GREG JENNETT:
Treasurer, it’s good to have you back with us once again at the conclusion of those talks there in Brisbane where you’ve announced a study, I think it is, on renewable sources of fuel, with an emphasis on aviation fuel, as far as we can tell. Coincidentally, of course, Air New Zealand, once run by Christopher Luxon, now NZ Prime Minister, but still an airline majority owned by that government, has abandoned its own corporate emissions targets for 2030 because it believes green aviation fuel is, quote‑unquote, unachievable. This is more than irony, isn’t it? It’s a direct contradiction here that they’re voting towards unachievability in their airline while flying kites with you. Please explain.
JIM CHALMERS:
Not at all, Greg. I mean, what we’ve seen today from Air New Zealand is a reminder, first of all, of the challenges in this part of industry, but also the need to build more supply and to do more value‑adding at places like here at Ampol at Lytton in south‑east Queensland. We know that the world will demand more sustainable aviation fuel. There’ll be a need for more low‑carbon liquid fuels. The Air New Zealand announcement goes to some of the challenges here, but we know from speaking with Ampol, speaking with GrainCorp and IFM Investors that there is a lot of appetite to fill this need to be an indispensable part of global supply chains when it comes to this kind of fuel. We’re under no illusions about how difficult it is to get some of these industries up and running, but the private sector and governments on both sides of the Tasman are interested in doing that. It’s partly what our talks were about today. It’s partly what the really important announcement from Ampol, GrainCorp and IFM Investors was about today as well. We want to create more jobs and more opportunities in the net zero transformation and sustainable aviation fuels have got a role to play in that. We know that there are challenges, but we think that they are not insurmountable.
JENNETT:
So, what will the New Zealand Government, the Australian Government and those private sector partners actually be spending on this endeavour? Noting for our audience that I think the global contribution of green avgas is well below 1 per cent across the planet right now. There’s a long way to go.
CHALMERS:
One of the things that’s attractive to airlines around the world, including here in Australia, is that the investment happens at refineries like this one and good partnerships between the agriculture sector and the energy sector, and they can create the kind of fuel that requires no big capital investment from the airlines themselves, and we know from speaking with the airlines that there’s a lot of interest in lower carbon fuels, sustainable fuels like that, which Ampol and GrainCorp and IFM Investors are looking to refine here in south‑east Queensland. There’s a big opportunity here. Now when it comes to the private sector investment, which is encouraged by our government and by the New Zealand Government, what they’re looking to do here is to work out whether they can refine that fuel here at Lytton and to fill some of that need. This is a big opportunity. We see it as a job‑creating opportunity, creating part of our economy. That’s why we’re so supportive of the announcement made by the private sector today, which shows there’s a willingness and an appetite to create these kinds of jobs and opportunities.
JENNETT:
All right, I want to take you to the big inflation story of the week coming up tomorrow. Let’s just stick with one other airline for the time being, Jim Chalmers, if we could. Are you going to have to find more money to assist Rex Airlines as it haemorrhages cash and possibly maybe looking at cutting routes, destinations and services? Are you on standby to do that?
CHALMERS:
Obviously the announcement today from Rex is a concerning one, because a lot of people rely on regional air routes and there’s a lot of jobs as well in regional travel, and so a very concerning development today. There’s no use pretending otherwise. As I understand it, the company has said that they will make more comments later in the week, most likely around Wednesday, about the future of Rex. My colleague Catherine King, who’s responsible for sustainable aviation fuel and for the aviation sector more broadly as Transport Minister, she’s working with her department to make sure that we’re across these developments. Beyond that, I’m not really keen to pre‑empt any announcements or developments that the airline might announce themselves towards the middle of the week.
JENNETT:
All right, we’ll await developments there from them. So, let’s go to the all‑important June quarter inflation figures, CPI figures out tomorrow. I think in comments you’ve made elsewhere today you are bracing for some deterioration in those numbers. Why won’t a figure tomorrow in the high 3 per cent range represent a failure of your budget strategy and forecasts?
CHALMERS:
There’s a few things about that, Greg. First of all, a figure like that would be consistent with the Reserve Bank’s forecasts. I don’t want to make a prediction or pre‑empt the number that we’ll get at 11:30 tomorrow. Certainly, economists expect inflation was sticky and persistent and stubborn in the June quarter of this year. That’s a bit like what we’ve seen around the world in other countries where inflation peaked higher and earlier than it did here in Australia, we saw that inflation doesn’t always moderate in a straight line. It zigs and zags on the way down. And there is an expectation from economists, to be frank about it, that that’s what we’ll see in tomorrow’s numbers. But we’ll wait and see what those numbers say. We have anticipated for some time that the inflation challenge in our economy is persistent.
Inflation is much, much lower than what we inherited when we came to office a couple of years ago, but we want it to moderate further and faster. We’re confident that throughout the rest of the year we’ll see a further moderation in inflation, but we’re realistic about what we might see in those June figures tomorrow. It’s a matter for the independent Reserve Bank how they react to those figures. But the government is doing its bit, turning big Liberal deficits into big Labor surpluses. The Reserve Bank Governor has said that’s helping in the fight against inflation. And we’re also rolling out cost‑of‑living relief in a meaningful and substantial way, but also in a responsible way, which puts downward pressure on inflation in areas like the energy rebates and also the rent assistance. We’re playing our part, doing our bit when it comes to the fight against inflation. We’ll see what those numbers say tomorrow.
JENNETT:
Yeah. What we’re seeing is inflation made in Australia, isn’t it? Because few other comparable developed countries are actually ticking upwards in their rates right now, including New Zealand, by the way, they don’t seem to have the same underlying inflation trend as we do right now. So, there are domestic elements at play here, aren’t there, whether by the federal policy settings or for that matter, by states?
CHALMERS:
First of all, New Zealand’s inflation peaked earlier than ours, and in the US, inflation peaked earlier and higher than what we saw in Australia. And so they’re a bit further along since their peak, that’s the first point. The Reserve Bank Governor and Deputy Governor have both made the point that the shape of our inflation challenge is actually very similar to what we’re seeing around the world. When it comes to the international sources and the domestic sources of inflation, the reality is, is that it’s both. We’ve seen shipping costs, for example, triple since November last year. We’ve seen global oil prices up about 10 per cent since this time last year. So, there’s some international factors at play when you think about all of this geopolitical uncertainty and then some domestic sources of inflation as well. Most economists expect tomorrow’s inflation figure to be driven by a combination of things like insurance and rent and petrol and maybe some temporary factors when it comes to fruit and veg. None of those drivers of inflation are government spending that’s the truth of it. If anything, the government is helping the fight against inflation by running these surpluses and providing responsible cost‑of‑living relief. But some of the pressures from around the world and from around the country are more persistent than we’d like.
JENNETT:
All right, I know you’ll have a lot to say about that, or expect you will tomorrow. Just quickly and finally, Jim, you’ll be off to Fiji later in the week to address Pacific banking. Will Australian banks, or do you expect Australian banks to step up to the plate in places like Nauru and elsewhere which have their services threatened?
CHALMERS:
The short answer to that, Greg, is yes. And I’m very grateful to the Australian banks for the constructive conversations that we’ve been able to have about maintaining a presence in the Pacific. And that is one of the really important contributions that the Australian Government and the Australian private sector can make to growth and prosperity and stability and security in the Pacific region. I think I’ll be the first Australian Treasurer to meet with their colleagues in the Pacific for almost 2 decades and half‑a‑dozen treasurers. And that’s because we see the Pacific as a really high priority in our economic policy and in our foreign policy. I’m looking forward to meeting my colleagues and counterparts from Pacific island nations so that we can talk about some of these really important issues. Climate change is one of them, banking is another. How we make sure that we grow together and how we make sure that we support each other in what is a really important part of the world, in our region, but also an important part of the global economy.
JENNETT:
All right, a bit lies ahead for them and for you this week, Jim Chalmers, we do appreciate you finding some time for us, though, this afternoon. Thanks again.
CHALMERS:
Thanks very much, Greg.