James Glenday:
Now, borrowers are bracing for yet another interest rate rise today. With the RBA expected to lift the cash rate to its highest level in almost 15 years. Financial markets and economists expect the board to deliver of a quarter‑percentage‑point hike in an effort to address stubbornly high inflation.
Emma Rebellato:
Now, this would be the fourth interest rate hike this year, with no guarantee that households will be spared another one before Christmas. The Treasurer, Jim Chalmers, joins us now live. Treasurer, thanks for joining us.
Jim Chalmers:
Thanks very much, Emma.
Rebellato:
If rates go up today, this would be, as we just mentioned, a near 15‑year high. You’re the Treasurer, how does that sit with you?
Chalmers:
Well, first of all, obviously I’m not going to make a prediction or pre‑empt a decision that the independent Reserve Bank will announce this afternoon. I think a lot of Australians are bracing for an interest rate hike because it’s the universal or near universal expectation of economists and markets that that’s what we’ll see this afternoon. We’ll wait and see what the Reserve Bank announces.
Obviously, people are already under very substantial pressure and an interest rate rise would add to the pressure that a lot of Australians are feeling. From my point of view, from the government’s point of view, we recognise the independence of the Reserve Bank, and we’re focused on our part in the fight against inflation, which is to manage the budget responsibly, provide cost‑of‑living relief in an ongoing way, and also to deal with some of these longer‑term challenges in our economy.
Rebellato:
So, what else will you do then to bring inflation down? Because as you said, households are facing a difficult time ahead. So, is the government willing to face pain as well?
Chalmers:
Well, what we saw in yesterday’s budget outcome is that we have made very substantial progress improving the budget since we came to office. Spending as a share of GDP is much lower than when we came to office. We delivered a couple of surpluses. We’ve now got the deficit much lower. Public debt is a fraction of what we see in other countries, and that’s because we have been managing the budget responsibly, and there is always more work to do.
But it’s really important to remember that this inflation challenge in our economy has a number of sources. We do have an inflation challenge which is made much, much worse by developments in the Middle East. It means Australians are already paying a very hefty price for developments on the other side of the world. It’s not the only thing that’s going on in our economy. But what we’ll see tomorrow in the inflation numbers is a big driver of the inflation that Australians are confronting right now comes from those decisions taken on the other side of the world to prolong a war, which has been absolutely disastrous from a cost‑of‑living point of view for Australians.
Rebellato:
Well, we know the International Monetary Fund, though, has said that federal and state governments need to rein in spending. That is also one of the factors that’s driving inflation. Do you need to do that? Is that what the government will be looking to do to rein in spending further?
Chalmers:
Well, the International Monetary Fund said that Australia had one of the 3 strongest budgets in the G20, and that’s a fact. Our budget is much stronger than what we see in other countries, particularly when it comes to public debt, which is a sliver of what we see in the US, the UK and Canada and in other places. That’s the first point. Second point is we have made a lot of progress. We found almost $180 billion in savings in the budget. That’s helped us improve the budget, bottom line. It’s also helped us fund stronger Medicare, more bulk billing, investments in public hospitals, cost‑of‑living relief.
All of those things are important as well, but there’s always more work to do to make the budget even more responsible. It’s possible to acknowledge that at the same time as we acknowledge that the budget is much better‑ in much better condition than the budget that we inherited 4 years ago.
Rebellato:
Treasurer, ACOSS says that if rates go up today, it’s going to cost people jobs and push people out of employment. If we get to 5 per cent, they say, it will spell human disaster. Is that where we’re headed?
Chalmers:
That’s not our expectation. But it is the case that when interest rates go up, it does put extra pressure on people, just as it puts extra pressure on people when the unemployment rate ticks up as well. And so our objective and the Reserve Bank’s objective is to maintain low employment at the same time as we see lower inflation within the Reserve Bank’s target band. And what we’ve seen in recent years is it’s possible to have low unemployment at the same time as we have much lower inflation than what we have right now.
Our inflation right now is not the fault of Australian workers. We’re seeing inflation in our economy for a range of reasons, including the war in the Middle East. It’s possible to have full employment, low unemployment at the same time as we have lower, more steady inflation. That’s the Reserve Bank’s objective, and it’s the government’s objective too.
Rebellato:
Treasurer, if interest rates go up today, there’s a chance they could go up again before the end of the year. People are already sitting on really tight budgets. We know renters could be facing higher rental income as well as fuel prices are high too. People are struggling. Is there something the government is looking at down the track if things do not improve, to help people, to help households?
Chalmers:
Look, we always work through our options from budget update to budget update. We’re always very cognisant of the genuine substantial pressures that people are under, and we weigh that up against pressures on the budget at the same time. And in the 4 and a half years that we’ve been in office, we’ve been providing cost‑of‑living help at the same time as we dramatically improve the budget. And so obviously from budget update to budget update, we consider all of our options.
It certainly is the case Emma; I agree with you. People are under very substantial pressure. It’s why our cost‑of‑living relief is so important in the form of tax cuts and more bulk billing and higher wages help for first‑home buyers in the housing market. All of that recognises that Australians are under very substantial pressure. And obviously, if interest rates go up, that will add to the pressures that people are feeling.
Rebellato:
Treasurer, there’s been a lot of focus, of course, over the past few days about artificial intelligence. In particular, that breach of OpenAI with the Medicare statistics portal. Is the government looking to prioritise cybersecurity spending?
Chalmers:
Well, we actually substantially increased our investment in cyber defences in government at the last Budget, I think $160 million from memory in extra spending in uplifting our cyber capabilities. And it’s part of a whole heap of work that the government is doing, trying to maximise the upside of AI. At the same time, as we manage these very, very serious risks. The AI Safety Institute, the National Standards for Data Centres, the work that we’re doing in government to uplift our cyber capacity, all of that is about recognising that the risks from AI are very substantial, as are the opportunities. We are confident that we’ll get it right and the rapid review that’s underway after the OpenAI incident will help us consider any necessary next steps beyond the very substantial work that we’re already doing right across government.
Rebellato:
Treasurer Jim Chalmers, thanks for your time.
Chalmers:
Thanks, Emma.