DAVID LIPSON:
Jim Chalmers, thanks for being with us. Is a surplus now guaranteed and how would that help families struggling with high prices across the board?
JIM CHALMERS:
The new figures that we’ll release today show that we are on track for the first back‑to‑back surplus in almost 2 decades, and that’s really important in the fight against inflation, turning those big Liberal deficits into Labor surpluses in a way that the Reserve Bank Governor has said is helpful to the fight against inflation but also so we can make room for our other priorities, including our cost‑of‑living help, and to get the budget on more stable foundations for the future too.
LIPSON:
The inflation figure out this week was a bit of a shocker. Do you still believe headline inflation will be under 3 per cent by the end of the year?
CHALMERS:
Well, it remains to be seen, and our forecasts and the Reserve Bank’s forecasts expect that to be the case. But I think what we saw in that monthly figure, which is still less than half what it was in the peaks in 2022, what we’ve seen here, what we’ve seen around the world in other countries where inflation peaked higher and earlier than it did in Australia is that inflation often doesn’t moderate in a straight line, it can zig and zag on the way down. We saw that earlier in the year in the US, we saw that very recently in Canada as well, and we saw that in our own monthly data too.
What’s really important here is that we continue to put downward pressure on inflation. We’re doing that with our responsible budget and our surpluses, we’re doing it in the way that we designed our cost‑of‑living relief, a big chunk of which will come in from Monday with those tax cuts for every taxpayer and energy bill relief for every household. And what the ABS has shown on Wednesday, and what the ACCC will show today is because of the design of our cost‑of‑living help, we are taking some of the edge off prices and off inflation, and that’s really important.
LIPSON:
So, you don’t think that the fundamentals of the economy and inflation have changed in any way since the start of the year, because if you look at the trend, inflation had been coming down to about January, it’s been pretty much flat since then, and it looks like it’s ticking up.
CHALMERS:
Well, the trend is important, and the most important trend is that we’ve gone from inflation with a 6 in front of it when we came to office, with quarterly inflation with a 3 in front of it, and that shows the progress that has been made over the last couple of years.
But it is true around the world and in Australia that it doesn’t always come off in a nice, neat, straight line. We’re very vigilant about the last mile, as they call it, in this fight against inflation.
Inflation is higher than we want it to be, and people are under the pump, and that’s why we’re providing this cost‑of‑living help from Monday.
LIPSON:
Yes. So on that cost‑of‑living help from Monday, the tax cuts coming in, good news for workers, but a report from the Parliamentary Budget Office is warning eradicating bracket creep could leave an $85 billion hole in the budget.
So, do you think tax brackets should be indexed to avoid workers paying more tax over time, or will that hurt the budget too much?
CHALMERS:
Oh, it’s not our policy. We want to maintain the ability to provide tax cuts when the budget can afford it, and that’s what we’re doing –
LIPSON:
– so that means that the tax cut will ultimately be eaten up by bracket creep before long, won’t it?
CHALMERS:
Not necessarily. I mean a big motivation for the tax cuts for every taxpayer, which will kick in from Monday and provide an average tax cut of $36 a week, but every taxpayer gets it, is because we found a much better way to return bracket creep, to provide that cost‑of‑living help and to make our tax system fairer at the same time.
That’s why everyone’s getting a tax cut, every taxpayer, 13.6 million Australians are getting a tax cut on Monday, and that’s because we know when the budget can afford to return some of this bracket creep, we can do that, and we can do that in a way that maximises people’s ability to deal with these cost‑of‑living pressures that we understand are persisting in our economy.
LIPSON:
Just on a different matter, the ANZ‑Suncorp banking merger, is that going to be approved?
CHALMERS:
I’ll have more to say about ANZ and Suncorp quite soon, actually later this morning, but I need to do that the right way and issue a statement. I have come to a concluded view on the proposal from ANZ.
As you would know, David, this has been running for almost 2 years now since the proposal was first floated by ANZ. We’ve done a lot of work in the interim, a lot of consultation and consideration; it’s been through a tribunal process, the regulators have looked at it, we’ve spoken to the relevant union, the industry and other stakeholders, and I have come to a concluded view, and I’ll make that view known through the course of the morning, hopefully quite soon.
LIPSON:
The Competition Watchdog, as you know, opposed this merger. They were concerned that less competition in the banking sector at this time was not a good thing, and obviously at this time we are now facing the potential of rising interest rates. Does that aspect worry you?
CHALMERS:
Obviously we factored in a whole range of considerations, the competitive elements and other elements as well, and not to pre‑empt that decision that I’ll announce quite soon this morning, but obviously we took seriously the ACCC’s view, but subsequent to that ACCC view, there was also a tribunal process too.
So, we’ve factored all of that in, all of the relevant considerations, we’ve done all the consultation, we’ve done a heap of work on this over quite a long period of time now, and we’ve come to a concluded view that I’ll make clear this morning.
LIPSON:
Just on interest rate rises, and we’re almost out of time, but I wonder whether you worry that the states in particular, through major stimulus measures, cost‑of‑living relief in their budgets have made the Reserve Bank’s job harder?
CHALMERS:
No. I mean, 2 things about that. First of all, I welcome the support that the states are providing to the people that we jointly represent. People are under the pump, that’s why they’re getting substantial cost‑of‑living relief from the Commonwealth from Monday, and also why the states are doing their bit as well.
The second point though is my focus is the Commonwealth budget, and we’re getting the budget in much better nick, we’re turning Liberal deficits into Labor surpluses, we’re providing this cost‑of‑living relief in the most responsible way, and that’s because we know the primary fight is still against inflation, and that’s our major focus. And part of that focus is designing our cost‑of‑living help in a way that puts downward pressure on inflation, not upward pressure on inflation.
The Bureau of Stats on Wednesday said we are taking the edge off power prices and rents. Rents would be higher and power prices would be higher were it not for our efforts. And a new report from the ACCC today will make a similar point about energy prices, that without our energy bill relief prices would be even higher.
So that’s our focus in the Commonwealth budget, and that’s why this substantial but responsible cost‑of‑living relief will be rolling out from Monday.
LIPSON:
Treasurer, Jim Chalmers, thank you.
CHALMERS:
Much appreciated David.