KIRSTEN AIKEN:
Treasurer, welcome. China announced a raft of new stimulus in the lead up to your visit. What will it mean for China’s economy and will it now be able to meet its 5 per cent growth target?
JIM CHALMERS:
Hi Kirsten. Certainly that’s the motivation behind the Chinese government announcing a raft of measures to try to support growth and activity in their economy.
We’ve been concerned about the Chinese economy for a little while now. It’s a big part of the global economic uncertainty that we’re seeing, and so we really welcome the steps that the authorities are taking there. I was in Beijing when they announced some of these measures. They’re a very good thing for Australia because I do think they give the Chinese economy an opportunity to get over some of these issues in property and consumption and in other areas which have been holding the Chinese economy back.
AIKEN:
Do you expect it will work?
CHALMERS:
When we’ve seen the government step in on earlier occasions during the global financial crisis and at other times, they do have the capacity to dial up activity in their economy, and that’s a good thing for Australia. All of your viewers would understand, Kirsten, just how important the Chinese economy is to us here in Australia. We’ve seen this before. We welcome the steps that the authorities are taking. It’s all about boosting investment, boosting consumption, also trying to get on top of these property sector issues, which have been a challenge in the Chinese economy for some time. Our forecasts expect the Chinese economy to grow quite weakly in historical terms over the next few years. So any steps like this to try to turn that around is very welcome from an Australian point of view.
AIKEN:
What will it mean for Australia’s iron ore exports? You had already said that you expected the falling price would see a $4.5 billion hit to this year’s budget. Will these stimulus measures see that figure improve?
CHALMERS:
First of all, it’s really important to recognise that our economic relationship with China, which is full of complexity and full of opportunity, it’s broader than just iron ore. Iron ore is a really important export for Australia into the Chinese market. But one of the reasons why I consulted the chairs and CEOs of 15 different major China‑facing Australian businesses is that we need to recognise that when there is growth in the Chinese economy, it’s good for a whole range of our employers and workers and investors here in Australia.
But the iron ore price is a good way to understand the impact of the steps that were taken and announced in the last week or so in Beijing. We’ve already seen since this time last week, the Australian iron ore price go up about $11 a tonne, from high 70s to high $80 a tonne. That does give you a sense of how sensitive that price can be to conditions in China, and also it gives you a bit of a sense of the positive impact of the steps that have been signaled in Beijing, what that can mean for us here, and particularly in this case for our exporters.
AIKEN:
You mentioned the relationship involves complexity. Have you had an assurance from China’s leadership that the current tariffs on lobsters will be removed?
CHALMERS:
Not yet, Kirsten. That was obviously a big part of the discussion I had with Chairman Zheng Shanjie, the chairman of the National Development and Reform Commission. We want to see those restrictions on lobster lifted as soon as possible, and I’m confident that they will be lifted when the time is right. We need to remember that of that roughly $20 billion in trade restrictions, most of those have been lifted already. Lobster is one of the last remaining sticking points. I certainly raised it. I said we want to see these issues resolved as soon as possible. Our teams are working with their teams to make sure that that’s the case.
AIKEN:
And just briefly, do you have any expectation of when there will be progress?
CHALMERS:
None that I’m prepared to flag on the show tonight, unfortunately, Kirsten. I certainly raised it. Certainly Minister Don Farrell, the Trade Minister, the Foreign Minister, the Prime Minister and others, we’re all working very hard to see these issues for our lobster exporters resolved. It’s an important market, the Chinese market. We’ve had some good success because of the work of those colleagues that I mentioned in getting the other trade restrictions lifted. We want to see that when it comes to lobster as well. I raised that. It wasn’t the only issue I raised, but it was an important issue I raised when I was meeting with my very senior counterparts in Beijing.
AIKEN:
Did anyone from China’s leadership or government ask you whether Australia will follow the US decision to ban Chinese software in electric vehicles?
CHALMERS:
Not that specifically or not that directly. Obviously there was a conversation about clean energy technology and how we make sure that the supply chains that we rely on, and that the Chinese rely on, how they can be based on market principles that have served the global economy so well.
But I was asked while I was there by one of your colleagues and counterparts in the media, and I was able to say, as Chris Bowen, the Minister, has said, that we don’t intend to take the same steps that the Americans have taken. We don’t intend to ban the importing of EVs from any one particular country, but we will continue to talk with the Americans about it. We will continue to take the advice of our national security agencies to make sure that the approach that we’re taking is appropriate. But for the time being, we don’t intend to go down the path that the Americans have.
AIKEN:
Does that mean there are circumstances that would prompt the government to reconsider its decision on that point?
CHALMERS:
Not really any that I can foresee. I’m just making the general point that I would make really right across the board here is that we get advice from time‑to‑time on the best way to approach these sorts of issues. We’re not anticipating taking steps like our American friends have taken. We do understand the issues that are at play here. We keep them under review, but it’s not our intention.
We want to make sure that we have access to EV markets. We want to see Australians benefit from EVs where that’s possible to do. We’ll keep an eye on the way that the technology and the supply chains evolve. But the position we’ve taken I can’t foresee us changing, at least certainly for the time being.
AIKEN:
Treasurer, on negative gearing, why won’t you answer yes or no to the question, did you ask Treasury for advice on implications of changing negative gearing and capital gains tax?
CHALMERS:
Because we don’t typically go into the conversations that we have with our departments, I don’t think it would be especially surprising to your viewers that we seek advice from time‑to‑time on different policies that are in the public domain or being debated in the parliament. We’ve got a really –
AIKEN:
Sorry to interrupt. Is it a big deal to actually say whether you did or did not personally ask for that advice? It’s been talked about for some days now.
CHALMERS:
I have said already in Brisbane, last week in Beijing on Friday, today in Canberra, I’ve said repeatedly that we get advice from time‑to‑time on issues that are before the parliament or in the public domain. I’ve made that really clear a number of times now. Sometimes that advice is commissioned by me. Sometimes it comes to me in the course of things like the Tax Expenditures Statement and the like. It’s not especially controversial. I know why people are interested in it, but it’s not part of our policy. Our focus is on the $32 billion of housing supply initiatives that we’ve already budgeted for, and that’s what we’re focused on. We’ve got a really substantial housing policy, and that’s not in it.
AIKEN:
And so let me ask you this. Are you clear on what the implications of changing negative gearing and capital gains in terms of housing would be? Would changing those rules see house prices fall or increase housing supply?
CHALMERS:
I haven’t received any advice on those specific issues that you raise, as I’ve said a number of different ways now over the course of the last week or so. I’m not going to get into the very specific conversations I have with Treasury about these sorts of issues. But you shouldn’t assume, as I said earlier today in the press conference, you shouldn’t assume that there’s been clear advice received on those questions that you raise with me right now. From time to time, whether it’s the Treasurer getting advice from Treasury or the Treasury supplying advice around issues that are in the public domain, it’s not especially unusual that this happens. This is just the Treasurer doing his job.
AIKEN:
One more question on this in relation to the advice that Treasury is currently drawing up on negative gearing and capital gains. Does it relate specifically to housing or does it also involve other investments?
CHALMERS:
It’s not that specific, Kirsten. I’ve tried to explain that in a couple of different ways tonight and also on other occasions. You shouldn’t make assumptions about how specific these conversations are. I’m not going into the detail of them. Treasurers, from time‑to‑time, get advice from treasuries on issues that are in the public domain. And frankly, my focus hasn’t been here. My focus has been on the good inflation numbers we got last week. My focus has been engaging with China and restarting the Strategic Economic Dialogue. My focus has been detailing today with Katy Gallagher, the second consecutive surplus under this government for the first time that’s happened back‑to‑back in almost 2 decades. Those have been the things that I have been focused on. I understand I’ll get asked questions about these other issues from time‑to‑time, but we detailed the second surplus today, and that is a very, very substantial development, quite a rare development in the course of the last couple of decades or so, and that’s been my focus.
AIKEN:
Jim Chalmers, thanks for joining the program.
CHALMERS:
Thanks, Kirsten.