Karl Stefanovic:
Well, homeowners across Australia are this morning celebrating the first rate cut in 4 years, which will see interest on home loans by $4 billion a year. We’re joined now by Treasurer, Jim Chalmers, live in Logan, Queensland.
Jim, good morning to you. So does one rate cut save your bacon or what?
Jim Chalmers:
Morning, Karl. That was a very welcome outcome for millions of Australians yesterday, for all the reasons that you just introduced.
It does mean a bit of rate relief, the rate relief that people desperately need and deserve. It has been a difficult few years for Australians with this inflation challenge, and because we’ve got inflation down, because we got wages up and unemployment low, now we’ve got interest rates coming down as well, and that’s a good thing.
Stefanovic:
Yes, but does it save your bacon or what?
Chalmers:
I don’t see it in those terms, Karl. I know that people want to apply a political lens to it, I understand that, but my job is to focus on the economics of it.
The economy, the combination of factors playing out in the economy gave the Reserve Bank confidence that they could cut interest rates, and that’s a good thing for millions of Australian homeowners.
Stefanovic:
It ain’t going to get better for the government than this, is it? You want to hurry if you want to get that honeymoon glow into an election?
Chalmers:
I’m not sure about that, Karl.
That will be a decision for the Prime Minister at the end of the day. My job is to keep focusing on the sorts of outcomes that we’ve been seeing.
We’ve got a wages number out later today which will show that real wages are growing again in our economy, they were falling when we came to office.
So my job is to obsess over what’s happening in the economy, the Prime Minister will work out the election date. It will be at some point in the next 3 months, and we’ll be ready for it when he calls it.
Stefanovic:
It was high interest rates though that belted us into submission at the end of the day and killed thousands of small businesses in the end. Aren’t we the ones who paid dearly for getting inflation down? I mean you can’t bank on us being grateful to you.
Chalmers:
I’m not seeking that from people.
What I’ve tried to do is recognise, not just yesterday and today but for months and months now, that the progress that we’ve made on inflation in this country we’ve made together.
People have been through a really difficult period. We know that the cost‑of‑living pressures haven’t disappeared overnight, even despite this welcome decision from the independent Reserve Bank, but a rate cut will help people.
It will take some of the edge off these mortgage repayments, and it comes at the same time as the government’s providing the tax cuts and energy bill relief and other cost‑of‑living help as well, and getting wages moving again.
If you look at the combination of what’s happening in our economy, inflation is down very substantially, real wages are up, unemployment is low, and now interest rates have started to come down as well. All 4 of those things are very good things.
Stefanovic:
Is there a possibility the reduction could be inflationary? Could it drag out the cost‑of‑living crisis?
Chalmers:
No, I don’t believe so, and if you read the Reserve Bank’s statement yesterday, what they say is that we’ve made a heap of progress on inflation. That progress has actually been faster and better than anticipated. Again that’s a tribute to the Australian people for what they’ve done to get through a difficult period.
This is the rate cut that they need and deserve, you know that, Karl, and I know that. It won’t solve every challenge in our economy overnight, it won’t take all of the pressure off household budgets, but it will help, and that’s why it’s a very welcome development.
Stefanovic:
I think that’s a good point, it’s not going to make any difference to our weekly shop in terms of what we pay at the supermarket, is it?
Chalmers:
If you think about food inflation, food inflation now is about half of what it was when we came to office. Inflation broadly was higher than 6 per cent, was rising, interest rates were rising when we came to office, now inflation and interest rates are coming down, including for food. The last year of food inflation’s about 3 per cent, it was almost 6 per cent when we came to office.
So we’re making progress together, but we recognise those cost‑of‑living pressures are enduring. That’s why the rate cut’s so welcome, and it’s why the government’s cost‑of‑living help’s so important, and that’s why it beggars belief that Peter Dutton didn’t support any of that cost‑of‑living help.
He would have seen people thousands of dollars worse off. They’ll be worse off still if he wins the election, and that will be the choice that people will make when the election’s called.
Stefanovic:
The Reserve Bank’s concerned that Donald Trump’s proposed tariffs might be inflationary. Do you share that concern?
Chalmers:
Certainly that’s the economic theory, that tariffs run the risk of pushing up inflation and slowing growth, so that’s the concern. For Australia, we’ve got a very trade‑exposed economy, and so we don’t want to see the escalation of these trade tensions.
There is a lot of global economic uncertainty as the Reserve Bank Governor said yesterday, a view that we share. But what the Governor said yesterday, a view that I share wholeheartedly, is that we’re optimistic about the future of our economy, but we’re alive to the risks, and some of those risks are global when we think about the escalation of trade tensions around the world.
Stefanovic:
All right. Just a quick one, on a lighter note, are you going to Vegas for the NRL launch?
Chalmers:
I won’t be doing that, I think that’s –
Stefanovic:
Aha, so there’s an election being called.
Chalmers:
– my birthday weekend, Karl, and so I can’t go to Vegas, Karl, because that’s the day we’re calling the election. I’m just going just tell – I’m only kidding. That’s my birthday weekend, and so I’ll be spending it closer to home with the fam.
Stefanovic:
All right. Good to talk to you, Treasurer. Appreciate it as always. Thank you.