DAVID SPEERS:
Jim Chalmers, welcome to the program.
JIM CHALMERS:
David, we’re very honoured that you’re spending the last day of your 40s with us. Happy birthday for tomorrow, the big 5‑oh. Thanks for having me back on the show.
SPEERS:
Thank you. No, that’s very kind, and slightly awkward, cause I can now ask you tough questions regardless.
Look, Wayne Swan, is your old boss right in what he says about the Reserve Bank?
CHALMERS:
I choose my own words, David, and my own views, I’ve got my own priorities, my own focus, and that’s working with the Governor of the Reserve Bank in this fight against inflation, and we’re making progress.
I was making a factual point this time last week, and it’s a fact borne out in the National Accounts that higher interest rates are slowing the economy considerably, and I’ve been making a similar point for some months.
Now Wayne went much further than I have. I’m making a factual point borne out by the National Accounts. I don’t second guess the Reserve Bank in the way that Wayne has. My focus is on working with Governor Bullock, I’ve got a lot of respect for Governor Bullock. Our objectives are actually aligned to get on top of this inflation challenge, and we need to do that without ignoring the risks to growth.
SPEERS:
And do those sort of comments from Wayne Swan undermine confidence in the Reserve Bank?
CHALMERS:
Well, first of all, I think it would be unusual if only former Liberal treasurers are allowed to engage in commentary about interest rates and the economy. You know, we had former treasurers Howard, Costello and Frydenberg all out in the last few days, and so I think Wayne’s entitled to express a view as well as a former treasurer.
SPEERS:
Weren’t they largely defending the independence and integrity of the Reserve Bank though?
CHALMERS:
I’m always defending the integrity and the independence of the Reserve Bank. In fact with my RBA reforms I’m trying to advance the independence of the Reserve Bank.
I’ve made it really clear, as has Governor Bullock, that we work closely together, we work well together, our interests are aligned here. We’ve got the same objectives, we’ve got slightly different responsibilities, which I think is what Katina was getting to on the couch a moment ago, but we’re making good progress together.
When we came to office, when I came to office inflation had a 6 in front of it under the Liberals, it’s now got a 3 in front of it, and we expect it to moderate further.
SPEERS:
So just on that, bottom line, do you agree the Reserve Bank’s main priority should be getting inflation down within that 2 to 3 per cent target zone?
CHALMERS:
Well they’ve got a dual mandate, that’s an important part of the mandate, but they also need to be cognisant of conditions in the labour market. We want to see, get as close as we can to full employment, for example, in the labour market. And they weigh all of those things up, we make that clear in the agreement that we have with the independent Reserve Bank, and I cherish that independence, as I said a moment ago I’m trying to strengthen that independence.
Now inflation has come down really quite considerably since its peak in the year that we were elected, but we need it to moderate further and faster. That’s why our budget surpluses are so important, that’s why our responsible economic management’s so important, the way that we design this cost‑of‑living relief. Because we can maintain this primary focus on inflation, but we can do that without ignoring the risks to growth.
And it’s just self‑evident, and not especially controversial, to say that the reasons why our economy is slowing considerably, including in those numbers that we got last Wednesday, is a combination of global economic uncertainty, persistent price pressures and inflation and higher interest rates. That’s not an especially controversial point; I think it’s self‑evident.
SPEERS:
But on this 2 to 3 per cent target zone for inflation, yes, the Reserve Bank has the dual mandate that you point to, but I think Michelle Bullock said inflation is her top priority, or main priority; you’ve referred to it as a priority as well just now. You’re not open to shifting that target zone, you defend it remaining at 2 to 3 per cent?
CHALMERS:
Absolutely. And we made that clear when we released the Reserve Bank Review. They endorsed the 2 to 3 per cent target. They said that the Governor should shoot for around the midpoint of that target, and we’ve endorsed that by saying that we agree with it.
And I’d also make the point, David, from your question, I mean it’s our primary focus too is on the fight against inflation. The point that we’ve made around the national accounts is that if we’d taken the advice of our opponents and our critics and cut harsher and harder at budget time, then we’d be in recession right now. That would have been a recipe for recession. Our opponents would have us in recession right now.
And I think a lot of the commentary and the criticism which we’ve seen, particularly in the last week, reflects the fact that our opponents and our critics desperately want us to be in recession for political reasons, they’re very disappointed that we’re not in recession.
I think it’s a good thing that we’ve avoided recession. government spending has played a part in that, and if we’d taken the free advice that we got at budget time, the economy would be going backwards, and people would be under even more pressure right now.
SPEERS:
But in per capita terms we are going backwards, we are in what some call this per capita recession. We know people have run down their savings, people are absolutely feeling this, the Governor talked about people might have to sell their homes as well. What are your plans to get productivity and growth moving?
CHALMERS:
Well, we’ve got sort of 3 phases of this, David. You know, in the near term we’re rolling out the cost‑of‑living relief, and that’s important, and we’re investing in health and other services, and we know from the national accounts that that’s one of the reasons why there’s any growth in the economy whatsoever.
In the medium term we’re building more houses, we’re boosting renewables, we’re training people for the jobs and opportunities where we can adapt and better adopt technology.
And we’ve also made it clear in productivity that we think the big opportunities here are the combination of energy and technology and human capital. We’re also making the economy more competitive and dynamic with our competition policy reforms.
And so we’re acting on a number of fronts to make our economy more productive, more dynamic and more competitive. We’re doing that in a way which recognises we’ve some near term pressures that we need to help people manage, the cost of living primarily, and inflation, but we haven’t taken our eye off the ball when it comes to some of these longer‑term opportunities as well, and that’s why we’ve got a substantial reform agenda.
SPEERS:
But even the Productivity Commissioner you appointed, Danielle Wood, she’s expressed some doubts over the productivity you’ll get out of your Future Made in Australia plans, or indeed the expansion of the care sector that you talk about.
CHALMERS:
What we’ve said about the care sector is it’s becoming a bigger and bigger part of our economy. We’ve made big investments in the care sector, and it’s an area where it’s been difficult to get more productivity and difficult to measure more productivity as well. And so we’ve asked the Productivity Commission and the Chair to make that a big priority in the work that they advise us on.
SPEERS:
So you’ve defended the government spending as keeping us from recession, so in the budget update at the end of the year, and then as I understand it a March budget before the election, will you follow the same strategy? You’re willing to spend more even if that keeps inflation a little higher?
CHALMERS:
A couple of things about that. First of all, two‑thirds of the OECD has had a negative quarter of growth or worse, and we’ve avoided that. We see that as a good thing; our opponents and critics see that as a bad thing. We know from the national accounts last Wednesday that without government investment growth in areas like Medicare and medicines, then the economy would have gone backwards in the June quarter, indeed it would have gone backwards in the quarter before that as well.
We think it’s better to avoid a recession rather than clean up after one, and that’s where we differ from our political opponents and our critics.
SPEERS:
Even if it keeps inflation elevated, above 3 per cent?
CHALMERS:
Well, there’s not much evidence, David, or not any evidence that I’m aware of that the combination of government spending is the primary determinant of prices in our economy –
SPEERS:
It has an impact though.
CHALMERS:
– I think that’s the point. Well, the point that Michelle Bullock was making is it’s not the main game. government budgets aren’t the primary determinant of prices in the economy. We are helping when it comes to electricity, early childhood education, rent and in other ways, the ABS has made that clear. We can help. It’s not the primary determinant.
And you asked me about the mid‑year budget update. We’ll do what we’ve done in the other updates and the other budgets, which is factor in the conditions as we find them, the challenges that we confront. We’ll continue to make the right economic decisions for the right economic reasons, and so far, we know from those June quarter National Accounts which came out last week, that we’ve been getting the balance broadly right.
SPEERS:
So just on spending, some of your colleagues want the government to put some sort of dental care into Medicare. Can you afford that?
CHALMERS:
Oh, look, we’ve got pretty severe budget constraints, we make that clear privately and publicly. There are way more good ideas than there is capacity to fund them. But obviously as the architects of Medicare, we’ve spent billions of dollars already this Parliamentary term strengthening Medicare for the future. We get all kinds of suggestions from colleagues and others about how we might be able to do more of that.
We’ve made it pretty clear we’ve got budget constraints; we’ve got a whole bunch of priorities. We will work with the states and territories on dental care to see if more can be done, but we need to be realistic about that in the context of these pretty serious budget constraints that we have.
SPEERS:
It sounds like a no for now.
CHALMERS:
Well, it’s not something we’re announcing today, David, you know. It’s something that we’re interested in talking with people about. We are engaging with the states and with the colleagues on it. And we’re the Labor Party, David, we want to strengthen Medicare as much as we can as soon as we can, but we need to do that in a responsible way which recognises the constraints in the budget.
SPEERS:
What about aged care? Will the reforms that you’re maybe putting forward this week, that you’ve been working on behind the scenes with the Coalition, will they mean more taxpayer spending or less?
CHALMERS:
Well, we’ve made it really clear, David, that these reforms are all about providing better services for more people in a more sustainable way without introducing a new tax or changing the treatment of the family home.
So what we are proposing coming out of the great work of the taskforce, and Minister Anika Wells working closely with Mark Butler, is we’re looking at those taskforce recommendations. We need to change the way that aged care is funded, because it’s a huge medium‑term and long‑term pressure on the budget.
We’ve said we’d like to do that in a bipartisan way, given the long timeframes that we’re talking about here. There will be some elements of that which require more government investment, there are some areas where it requires a bigger contribution from people who can afford to do that, but we’re genuine when we say we want to get a bipartisan outcome.
Anika Wells has been working on this for years. Her and Mark Butler have been engaged with the Opposition for months. We’ve given them a lot of detail a long time ago so that they may consider it in good faith, and ideally, we’d have more to say about this quite soon.
SPEERS:
Well, yeah. They contest whether they’ve got enough detail. Can you tell us? You talk about a bigger contribution from users. How much will people pay?
CHALMERS:
I think people know from the taskforce and in other public commentary that we’ve made that when you see the way that growth in aged care spending is such a bigger and bigger part of the budget going forward in the coming decades, that business as usual is not going to fund in a sustainable way the aged care services that more Australians need and deserve.
It’s great that people are living longer and healthier lives, that’s a wonderful thing, a terrific thing, and we’ve got to make sure that it’s sustainable. And we’re –
SPEERS:
But why can’t you tell us, Treasurer, people want to know what you’re talking about here. I don’t know why there’s no transparency around this. How much are people going to pay?
CHALMERS:
Partly because it’s subject to trying to land an agreement with the Opposition. You know, we’re genuine when we say we want to get to a bipartisan outcome. We haven’t been engaged in that negotiation or that discussion publicly. We’ve been trying to land it in an appropriate and a respectful way, which recognises that the Opposition has their own decision‑making system that they have to work through.
But ideally, David, hopefully we’ll be able to say more about this relatively soon. We want to land an agreement, and we want to do that because we want to provide better services for more people in a more sustainable way.
SPEERS:
That’s government spending. I want to ask you about revenue that you’re getting in the door as well. I know a few weeks ago you warned of a – what was it – $3 billion hit to revenues because of the iron ore price coming off. It’s come off more since then. Is there any update on that figure?
CHALMERS:
First of all, commodity prices are an important contribution to the budget, but not the only reason why we’ve been able to deliver those 2 surpluses in our first 2 years. The strength of the labour market’s been a big part of it as well.
But what we’ve seen in iron ore, and actually also in met coal is prices have come off, I think, around 40 per cent since the start of the year, really quite a substantial drop in prices for those 2 key commodities.
So one of the scenarios that Treasury has provided us is if we continue to see that kind of drop in some of our key commodities it could cost the budget something like $4.5 billion. So that’s one scenario that we’re looking at.
But more broadly, David, what we’re seeing in the commodity markets, whether it’s iron ore, met coal, but also the oil price, which has been really quite incredibly volatile as well, is this is a real sign of weakness in the global economy, uncertainty and volatility and risk in the global economy, and we’re not immune from it, our economy’s not immune from it and nor is our Budget.
SPEERS:
Speaking of the global economy, there’s been some talk about you maybe going to China soon. You’d be the first Treasurer in 7 years to do so. Can you confirm whether that trip’s happening?
CHALMERS:
I can, David. We’ve agreed to a Strategic Economic Dialogue with my Chinese counterparts, and I’m looking forward to joining them in the last week of September, most likely on or around the 27th of September, I’ll be going to Beijing.
You’re quite right that that would be the first visit by a Treasurer in 7 years. It will be the first ministerial visit this year.
This is all about recognising that there’s a lot at stake and a lot to gain from a relationship which is more stable and stronger and more prosperous. We want to make sure that we are maximising this really important economic relationship with our key trading partner.
It’s a relationship which is full of complexity, but also full of opportunity, and I want to help the government maximise that opportunity for the Australian people, workers, businesses, employers, investors.
SPEERS:
It does have its complexities. No doubt you’ll raise the remaining trade restrictions on Australian lobster, and no doubt they will raise Australia’s foreign investment rules.
Can I just ask you; do you want China’s investment in critical minerals processing in Australia or not?
CHALMERS:
We want to make sure that our foreign investment regime is non‑discriminatory, it’s not about one country or another. Part of the reason I’m reforming the foreign investment regime is because I want to strengthen it in areas like critical minerals, critical infrastructure, critical data, and I want to streamline it for areas where there are fewer concerns. That’s not about one country or another.
I’m looking forward to speaking about that with my Chinese counterparts later this month. And the Strategic Economic Dialogue does give us the opportunity to work through issues like that, work through issues around the trade restrictions, to compare notes on how we’re seeing the global economy. It’s a really important opportunity to maximise and further stabilise that really important relationship, and to work through any issues that either side might want to raise.
SPEERS:
Final one, Treasurer, on the census, you are the Minister ultimately responsible for the census. Can you clear up, will there be in the next census questions on both sexual preference and gender identity?
CHALMERS:
There will, David. You know, we’ll be adding a new topic which covers both sexual orientation and gender, that will be the first time, in the 2026 Census. We have listened to the community, we’ve worked very closely with the Australian Bureau of Statistics.
I wanted to say how professional and diligent and sensitive the Chief Statistician, David Gruen, has been as we’ve worked through these issues. LGBTIQ+ Australians matter, they have been heard, and they will count in the 2026 census.
SPEERS:
Because it was only 10 days ago or so that you were saying there wouldn’t be these questions, you were worried about it being weaponised. You’ve changed your view on that?
CHALMERS:
Well, we had good intentions here, David, and we’ve listened to the community, and we’ve worked with the ABS, and we said that we would find the best way through, and I believe that we have.
I believe that we’ve found here in introducing this new topic, which covers both orientation and gender, we believe that in listening and in working with the ABS and the community and consulting in a really genuine way, we’ve found the best way forward.
SPEERS:
Are you able to share those questions with us yet? What’s the process from here?
CHALMERS:
Well, the government determines the topics, and then the ABS determines the questions.
SPEERS:
Right.
CHALMERS:
And so there will be more that will be said, obviously, and my colleague, Andrew Leigh, who’s been working very hard on this, he’ll be releasing a statement today. But the government’s role here is the topics, the ABS does the questions, they will continue to work in a professional and diligent and sensitive way with the community to make sure that we get this right. I’m confident that we will.
SPEERS:
Okay. ‘Cause the PM, the latest comments from the PM were that there’d be a question on sexual preference, but there’s already an existing question on identity that can cover the gender issue. You’re now saying it will be a stand‑alone topic that covers both of those things?
CHALMERS:
Well the Prime Minister was talking about making one change, and that’s what we’re doing. We’re introducing a topic for the first time which covers both sexual orientation and gender. The ABS will find the best way to do that.
But really, the message that we want to ensure that Australians hear from us today is that we understand the feedback that we got, we listened to that, we took it very seriously, we listened very genuinely. We said that we would find the best way to do this, and I believe that we have, and we will, and the ABS will continue to refine the actual wording of the questions now that this additional topic has been added.
SPEERS:
All right. Treasurer Jim Chalmers, thanks very much for joining us this morning.
CHALMERS:
Thanks David.