HAMISH MACDONALD, HOST:
The Treasurer is Jim Chalmers, good morning to you.
JIM CHALMERS, TREASURER:
Good morning, Hamish.
MACDONALD:
Could I invite you to respond to what he was saying just there, that the Prime Minister is effectively missing in action?
CHALMERS:
Look, I think Angus Taylor is as responsible as anyone for the mess that we’re trying to clean up and if his argument is that we've been in government for six weeks or so and we haven't cleaned up a decade of economic mismanagement, then I think he'd be best served by pulling his head in. We would prefer not to be having to fix these relationships around the world that our predecessors and particularly the former Prime Minister ran down. Doing that important work with international friends and partners has a tangible benefit for Australians here at home and it hasn't prevented us from doing things like helping to secure a minimum wage rise or properly funding our hospitals that are under COVID pressure, doing a deal with the states and working with them to make sure that our health system can cope with the COVID that we're dealing with now, a whole range of things in my portfolio - beginning to go through the Budget, this audit of Angus Taylor's rorts and waste. All of this has been going on at the same time as we've been repairing these relationships around the world which have been run down to the detriment of the Australian people.
MACDONALD:
To some of the substance of his point though, how will a jobs summit in September, a Budget in October plus the longer‑term changes to child care, how will those help households feeling the pinch right now because of these rate hikes?
CHALMERS:
A couple of things about that. On the Jobs Summit, unfortunately, our predecessors were temperamentally incapable of bringing people together around our big national economic challenges and we've got a different approach. The Jobs Summit is about finding common ground in areas like wages growth, areas like productivity, areas like migration, childcare, participation, so that we can create more opportunities and get that decent sustainable wages growth while we grow the economy as well as we emerge from COVID and some of the other near‑term challenges that we've got. So that's an important opportunity for people to get around our big national challenges and see where we can work together. When it comes to child care, that's going to be an absolutely crucial economic reform, which is going to ease the cost of living and make it easier for people to work more or return to work if they want to do that. So we've got the right Economic Plan.
If you sat down a whole bunch of experts around a table and said - in the context of high and rising inflation, falling real wages and a trillion dollars of debt in the Budget - what should we be doing? I'll tell you what we should be doing. Training more Australians, making child care more affordable, reforming the energy market so we've got cleaner and cheaper energy, co‑investing to ensure a future made in Australia so we can create these great jobs in secure industries, investing in the care economy and the digital economy. Those are the core elements of our Economic Plan. If the Liberals and Nationals want to say that we haven't fixed all of the mess that they left for us after a decade in office, we haven't fixed that in six weeks, that seems to me to be a pretty shoddy argument. You can't flick a switch and fix all of these issues that we've got in our economy, they are big and substantial. But we've started the work, we're working around the clock to make sure that we can implement our Economic Plan to grow the economy without adding to these inflationary pressures and get some decent wages growth.
MACDONALD:
Yeah, but the central part of that is without adding to the inflationary pressures. What stimulus are you willing to take out of the economy to help tame inflation?
CHALMERS:
There's two ways to look at this challenge, Hamish, at least two ways. First of all, to make sure that every dollar that's being spent in the Budget has an economic dividend and not just a political dividend. And so, our responsible commitments in some of those areas that I just ran through, many of them will ease the cost of living, many of them will grow the economy, some of them will do both, for example, our childcare policy, that's important. But in the Budget itself…
MACDONALD:
With respect Jim, I'm really asking you about the other part of that which you've referred to. What can you take out of the economy to help with the inflation question?
CHALMERS:
And that's the point I was getting to Hamish, which is the other part of this equation is to go through the Budget and make sure that we are not needlessly spraying money around for political purposes. And that's why Katy Gallagher and I have already begun our audit of rorts and waste in the Budget to make sure that where there has been politically motivated spending - whether it be slush funds or other kinds of rorts that Angus Taylor knows all about - that we eliminate that spending and we redirect it to a more productive purpose. Because that gives us the best chance of making sure as we emerge from what will be an incredibly difficult period with high and rising inflation and rising interest rates, when we get to the other side we want to have dealt with or begun to deal with some of the other pressures in the economy which have been building for much longer than COVID or much longer than this inflation spike.
MACDONALD:
What's the quantum that we're talking about here, though? I mean, I know you're saying we've begun, but do you have a sense of how much of that there is, how much fat there is to cut?
CHALMERS:
The best opportunity to report back to you on that Hamish, will be in the October Budget and one of these processes that we've begun already directed towards that October Budget. I didn't want to wait until May, which would have been the usual timeframe for a Budget. I would have thought this task is more urgent than that. But you can't just do it in a couple of weeks, you've got to make sure you're doing it methodically and responsibly. The Budget in October will be a good opportunity but before that, the end of this month in the first week of the new parliament, I will also update the Australian people on our expectations for the economy, some of the pressures in the Budget, including, now, the necessary spending on flood reconstruction in flood‑affected areas in New South Wales, but some other health pressures as well. We'll account for all of that, we'll talk to the Australian people and update them towards the end of the month on all of those pressures so that they know what we are working through as we head towards that October Budget.
MACDONALD:
I understand that you're going into this process saying we want to uphold all the promises we made. We're not going to change any of the legislation around the tax cuts. But clearly the situation that you face now in government is challenging as far as the economy is concerned, why not reconsider some of this stuff to actually, genuinely tackle inflation?
CHALMERS:
First of all, the tax cuts you refer to are still a couple of years away, so changing anything on that front would not materially impact the inflation challenge that we have right now. That's the first point. Second point, is our commitments that we went to the election with are more important now than ever. Some of those things that I ran through, we anticipated some of these challenges - whether it's inflation, whether it's falling real wages - some of these issues have been around - even rising interest rates, they started to go up before the election - so some of these issues have been around for a little while now. We geared our Economic Plan towards them. Whether it's skills, child care, energy, investment in industry - these are more pressing, more urgent needs now than they were even before the election when we committed to some of these policies. So it's more important that we implement that, and we'll be doing that in the Budget.
MACDONALD:
A borrower with an $800,000 mortgage is already paying $550 more a month on repayments, depending on the circumstances of their loan than they did before the Reserve started lifting rates in May. Given all that financial pain, do you think you could revisit the decision not to extend the temporary cut to fuel excise?
CHALMERS:
This is a collision, really, of the fiscal reality and the economic reality. That policy - that six‑month petrol price relief that was in the last Budget of the last government, which we supported - ends in September. Even that six‑month relief costs about $3 billion. And so to extend it for another six months, for example, would be another $3 billion. To extend it indefinitely would cost the Budget a lot of money and we have to weigh all of these things up responsibly. We have to weigh up our priorities, and you can't do everything that you would like to do when you've got a Budget which is heaving with a trillion dollars of debt. So you've got to work out, where could an investment of taxpayers' dollars give taxpayers the best bang for buck? Where can it tick a few boxes, investing in the future as well as providing relief for families. That's why our emphasis in areas like child care, medicines and wages are our priorities. Because we can provide genuine, sustainable, long‑term cost of living relief in those areas in ways that benefit the economy. It's harder to fit some of these other extensions of the near‑term relief into the Budget indefinitely.
MACDONALD:
I understand you've spoken with the banks about passing the rate rises onto deposit holders as well, the people that are saving. There's not the same uniform approach for banks and institutions passing that on to savers in the same way that there is with those that are borrowing. Have you received any guarantees that savers won't be ripped off?
CHALMERS:
No Hamish, the conversations I've had in the last few months and not in the last day or so haven't been along the lines that you've suggested, but I have conveyed to some of the CEOs that I'm concerned that when rates rise that those benefits aren't passed on to savers as quickly as rate cuts are passed on to savers. I think that's the reality, and I think it's disappointing. I did hear your interview with Anna Bligh earlier this morning and I think she made a good point, which is if people aren't getting the kinds of returns that they think they should be getting from their savings, I would also encourage them to shop around and find a bank that is prepared to treat you better. Because the victims of these low interest rates that we've had for a little while now are savers. We want them to be the beneficiary of rising interest rates in the same way that they were victims of rates when they went down to those historic lows, and so I'd encourage and urge the banks to do the right thing by them.
MACDONALD:
Neither the Reserve Bank nor Treasury are forecasting a recession. I think we can probably all guess what you might say about the likelihood of one here. But I'd be interested to hear your thoughts on what Larry Summers has been saying in the United States about how the US might avoid recession and the need for higher unemployment. How do you interpret his remarks? And do they apply here?
CHALMERS:
I don't see it exactly the same way, but there are a lot of people expressing concern about the American economy. That's something that, obviously, we are keeping a close eye on. Because a lot of the commentators, a lot of the economists, have very real concerns about the near‑term prospects in the United States. If the US were to go into recession, obviously, that would have consequences for us. They've got a more acute combination of the same challenges that we're facing. They've got higher inflation and they've got a central bank that's going to have to do a lot of work to try and rein that inflation in, and so people are worried about that. That's something that, obviously, we're keeping a close eye on too.
MACDONALD:
Jim Chalmers, we'll leave it there. Thanks for your time this morning. We appreciate it.
CHALMERS:
Thanks very much, Hamish.