Kieran Gilbert:
Treasurer, thanks for your time. This has exceeded the market expectations slightly. You say the economy is robust and resilient. Does this mean we’re going to get another hike for sure later this month? Another rate hike?
Jim Chalmers:
Well, obviously, I’m not going to pre-empt the considerations of the independent Reserve Bank. I think what we’ve seen today is a robust and resilient result in the face of this ongoing, quite substantial international uncertainty brought about by a conflict on the other side of the world. And so there’s a lot that we have going for us in these national accounts. But we recognise that we’ve got some challenges too, around inflation, productivity and global volatility. The government’s very focused on them.
Gilbert:
On the, on the public demand piece, and I know you were talking up the private demand and private demand driving a lot of the growth, it’s still 27.7 per cent as a share of GDP still ticking up a bit in the quarter. Do you do, do you need to do more to take government dollars out of the system, given how they say, the RBA says, we’ve got a speed limit of 2 per cent growth?
Chalmers:
Well, we’ve been doing that in every budget update. There’s always more work to do when it comes to budget repair and responsible economic management. But public demand is making a sliver of the contribution that private demand is in these national accounts.
In fact, one of the main conclusions, in addition to dwelling investment being up, growth being as strong or stronger than every major advanced economy, one of the key conclusions is that the private sector is doing the heavy lifting. I think 4 in every 5 dollars of demand in our domestic economy is coming from the private sector. That’s a good thing. Public demand is only making a sliver of that.
Gilbert:
But you say it’s on your radar. You want to keep driving that down.
Chalmers:
It always is. I mean, Katy Gallagher and I, in every budget and every budget update have been able to make progress on this front. We find savings, we bank upward revisions to revenue. We delivered a couple of surpluses, we got the deficits down. The debt trajectory now is much better than what we inherited. But the work of responsible economic management is never finished. It’s a journey rather than a destination, and we’re very focused on it.
Gilbert:
On the property front, was this, are we seeing a situation of be careful what you wish for in terms of just how much that property market’s cooling?
Chalmers:
Well, there is a couple of important bits of perspective here. I mean, we have seen the housing market soften, we have seen prices come off, but they were coming off before the Budget. There’s a number of factors at play there. And even if you look at the last couple of decades of extraordinary price growth, we’ve still had, I think, at least 7 occasions in the last 2 decades where prices have come off. They actually came off quite substantially in 2019. So, it’s not unusual for prices to come off.
The most important bit of perspective here is not to judge housing, the housing market over the next couple of years, based on the last couple of months. There was already volatility in the housing market and we’re seeing that continue.
Gilbert:
Should you have, in hindsight, and given what you’re saying, that there was already signs that things were cooling, in hindsight is a better, if you’re going to make a change like that, do it when there’s an uptick as opposed to a downtick, because if you do it now, it exacerbates the down.
Chalmers:
Well, we’ve still had, over the course of the last couple of years, we’ve still had strong price growth, and so it is as important now as ever that we try and help first‑home buyers get a fair crack in a market which has locked them out for too long. It’s a really important change that we are making. It’s not the only thing playing out in the housing market, but it’s an important policy change and people should judge it, people should assess, it over the next couple of years, not the last couple of months.
Gilbert:
Is it a correction?
Chalmers:
I know that there’s a technical definition there. I know the Commonwealth Bank and others have made some commentary about this. Prices are coming off. Prices were coming off before the Budget. It remains to be seen how substantial that is.
Gilbert:
We won’t see a crash?
Chalmers:
Well, the Commonwealth Bank, for example, which has been in the media today, they’re expecting prices to grow next year. And so that’s another reminder that in the last couple of decades we’ve seen prices come off, but overwhelmingly we’ve seen prices grow in the housing market.
Gilbert:
So, we won’t see a crash. Are you confident of that?
Chalmers:
Yeah, I think you need to judge the housing market the way that Australians do when they’re buying a house which is not week-to-week or month-to-month or not based on one set of bank forecasts or another, but over a longer period. People should assess and judge our policies and their impact on the housing market over the coming years and decades, not over the last couple of years.
Gilbert:
Do you feel for those that bought a, a place with the 5% Deposit Scheme? Because they probably would be underwater now.
Chalmers:
But they wouldn’t have bought that house anticipating that they would sell it right now. They would have made a long-term decision. And the 5 per cent deposits are a really important way that we’re helping more people get a toehold in the housing market. And people make those decisions based on the longer term, not week to week or month to month.
Now, from time to time, people, yourselves and others will ask us about negative equity. Negative equity today is less than half what it was a few years ago under our predecessors. And so that’s an important bit of perspective too.
Gilbert:
So, overall, because I spoke to a few economists and not all critics of yours, I know there aren’t many ones, but before we came on air today, and some very positive about you and your efforts, but they used a word with me that’s consistent, I think across a few of them. Precarious – things are precarious. Is that, do you agree with that?
Chalmers:
Well, right around the world that’s the case. You know, later this month I’ll release the Intergenerational Report and that will go to some of these issues which are creating such uncertainty. This idea that the pace of change is accelerating, the pressures, global and otherwise are intensifying, people are under genuine pressure. And so there is that sense around the world and not just in Australia, that although we’ve got a lot going for us, we’ve got a lot coming at us as well.
And we see that reflected in a number of different ways, including in today’s national accounts. I mean, the war in the Middle East plays out in the national accounts today because there’s less fuel, less travel, more EVs and more fuel inventories. So, we can see the impact of this uncertainty right throughout our economy. But we’ve got a lot going for us too.
Gilbert:
And the AI thing’s a massive piece. Richard Marles, Andrew Charlton in the US this week, trying to help shore up some of that future. In your mind, is that the key to unlock the productivity puzzle?
Chalmers:
It’s a key, but it’s not the only factor. I think it will be the biggest transformational event in our economy, in our lifetimes. And our job, our objective, is to maximise the economic upside while minimising some of this substantial risk. It will be the biggest transformational thing that happens in our economy and arguably in our society, and so that will play out in productivity.
But we don’t have all of our eggs in one basket there. We’re cutting compliance costs, we’re teaching and training more people to adapt and adopt technology. There are a whole range of things that the whole Cabinet, including those 2 good colleagues that you mentioned, we’re all engaged in that work in one way or another.
Gilbert:
Finally, and it’s not directly related to your responsibility, but as Treasurer, obviously, everything comes under your remit to some extent. My colleague Peta Credlin reported an exclusive this week. A former counter-terror officer delivered a bombshell submission to the royal commission saying that there were severe capability constraints and issues for the AFP in the lead up to the atrocity in Bondi. You won’t comment on the royal commission, obviously, but is the federal police, are you comfortable that they are adequately resourced?
Chalmers:
I am. And I don’t mean any disrespect to Peta Credlin when I say I wasn’t watching her program. I haven’t seen that submission. One of the reasons for the royal commission is to get to the bottom of a whole range of issues. But I am really confident that the AFP is well resourced and well led. I know that when we are asked to consider the appropriate resourcing for the AFP and for other agencies, we take that extremely seriously and we look forward to the conclusions of the royal commission itself.
Gilbert:
Yeah, indeed. When you’re in the ERC, you get something from Krissy Barrett or someone in the AFP saying, we need these capabilities, you are always inclined to say yes to that?
Chalmers:
Well, I’m obviously not going to talk about the discussions at the ERC or the Cabinet or the NSC or any of the different forums where we consider these sorts of things. But this is a government which is very focused on adequately resourcing our national security agencies. That’s been our approach throughout. It is well resourced, it is well led and people will have views about that, we welcome that, that’s the whole point of the royal commission.
Gilbert:
Jim Chalmers, thank you for your time.
Chalmers:
Thanks, Kieran.