GREG JENNETT:
Treasurer, welcome back to Afternoon Briefing, do you give the independent Reserve Bank full credit for bringing inflation down and ‑ at least for now ‑ on time and on target with forecasts?
JIM CHALMERS:
Thanks, Greg, for having me back on your show. Inflation is moderating in our economy in welcome ways and for a range of reasons. Obviously, tighter interest rates is part of the story but also from a government point of view, what we've been able to do is to roll out a three point plan here, which is helping in the fight against inflation. We've got a bigger surplus to take some of the pressure off inflation, we're rolling out this cost‑of‑living relief in a way that takes the edge off cost‑of‑living pressures without adding to inflation and we're also investing in the supply side of the economy. So there are a whole range of reasons for this and we know that we’ve still got a long way to go. We know that people are still under the pump but what we see in today's numbers represents, I think, some welcome progress. Inflation is still too high but it's heading in the right direction.
JENNETT:
Is it mission accomplished on the monetary policy side, the interest rate side, at least for now?
CHALMERS:
Well, I think ‑ as you know, Greg ‑ we've spoken on a number of occasions over the years, and I'm not going to get into pre‑empting the deliberations and the decisions of the independent Reserve Bank. They will weigh up this inflation data today, which was a bit better than the market certainly expected. They'll weigh that up against all of the other issues in the global economy and the domestic economy as well. My job isn't to give them free advice. My job is to focus on rolling out this cost‑of‑living help, which is the Government's overwhelming focus at a time where inflation is still high, even though it's moderating in these welcome ways.
JENNETT:
All right, well, let's drill into some of the numbers. Services inflation ‑ as opposed to goods ‑ highest growth in 20 years. This is whether it's for pet care, or eating out, or rolling rents into the equation as well ‑ the Bureau says it's contributing to these stronger wages growth. Why is this not a sign of some pressure coming onto prices from wages?
CHALMERS:
Well, I think clearly the composition of this inflation challenge is changing, and we see that in today's figures. But all of those that you just mentioned a moment ago, Greg, I think the one that is the most concerning is rent. And that's why we've got the biggest increase in rent assistance in 30 years rolling out very soon. It's why we're trying to build more public housing, more social, more affordable housing with our public housing accelerator and our Housing Australia Future Fund. We've got to get much more housing supply into the system, it's got to be more affordable when it comes to rent. And so of all of those categories that you just mentioned, for understandable reasons, I think rent is the one that we need to be most focused on and rent is the one that we're very focused on when it comes to our cost‑of‑living relief package.
JENNETT:
Is there a strong likelihood that these rental price pressures haven't actually peaked yet, because of the lag that follows interest rate increases, in particular?
CHALMERS:
It remains to be seen, I'm obviously aware of the sorts of predictions that get made about these rental pressures. They've been with us for some time, they are as much a consequence of not enough supply as any other reason. And that's why we've got this broad and ambitious housing policy, which is all about building more affordable homes at the same time as we make it easier for people to pay the rent, with the biggest increase in Commonwealth Rent Assistance in 30 years. But obviously, rent is a big part of the inflation story, it's obviously a concerning part of the numbers that we saw today. Overwhelmingly, overall, the inflation picture is getting a bit better in our economy in welcome ways, but that doesn't mean every single part of our economy is out of the woods, and rent is obviously one of those things that we're most focused on.
JENNETT:
You did touch on the stalled Housing Australia Future Fund, of course, the Senate and parliament generally is returning next week. Is the Government considering trying to challenge the freeze that the Senate slapped on there ‑ as things currently stand this would not be addressed until mid‑October. Is the Government anxious to challenge that if the numbers can be mastered?
CHALMERS:
Obviously, I'll leave our parliamentary strategy to the Prime Minister and the Leader of the House. Clearly, we want to see the Housing Australia Future Fund passed. We've got to weigh that up against all of the other priorities in the legislative program when the parliament returns next week. No doubt the Prime Minister or Tony Burke will have more to say about that in due course. We desperately need to see the Housing Australia Future Fund passed. It's part of building more homes and more affordable homes in this country, and a country that desperately needs them. It's an important part of our housing policy but it's not the only part. Billions of dollars are rolling out when it comes to public housing, when it comes to affordable housing, and also this rent assistance which will help take some of the edge off these rental pressures that we see in today's inflation data.
JENNETT:
All right, now childcare, up one and a half per cent in the quarter, which is prior to the additional subsidies coming into the system. But you'd be well aware, Jim Chalmers, of anecdotal evidence, the prices ‑ or fees, I should say ‑ have exploded since the first of July. Do you concede that the full extent of the family benefits that had been modelled won't be experienced by most families?
CHALMERS:
First of all, you're quite right to point out that this is from before our policy kicks in, and so I welcome that acknowledgement. We've said, really for the last few weeks, in anticipation of this game‑changing relief for Australian families, that we expect families to be better off or we expect many families to be substantially better off. And if there are issues in pricing when it comes to early childhood education, we've got the ACCC providing advice to the Government about the structure of pricing to make sure that when governments provide this kind of help, that it flows through to families. But we are obviously aware of how big a part of the cost‑of‑living puzzle early childhood education is for families ‑ particularly families with little kids, and particularly parents who want to work more and earn a bit more ‑ and we want to make it easier for them to do that. That's why it's a good economic policy and not just good social policy. But when it comes to pricing, we expect people to be better off, a lot of people will be substantially better off and we'll get to the bottom of the broader pricing issues with the help of the ACCC.
JENNETT:
All right, let's see what they come back with. Just a final one on inflation and components of it ‑ insurance premiums, up 14 per cent over the year, strongest in one quarter in 23 years as measured by the Bureau ‑ this becomes discretionary for some families in a cost‑of‑living crunch. Do you advise them to, or what do you advise people to do about homes and cars in particular? Should it be opted out of when prices are soaring like this?
CHALMERS:
First of all, I try and avoid giving personal financial advice to people, they'll weigh up their own pressures on their household budget. Clearly, it's in the interest of the country for people to be as well insured as they can be ‑ Australia is a tricky place, obviously ‑ whether it's natural disasters or other events that people insure themselves against. As it turns out, I've had some discussions today about the insurance market. Clearly, the increase in insurance premiums has a range of sources. It's not something that's easily fixed, and nor should we pretend that it can be. My colleague, Stephen Jones, and others in the Government are trying to work out how can we do something meaningful on insurance. But the most important thing that we can do and we are doing, is to make sure we're much better at natural disaster mitigation. For example, Murray Watt and other ministers, are making sure we're getting ahead of disaster season to mitigate communities to the extent that we can, and that will have a positive impact on claims and premiums.
JENNETT:
And what are the other options that are at your disposal that Stephen Jones or others are examining?
CHALMERS:
Look, we've had in the first couple of Budgets of the Government, we've had some measures about trying to understand the pressures on insurance premiums, the inflation in insurance premiums. But I don't want to pretend to your viewers, Greg, or to you that there's some very easy solution here when it comes to insurance premiums. This has been an issue in our economy for a little while now. If there was an easy answer, I think somebody would have grabbed it by now. But we'll do the work and if there's more we can say in the future about that, obviously, we'll say it. But most importantly, particularly when it comes to natural disasters, we do the mitigation at the community level and we help out on the household level, and that will make a difference.
JENNETT:
All right, and I know you've been keeping an eye on economic developments in China, Treasurer. Like you, President Xi and the Central Committee have changed their central bank governor, overnight. What's your analysis of this? Do you see a sense of panic about the Chinese economy kicking in through this change at the top?
CHALMERS:
Look, that's obviously a matter for President Xi and for his colleagues to determine who fills those roles, and I certainly wouldn't describe it the way that you just have. But the Chinese economy is something that the whole world is monitoring very closely. We have seen some softness in Chinese data in recent weeks ‑ particularly for an economy like ours, with such an important economic relationship with China ‑ we're obviously very focused on that. It is one of the downside risks in the global economy, a weaker Chinese economy. The global picture is a mixed bag. We've got recession in places like Germany and New Zealand. We've got resilience in places like the United States, and to some extent here in Australia, so it's a bit of a mixed bag. But one of the things that people are watching very closely, one of the downside risks is that softer data we've seen in China. The authorities have been responding publicly to some of the concerns that have been raised and we will monitor developments there as you'd expect us to.
JENNETT:
All right, well, developments at home and abroad covered off today on a busy day for you, Jim Chalmers. Really appreciate your time, thanks for joining us once again.
CHALMERS:
Thanks for your time, Greg. All the best.