KATHARINE MURPHY:
Hello lovely people of podcasts. Welcome to the new political year‑ God help us all! I'm Katharine Murphy and you're on Australian Politics. And I don't know what I just trod on in the pod cave then but anyway no one hurt I don't think! And with me for the first episode of the year, I'm delighted to say long‑time friend of the pod, the Treasurer Jim Chalmers has joined me. Welcome to the new year, Jim.
JIM CHALMERS:
First cab off the rank!
MURPHY:
Are you honoured?
CHALMERS:
I am actually honoured. It's great to be back.
MURPHY:
There's lots of reasons why Jim would be my first interview of the year because obviously anybody following the news knows there is an enormous amount happening in his economic hemisphere as Treasurer, but the principal reason I have brought him into the pod cave for the first chat of the year is because he's written an essay for The Monthly, which is about to come out. When does it come out?
CHALMERS:
It comes out on Monday officially, but you hear word around the traps about copies appearing here and there but Monday is the official day – 30th of January.
MURPHY:
So it hits the newsstands on Monday, but I imagine a number of us will be ‑ well, I don't have to imagine, this conversation you'll be listening to on Saturday morning and there'll be a fair bit of news around I think pointing to the Treasurer's arguments in this piece. Now, I'll just start with a slightly inside baseball question that you and I will enjoy: What is it about Queensland right wingers and The Monthly?
CHALMERS:
It's the newsletter for us. Katharine is referring there, of course, to ‑ almost to the day 14 years before my essay appeared, Kevin Rudd's appeared about the Global Financial Crisis. And I think in 2012, there was the Wayne Swan essay. But the last politician to write an essay for The Monthly was actually Penny Wong. I think in 2016 she wrote about marriage equality ‑ so it goes Rudd, Swan, Wong, Chalmers, which trods on your argument a little bit.
MURPHY:
Interregnum ‑ one South Australian left winger. Anyway, I'm sort of being slightly facetious, obviously. I posed the question, as Jim has said, really I suppose to plot a bit of a continuum. Now let's leave Penny's marriage equality piece out because it doesn't really suit my purposes, Jim, so let's set that to one side. So obviously, Rudd wrote his essay ‑ this was at the sort of the beginning of the sequence of crises, which you're now also embroiled in managing. So that was sort of post Global Financial Crisis. Wayne Swan's essay was just a sort of ball of fury about his response to ‑ let's call it his fury of greed being good, allegedly. There was sort of plutocrats and concentration of power, and what was wrong about capitalism. It was quite a strident piece. Yours in terms of the sort of metaphor ‑ do we burn the village or renovate the village, I think you're probably in renovation territory in terms of what you're saying about capitalism and the system and the sort of interplay between capitalism and democracy ‑ more renovate than burn to the ground. Why don't you ‑ rather than me telling the listeners what you've said ‑ why don't you take them through the central arguments that you're making?
CHALMERS:
I think your starting point is the perfect one, which is to recognise as the essay does that in the last 15 years or so we've had three big economic crises. The first was the Global Financial Crisis which became a demand shock in the economic jargon; the pandemic became a supply shock ‑ it messed with our supply chains; and what we're going through now is this big global inflation shock, where interest rates are going up and that's putting a lot of pressure on really most of the advanced economies around the world. What I tried to do over the Christmas break was to take a big step back and say, what do we know about these three crises and what can we learn from them? The reason why I use this very, very old quote from the Greek philosopher Heraclitus is because his quote was about no man steps in the same river twice because it's not the same river and he's not the same man. And I use that to try and recognise that the three big crises are all different. They've all warranted different kinds of responses but they've all made us in one way or another, our society or our economy more vulnerable. And the other thing that unites them is that broadly there hasn't been the kind of learning about these crises that we want to see.
One of my big frustrations as someone who cares deeply about the state of our economy, but also the state of our society ‑ and you and I have known each other a long time, you know I've always been trying to work out how do we nicely line up our economic objectives and our objectives in our society. And I feel like the big lesson out of those three crises over a decade and a half is that we need to do that much better. I think particularly in Australia over the last decade, governments have pretended that there's some kind of false choice between doing the right thing by the economy and doing the right thing by our society. And in the process of pretending it's a choice between one or the other, they've kind of delivered on neither. So the essay is really about how do we line up our values, with our budgets with our economy in a lot of meaningful ways, but principally when it comes to cleaner energy; principally when it comes to how do we make technology work for people, not against them; and also, how do we get public investment and private investment flowing into those areas that we really care about: housing, energy transition, all of these sorts of things. That's largely what the essay is about. There's a heap of pessimism in the global economy right now. There's a lot that does and should worry us about conditions in the global economy. But I've tried to write it in an optimistic way that says the future is bright so long as we learn from what has been a pretty torrid 15 years or so.
MURPHY:
Now, you sort of make the case for values‑based capitalism. In the in the many iterations of Labor governments over the last century, there's been different versions of different values‑based capitalism, depending on the times. But I want you to drill down into that a little bit further because obviously it's not a binary: capitalism is valueless or has values. There are always values embedded in it. Neoliberalism is a set of values embedded in capitalism. So when you talk about values‑based capitalism ‑ you've sort of done it in a big picture sense in in terms of your summation of what you've written ‑ but what are you getting at?
CHALMERS:
Let me put it this way. One of the things that I love most about this job that I've got right now is you meet a lot of people from the global investor community and the Australian investor community. And what you learn from spending time with them is that there is a view about their role and a view about the role of the economy, which is not always represented on the front pages of the financial press. In the piece, I talk about Mark Carney ‑ an incredible guy, he's been the central bank governor in two countries and really a genuine thought leader, who I've been able to spend a little bit of time with ‑ and a guy here in Australia called Michael Traill. They are representative, I think, of this view of people who move in quite conservative circles, who have in one way or another come to the realisation that you can keep the wheels of the capitalist economy turning in a way that satisfies some of our social objectives.
That's really kind what I'm trying to do with these investor roundtables I'm putting together and what I'm trying to do in housing and what we're trying to do as a government in energy, and what we'll turn our mind to with data and digital and the intersection of critical minerals and advanced manufacturing. All of these sorts of things where we've got these big constraints in the budget, collaboration is the only way we're going to achieve our big economic objectives.
It's really heartening that when you spend time with people, people are looking for ways to do some good. One of the reasons why I have an optimistic view about humankind is because I genuinely believe that even in quite conservative circles, people are looking for a way to satisfy their financial objectives at the same time as we satisfy our social objectives and our responsibilities to each other, our obligations to each other. And so that's how I see values‑based capitalism. How do we nicely line up and neatly line up what we're trying to do in the economy, what the private sector needs to do in the economy to generate the kind of returns and wealth creation that creates jobs and opportunities, how do we line all of that up with our objectives, our national objectives. I feel like COVID in particular, but really each of these three crises that we've been talking about over the last decade and a half, it feels like each of those has given us the big hint that we can do things a little bit differently. As you said, not to burn the thing down and try and rebuild it. The Prime Minister has talked about reform not revolution. I think there are really obvious and quite meaningful ways that we can just neatly line these things up.
MURPHY:
I think I said to you at one point that I met Michael Traill a couple of years ago, and he's a genuinely interesting person and has been doing interesting stuff for quite a period of time in this space that you're talking about. But when you sort of talk about constraints in the budget, Jim, you're a very clear communicator, but I think there will be some people listening to the podcast who don't really understand exactly what you mean. What you mean is we've got high debt and deficit, we've got a pool of national savings and other pools of money for investment sitting there possibly underutilised in terms of these values‑based social objectives that you're talking about. So it's a matter of building a bridge between these interests. I know what you mean but I guess I wonder how you deploy this at scale? I can see a bunch of worthy pilots that you might be able to do as a government. We've seen it already with superannuation and housing. Obviously there will be opportunities in the energy transition for similar things. But I guess I struggle to see how you how you do this at scale and in order to actualise what you're talking about, which is change the system so that the system rewards good, as well as profit. How do you actually build it at scale?
CHALMERS:
The key ingredient there, which hasn't always been there is a genuine sense of collaboration. If the argument that sits behind your question is that there's no easy way to go from how things are to how I want things to be, then of course that's true. And we've talked on other occasions about why our aspiration is to be a long‑term government is because you need to build some momentum, you need to lock down the ways we think about this differently. But I think at its core, the reason why I mentioned the state of the budget, and the reason why I am looking for other ways to satisfy our economic objectives is just because I feel that there's a real window of opportunity here. In the essay, I call it our big challenge and our big chance. It's before we forget the lessons from those three crises that we keep coming back to, before we forget about them, before we lose this opportunity, we should really get the ball rolling on a different kind of capitalism, which doesn't compromise the wealth generating, profit generating role that is legitimate and encouraged for the private sector, and to work out what do we care about as a country. We care about a cleaner economy; we care about having a bigger and broader industrial base; we care about being able to house people near where the jobs and opportunities are being created. And I feel like some of these steps that we've already taken ‑ that you refer to, particularly on housing ‑ I see that if we can make them work, you build some momentum, and that at its core is what I'm trying to do.
MURPHY:
Also, to pay due respect to your concept, there has been this sea change in business, which is partly to do the overhang of crises, partly to do with the fact that everybody's actually going to take the energy transition seriously now because capital has made its choice about how this is going to pan out. I agree there's a well there to tap. I guess I just don't know how quickly you can you can tap it. And the other question I've got because ‑ like Eeyore here ‑ the other question I would have about it… I just want to add at a personal level, to congratulate you for taking the time to sit down to compose 6,000 words to think about big ideas and trying to articulate them because not enough of that happens in Australian politics. So I just want to say, thank you, it's good. I look at your job, Jim, I look at the six months that you've had, I look at the six months you're going to have, as you basically deal with inflation running at north of 8 per cent, rising interest rates, you're going to chase the states basically down the street for the next six months to try and line up these energy rebates in order to give people price relief, right ‑
CHALMERS:
That's quite the image, isn't it? Me chasing Tim Pallas down Collins Street.
MURPHY:
You heard it here first. It's going to happen, just watch. They're all bandwidth issues, right? You've also got to produce your second Budget in one financial year, right? As much as big sky dreaming is important ‑ and I congratulated you with absolute sincerity ‑ I'm just wondering how the hell when your job is basically crisis management now ‑ that's the request of the last 10 years, crisis management, that's what that's we do here ‑ how you get the bandwidth to try and actually shift something, shift the fundamentals of something?
CHALMERS:
I hope it's okay that I disclose this but I remember when I was talking to you when you were writing your big, brilliant Quarterly Essay. I'm sure every listener has already read it, but if not, check it out. And I remember when we were talking about that, and you go through these kinds of cycles: it's a great idea when you sign up, you curse it at some midpoint, and then when it's finished, you're pleased you did it. And you're even pleased for the people who read it ‑ maybe they didn't like it, people who did like it. But you know, there are interim steps where today I tweeted a photo with a copy of the cover and said, check it out on Monday, and all the trolls come in and I think `why do I bother?' But I'm pleased I did it. And we only got commissioned in the middle of December and our deadline was early in January. And thanks to the wonderful Katy Gallagher, I had a break over Christmas and ummed and ahed about whether or not to do it, and in the end, I thought it's not an opportunity, you can really say no to partly because of that history that you began with but more than that, and the reason I'm pleased I did it, even though there were a few quite late nights, is because we all need an opportunity to take a little step back, and work out where everything fits. And I'm proud of it. I'm pleased I did it. It was a sprint over the Christmas break. But in the end ‑ I read it now and some people will like it, and some people will hate it, and that's fine too. Some people will say, why weren't you spending your time in another way, and I understand and accept that, too. But I'm pleased I did it. I'm proud of it. And I hope people get something out of it because then the time that I spent on it would be worth it.
MURPHY:
I would never say to you, why did you spend time on that rather than something else. I would never say that to you. And what I said to you was thank you for doing it. But I guess my concern is how you get the bandwidth to do the things you want to do. And I mean, it's kind of the story of Labor governments, isn't it?
CHALMERS:
I see what you did there, Murph. Yes to the extent that no government arrives on day one and can write the story completely of their first term in office and I think one of the benefits of having a Prime Minister with as much experience as ours does, is he appreciates that, I think. And so what we try and do is we know what the things we really care about delivering are. In my patch, we care about wages growth, we care about cost of living relief, we care about inflation moderating, all these sorts of things are pretty clear. And so you're finding room to try and deliver on your objectives and bed down the policies that you're committed to and all of those sorts of things, but it's only realistic to understand that a lot of your time will be spent fighting fires as well. Inflation is the fire in the economy right now in the way that it was the pandemic for my predecessor and for earlier predecessors, including Wayne and others, it was a global financial crisis ‑ there is an element of firefighting. But we need to find ways as a system and the people within the system, we need to find ways to take a little step back and work out where everything fits. And absent of this opportunity to write this essay, I don't know if I would have done much of that over the break so I'm grateful for the opportunity.
MURPHY:
Yeah, and please don't conclude from this line of questioning that I think you've wasted your time and it's all silly, I don't think that at all. The starting point was, you know, not enough thinking happens like that sort of out loud thinking and sort of, you know, big picture planning, but I just sort of look at the next six months and just I scratch my head, I do. But anyway, never mind. There's just one more thing about the essay, actually, that I want to tease out before we get on to the next six months quickly. And you talk I think, at one point, perhaps my terminology is incorrect, because I just don't have it in front of me. But it's interesting, part of the retooling of the economic systems that you talk about relates to the clean energy transition and to obviously, disclosure about climate impacts, various investments, etc. That's all really interesting. What can we expect on that really over the next little bit?
CHALMERS:
So I'm doing a heap of consulting right now on meaningfully changing the way that companies report their climate risks, but also their decarbonisation plans and all the rest of it, because when you talk to a lot of big investors, particularly big institutional investors, one of their frustrations is they want to invest in the right places, but they don't have a reliable, consistent way across different investment opportunities to work out which is the thing that aligns best with their values. And so there's a heap of work going on some, some companies are actually quite good at doing it, but I want to make it consistent world's best practice. I think that consultation period ends quite soon and so that'll be a meaningful change, but where it fits in, is if you care about this values based capitalism, you care about lining up what we care about with our economy and our society, then you've got to make sure that the market scaffolding is right ‑ and this is an important part of that ‑ but also the economic institutions are right. I care deeply about the day to day outcomes in the economy and how it affects real people in real communities, but part of my job as well is making sure the scaffolding around that is right as well. And so if we care about getting these kinds of outcomes ‑ energy, making technology work for people, making sure that growth is stronger, but also more inclusive and more sustainable ‑ all of these kinds of objectives, then you've got to get the market design right, you've also got to get the institutions, right. And there's a big part of the essay, which I hope people kind of grapple with as I did in writing it, which is to say one of the reasons we need to strengthen our economy is to strengthen our democracy. There is a very clear link between economic failure and democratic failure which should trouble us. And so strengthening the economy is a way to strengthen our democracy. To strengthen our economy, we need to strengthen the institutions. That's why I'm doing a heap of work on the Reserve Bank, I'm going to do a heap of work on the Productivity Commission, all of these other things ‑ the intergenerational report, well‑being budget, measuring what matters ‑ this is all about the scaffolding around decisions because at some point when I'm not here anymore, I want to leave behind a different way of coming to decisions about economic policy which is more robust, more reliant on the evidence and which rebuilds trust in our democracy more broadly.
MURPHY:
And it's also I mean ‑ I'm so glad you foregrounded that, because I didn't, and it's important. But also part of this is not only transparency, and looking at these institutions, it's also what you measure that determines where your priorities are. And that's an interesting concept for people to wrap their heads around, right? If we prioritise wellbeing, which is one of the objectives of the government and other governments have sort of been down this path, then you're actually measuring different things.
CHALMERS:
And the big thing I think for your listeners to understand about that is people who want to criticise this broader approach to measuring what matters and this approach to wellbeing, people who are critics of that, they want to pretend dishonestly that it's a choice between measuring our economy the way we have been, or measuring it this way. What I'm talking about is, in addition to all of the usual ways we measure the economy ‑ GDP growth and wages growth and unemployment, all of those things, are quite important. What I'm talking about is recognising this opportunity that we have ‑ every Australian in one way or another has thought about their own wellbeing the last few years. I think people take a broader approach to that ‑ financial wellbeing is so central to people's lives, but there are other ways as well. And I think, frankly, my predecessor ‑ I have a little a little cheeky shot at Josh in the essay. I don't think he understood that. When he jumped up in Question Time with all the jokes about Indian faiths and yoga and incense and all the rest of it I think he was pleased with it. That's great. But I think it missed something that's been going on in the minds of Australians about, not about that narrowly, but more broadly, what does it actually mean? What does my wellbeing actually mean? Amidst all of this turbulence and all of this vulnerability and uncertainty what actually matters most to me? And I want to do a similar kind of thing when it comes to the national government. What matters most to us as a country and how do we track progress on it? Because if we don't do that, then it'll be pretty circular. We'll chase our tail on some of these sorts of things. And even though I've only been the Treasurer for a little while, I've been knocking around this place for a long time. And I've had this frustration for a long time where there's a lot of circular kind of things, where the things we care about as a country come in and out of the national conversation, we don't really kind of track it. We don't have a big national conversation about what we care most about. Not always, sometimes.
MURPHY:
Not enough. I think we completely agree on that point. And in terms of Frydenberg, Josh Frydenberg, your predecessor who said some very silly things about wellbeing, I think, look, another friend of the pod, Josh, I think he would actually ‑ I don't know if he'd ever admitted, but I think he would reflect on what he said at the time where he said those utterly ridiculous things and you know, how sensible or otherwise that was? Because it was I mean, it was capital D dumb at the time and it's looked even worse since so anyway, hope you're well, Josh. Anyhow, let's just ‑ because this is the problem, when you and I get in the pod cave, we just start talking. Anyway, a couple of things we need to get through quickly just about life and, you know, what's on your desk at the moment? That was a very bad inflation number this week. Is that it? Is that as bad as it gets? What do you think?
CHALMERS:
Well, one of the things I like about this part is that we don't beat around the bush on it. And, you know, headline inflation at 7.8 is, well it's a shocker. It's not a shock because it's exactly what the Treasury forecasts and it's not far off what the Reserve Bank forecast, but it's obviously unacceptably high in expected and predictable ways but that doesn't make it any easier for people paying these higher prices. We think it is likely to be the peak but we won't know that for sure until we get the next quarter's numbers. But I think there's a broad expectation that that was the peak. But even as it moderates, even as we're kind of on the other side of the inflation mountain, inflation will still be higher than we'd like for longer than we'd like. And so my job in the May Budget, like it was in the October Budget is to try and find ways that we can help people without spraying money around in a way that actually adds to the inflation problem in the economy and is counterproductive. And so a lot of our thinking and with my colleagues on the Expenditure Review Committee and in the Cabinet is how do we do that.
MURPHY:
And I mean, a number that bad even though obviously forecast and I think the bank's forecast was higher than Treasury's wasn't it?
CHALMERS:
It was.
MURPHY:
So not a shock as you say, but a shocker. Not a shock, but a shocker. It'll invite a response from the bank, right?
CHALMERS:
I think everyone expects that. I don't want to give you the long rote thing about ‑ I'm not going to make predictions but the market was already expecting more interest rate rises and this outcome won't discourage that or dissuade them from that view.
MURPHY:
Okay, last question. And you did raise the budget. Is values based capitalism consistent with making Australia's tax system less progressive? Sorry, let me re‑frame ‑ consenting to make Australia's tax system less progressive. And if you speak stage three tax cuts, you'll know what I'm talking about. That's for the listeners, not Jim. Jim knows what I'm talking about.
CHALMERS:
I knew where you were coming from. Well, first of all, I'm not here to say we've changed our approach to that ‑ we haven't. I think what matters is what we do right across the Budget. And what is consistent with a values based approach is ‑ when you think about ‑ one of the main things that'll be in the May Budget will be energy bill relief, and that is deliberately targeted at people on fixed payments and low incomes. And that's a demonstration of our values, when you've got one and a half billion dollars, that you've allocated for some cost of living relief when it comes to electricity bills that is going primarily to people on low and fixed incomes, proudly. That's a demonstration of our values. And in other ways, as well, I'm also going to try and have a much bigger focus in this Budget on entrenched disadvantage in communities like the one that I represent. So there are other ways to demonstrate our approach.
MURPHY:
What other ways?
CHALMERS:
Well, I'm answering your question. I'm working with Amanda Rishworth, for example, on ways that we can identify some of the most vulnerable communities in our country and work out how do we empower local leaders and pool our resources and make a meaningful difference to some of the entrenched disadvantage that's in our country. You think about the unemployment rate ‑ three and a half per cent ‑ there's still people who are not accessing the opportunities of an economy that's creating the fastest jobs growth for the first six months of the Albanese Government than any first six months of any government on record. And so we care about that. And so that's a demonstration of our values and I'm hoping to be able to say something working with colleagues on that in the May Budget but other ways too ‑ the energy bill relief and we'll respond to the economic inclusion committee that we set up around the end of last year, there's a whole bunch of ways.
MURPHY:
Well how dare you drop that in the last ‑
CHALMERS:
Well on disadvantage ‑ when you're in Opposition, you give a bunch of speeches and you hope that somebody picks up and runs with them. One of the ones that I did in Opposition at ACOSS was about this. This is a decade‑long passion of mine.
MURPHY:
Oh I know.
CHALMERS:
Which is to recognise that if you want to shift the needle on poverty and disadvantage, and it's such a big, national challenge, the best way to start is to find out where those challenges are most acute. And I'm fortunate to represent the community that I represent, but it's got its fair share of challenges in this front. And for a long time, in your quiet moments, you know ‑ you're on a plane scribbling notes to yourself or you're running in the morning or you're doing something, and you have these thoughts ‑ in my mind, I have always thought that if I get a crack at a job like the one that I have now, and I know Amanda and others think the same way, if you want to shift the needle, the best way to shift the needle on entrenched disadvantage is to go where it's most prevalent. There's a lot of great work going on around the community in the philanthropic sector and other places around this. And we want to show some leadership here if we can. I am front running a bit. And I feel ‑ now that you've shown an interest in this and picked me up on it. But this is something I care deeply about.
MURPHY:
Oh, look, I know. And obviously, it'll be something you work through in the Budget context, I'm not expecting you to just unfurl the entire landing points for me today, but I'm more than intrigued and some of the sort of areas that Michael Traill's been involved with is very much in this area. So that's a nice squaring of the circle between a Monthly essay and what might be coming in the Budget. Anyway, as a friend of the pod Jim, of course you will return and we will talk about this project of yours in some more detail.
CHALMERS:
I would return daily if you'd have me, if your listeners would tolerate that.
MURPHY:
I'm very interested in where your mind is going on that, so lots to talk about and yet another thing you've got to do over the next six months. So thank you for finding time to come in and have a chat. To you guys for listening, I gathered that Apple rated this podcast as one as one of its much listens in 2022 and that's because a lot of you are listening and talking about it and sharing it and enjoying the conversational tempo of this whole exercise. So I'm really seriously delighted by that. So continue to share, tell your friends about it, et cetera you know what to do. We will be back with another episode next week.