have come off, and so we do want to see that reflected in the prices that people say.
O’KEEFE:
So why isn't it coming down then?
CHALMERS:
You should get the supermarkets on your show, obviously, to explain in more detail but the pressure on inflation is coming from a range of sources. Some of the input costs that supermarkets and grocery chains confront have been easing and when that happens, we want to see that reflected in prices. We want the prices to be a fair reflection of the costs that these businesses pay, and the ACCC does have a role there in monitoring prices in the economy.
O’KEEFE:
But isn't the truth, you can't do much about it? I made this argument the other day - if the production cost of a kilo of pink lady apples is two bucks and they're selling it for five or six dollars a kilo or Coles or Woolies and people pay the five or six dollars what can the government do about that?
CHALMERS:
Well, I think that the regulator, the ACCC, is the most important way that we can do it. We can exert pressure as well, as you and I are doing right now, by making sure that it's a bigger part of the public conversation. But also one of the things I've noticed in my neighbourhood, Chris, and more broadly, is that people have alternatives. There's a fruit market near my joint, which is normally relatively busy on a Sunday, it's now absolutely chockers. And because people are shopping around for better deals, that's a good thing, because that exerts some competitive pressure as well.
O’KEEFE:
Just on rents, still a driver of inflation, I know you can't build and then tenant homes quickly. So do you believe that rent freezes have a place like they're talking about in Victoria?
CHALMERS:
I think that's something for the states to contemplate. They have those levers. We've made our views on that relatively clear - that's not something that we're trying to impose but it's up to the states. If they think they can make a go of it then that's fine by us. Really what we're trying to do is in the near term, provide some rent relief by Commonwealth Rent Assistance, but also we are desperately trying to build more affordable homes in this country. Public housing is part of it, but not all of it. More affordable homes near where jobs and opportunities are being created. That's one of the reasons why the Greens are so mad to be voting against more housing in the Housing Australia Future Fund that has been before the Senate.
O’KEEFE:
Just quickly can we rule something out before I let you go? The CFMEU's idea: taxing businesses with a turnover of 100 million bucks, a corporate tax rate 40 per cent according to the CFMEU.
CHALMERS:
That's not something we're contemplating. We've got three big parts of our tax agenda that we are legislating: the changes to the concessions in the super system, the PRRT that we've hammered out, and multinational tax reform. Those three things are meaningful tax reform and that's what we're focused on. We're not contemplating some of those ideas that were put forward.
O’KEEFE:
Sane and reasonable, Treasurer, appreciate your time.