David Speers:
Treasurer Jim Chalmers joins me now. Welcome to the program.
Jim Chalmers:
Thanks very much, David.
Speers:
So, in the lead‑up to the election, you told voters the worst of the inflation challenge is well and truly behind us. Did you get that wrong?
Chalmers:
No, David. It remains the case that inflation is much lower than when we came to office, but it is still higher than we’d like. The numbers today didn’t come in much higher than we expected, but they came in higher than we’d like. We’ve been up front about that throughout the course of today, responding to this data.
We know that people are still under pressure, but more than acknowledge that, we’re acting on that with cheaper medicines and more bulk billing, student debt relief, 2 more tax cuts for working Australians at the same time as we get the budget in better condition, including in the most recent update in December.
Speers:
I’ll come back to what more you plan to do about this, but the impression at the election was clear that the worst was behind us. Are you saying voters were meant to read between the lines that inflation would stop going down and start climbing back up again?
Chalmers:
Well, it remains the case, David, that whether it’s just before the election or after the election, that inflation is quite substantially lower than the 6.1 per cent that we inherited from our political opponents –
Speers:
Since the election last year, it’s gone up.
Chalmers:
– and at the same time, we’ve got unemployment at 4.1 per cent, very high labour market participation, real wages growing and the like. And so, we have made a lot of progress in the economy, but there’s more work to do, obviously and today’s inflation figures, I think, are a really important reminder of that.
Speers:
But are you suggesting this is not a problem?
Chalmers:
I haven’t said that at any point today, David, including in the last minute or so, I’ve acknowledged that this inflation is higher than we would like, not that much higher than what we were expecting, but certainly higher than we’d like. There are still price pressures in our economy, we’ve acknowledged that for some time. This inflation is lower than what it was in recent years, it’s much lower than its peak but there are some persistent price pressures in our economy, we’ve been upfront about that.
And if you look at today’s data, some of it is temporary, some of it is more persistent, none of it can be attributed to the budget settings. In fact, we’ve improved the budget at every budget update since we’ve come to office. The increase in inflation today was primarily driven, in fact, by less government spending, by the withdrawal of energy rebates, plus holidays, plus housing. I don’t think that any of that could be objectively attributed to government spending or the budget position.
Speers:
Again, here you’re arguing in that answer that this has got nothing to do with you. I mean, voters remember you take credit when inflation falls. You said when it was falling it was proof of the government’s responsible economic management. But now, when it’s going up, it’s got nothing to do with you.
Chalmers:
No, I’ve said repeatedly today, David, that I take responsibility for all aspects of my job. But more than take responsibility, we’re taking action – cutting taxes, providing cost‑of‑living relief, getting the budget in better nick. It was only a few weeks ago, David, that our responsible economic management was brought to the fore in the mid‑year budget update – another $20 billion in savings, improving the budget bottom line in every year of the forward estimates, getting the Liberal debt down, that’s been the story of this government.
And the story of 2025 and our economy was public spending – public final demand – retreating and its place being taken by private final demand, by private investment and private spending. That was the story –
Speers:
But isn’t that space being created for that private demand. Do you need to make more space, reduce that government spending further to create more space, because whatever it is, it’s pushing up inflation?
Chalmers:
Well, we found savings throughout our term in office, David, and as I just said, we found another $20 billion in savings in the last budget update. That takes the total to $114 billion in savings. We’ve banked most of the upward revision to revenue, we’ve delivered budget surpluses which our predecessors were incapable of. There’s always more work to do, I’ve acknowledged that at every turn.
Speers:
Well, that’s what I want to ask you. What are you going to do now? Because you know, families are already facing higher back to school costs, higher energy bills, rents are higher now, the prospect of an interest rate rise next week for mortgage holders. What are you going to do now?
Chalmers:
We’re already rolling out our cost‑of‑living relief in a responsible way in the ways that I’ve identified already in this interview. Obviously, when we put the Budget together in May, we will take into consideration the prevailing economic conditions. We don’t write that Budget in January, but clearly, the inflation data that we got today will have a very substantial bearing on the budget settings that we determine in the lead‑up to the release of the Budget in May and that’s what we’ve done in every budget update.
Speers:
Well, that’s interesting. So, explain what that means to us because this is going to have a substantial impact. Today’s figure, you’re saying, on your budget preparations. In what way? How does this change your thinking?
Chalmers:
Inflation is one of the 3 key determinants and influences on the Budget that Katy Gallagher and I will deliver in May. Inflation in the near term – we’re still expecting inflation to moderate over the next 12 months or so – inflation in the near term, the productivity challenge, which has been a feature of our economy in recent decades and a big part of our focus since the last election. And thirdly, all of this global economic uncertainty which is accelerating as the world becomes more volatile. They will be the 3 key influences on the budget.
There will be reform in the budget, there will be more budget repair in the budget as well and those 2 things will happen alongside us rolling out this cost‑of‑living relief in the form of 2 more tax cuts, a standard deduction in the tax system, in addition to all of that cost‑of‑living relief which is rolling out right now, as we also improve the budget position in all 4 years in the update in December.
Speers:
Ok, so you’ve just said there will be reform, there will be further budget repair in the May Budget. I want to ask you about this because you have this sort of political opportunity now where you’ve got room before the next election, quite a bit of time. You’ve got political opponents who are in chaos, and we don’t need to get into that right here. But that’s clear to all. It’s an opportunity, isn’t it, to be bold, to take some risks. Can we expect boldness when you talk about reform and budget repair in this budget?
Chalmers:
This is a bold and ambitious government, and we’ve already shown a willingness, demonstrated a willingness, whether it’s the energy transformation, the tax reforms that we’ve already got in place or in other ways, we’ve shown a willingness –
Speers:
Beyond those measures, will this budget include bold reform?
Chalmers:
Well, I don’t write the budget in January as I said, David. There is a lot of thinking, a lot of decisions still to be taken. It will be a matter for Cabinet. We take these decisions collectively in our government and the budget will be focused on the economics, not on the politics.
We know that our opponents are in disarray, we know that they are a bin fire of far‑right politics but our focus is on the cost of living, it’s on housing, it’s on ambitious reform, it’s on budget repair, and it’s also about making our economy more resilient in the face of all this global economic uncertainty.
Speers:
Look, a final question. You mentioned your mid‑year budget update and the Budget last year all said we’d see real wage growth in the coming financial year. With today’s inflation figure higher than expected, are we still going to see real wage growth, or will our living standards go backwards?
Chalmers:
Well, it remains to be seen. We’ll see what kind of outcomes we get on wages. Obviously, real wages are a calculation of inflation and the wage price index, and so we will see. But clearly—
Speers:
But you’re not sure right now whether we’re going to see living standards fall.
Chalmers:
Well, the rest of my sentence, David, was clearly when inflation is higher than we’d like, that has implications for real wages but we’ve had 2 years now of continuous real wages growth. When we came to office, real wages were falling very, very sharply. We’ve deliberately turned that around. Obviously, that’s under pressure now as we get this inflation data, which is higher than anyone would like.
Speers:
Treasurer Jim Chalmers, thanks for joining us.