Laura Tingle:
Treasurer, welcome back to 7.30.
Jim Chalmers:
Thanks very much, Laura.
Tingle:
Before we talk about the economy, I should ask you for your response to events in the Middle East overnight.
Chalmers:
These are very welcome developments. We’ve been calling for a ceasefire and for the release of hostages for some time. Too much blood has been shed already, and too many innocent lives have been lost. Now we need to see all parties on all sides stick to the terms of the agreement because we want to make sure that this peace is lasting rather than fleeting.
Tingle:
Thank you. So if we could move to domestic issues and today’s job numbers. I’d just like to go through what they tell us about the labour market because there seem to be a lot of conflicting messages. The financial markets seem to jump straight from a lot more jobs than expected to no rate cut in February. But if we could break it down, the economy is weak yet it’s created 56,000 jobs in one month. What do today’s stats and the advice you’re getting tell us about demand for labour and where it’s coming from?
Chalmers:
I think the overarching story of these new jobs numbers today is that Australia has found a way to make substantial and sustained progress on inflation, get wages up at the same time and keep unemployment really quite remarkably low at the same time as we create these 1.1 million jobs, including 56,000 in the last month as you rightly point out. And so that is a very handy combination of economic data, inflation down, wages up, unemployment low.
But there are a lot of cross currents in our economy right now. One of the things that makes the labour market so remarkable is because we do have this low unemployment and all of this job creation at a time when there’s not a lot of growth in our economy.
Now, when it comes for demand for labour in the economy, overwhelmingly this demand is coming from the private sector. You will hear people talk about a distinction between market and non‑market jobs, a more helpful distinction is between the private sector and the public sector. And 4 in every 5 jobs that have been created under the life of this government have been private sector jobs, and the main growth there has been in services. And you can understand, as the Reserve Bank Governor and others have explained, that the big bounce back in employment after COVID was services led because services were held down for so long. And so overwhelmingly the private sector, overwhelming the services part of the private sector is generating a lot of demand for jobs.
Tingle:
The critique is, including from the Opposition, that the government is essentially propping up the jobs market because there’s all these jobs in the non‑market sector, but you’re saying even in areas like health and education, the jobs are actually being created in the private parts of those sectors?
Chalmers:
It’s still possible to have private sector jobs in the non‑market sector, there’s 2 ways to draw this distinction. Our opponents draw that distinction because they want to diminish the really quite remarkable progress that the Australian people, workers and employers and governments have made over the last couple of years. They want to diminish those achievements.
But when it comes to that more useful private versus public distinction, 4 in every 5 jobs private sector, one in every 5 jobs public sector, and the big force which is driving a lot of the growth is services. Health is part of the story but also financial services, accommodation, other kinds of services too.
Tingle:
On the other side of the market, the supply question, it seems like no matter how much demand we’re getting in the market for labour, there’s enough supply to meet it. Is that just from migration or is there something else going on in the economy?
Chalmers:
No, there’s something else going on in the economy. One of the truly outstanding features of today’s jobs numbers is the record high when it comes to employment to population. And that shows that we’re creating more opportunities, that those opportunities are growing faster than our population is growing from migration. And if you think about the overall record participation is 67.1 per cent, that is a new record today, but amongst women it’s 62.9 per cent, almost a full percentage point higher than when we came to office. So one of the real stories of our labour market, one of the things we’re proudest of, is that when it comes to labour supply and labour market participation, women are leading the way, a really substantial increase in participation. That’s not accidental, that’s deliberate.
Tingle:
You mentioned wages there quite a lot. Economics 101 says if demand and supply are basically equal, prices won’t go up. Some wages are going up, but overall the data in the last few months has shown there’s not a lot of wages pressure, in fact the wage price index is declining a little. Are you confident that will continue? Because that obviously has implications for inflation.
Chalmers:
I’m confident we can continue to get wages growing and more importantly real wages growing in a sustainable way. The most important equation when it comes to wages is real wages, when we came to office they were falling substantially, they’ve now grown for multiple quarters. But we made sure they’re growing in a sustainable way.
You would have seen Laura over a period of time, from time to time, people will warn about a so‑called wage price spiral, there’s not a whiff of that in our economy. There’s absolutely no whiff of that anywhere and that’s a very good development. Not every country has been able to do that. A lot of countries have had to pay for progress on inflation with much higher unemployment or with negative quarters of growth, even recessions. Australia has avoided that predicament.
What we’re seeing in our economy looks more and more like the soft landing that we are seeking, that we have been deliberately trying to achieve. We’re making that substantial and sustained progress on inflation. We’ve got wages growing, particularly real wages growing, and we’ve got these remarkable outcomes in the labour market at the same time.
Tingle:
If you look at the Reserve Bank minutes last month they seemed pretty content with where inflation was going, but were still a little bit worried that the labour market was too tight. Your message here is the signs are that it isn’t too tight which should, when the bank meets next month, be a good sign for their deliberations on interest rates.
Chalmers:
I don’t want to say anything which is confused as giving free advice to the independent Reserve Bank. But what I will say is Australia has found a way to choose lower inflation and low unemployment, not lower inflation or lower unemployment. And not every country again has been able to do that. Unemployment is higher in the US, the UK, Canada, New Zealand, Europe. Our moderation in inflation has been substantial, it’s been sustained but it hasn’t come with a spike in unemployment, that’s a very good thing. You will hear people and you will read people try and pretend that low unemployment and job creation is some kind of bad outcome in our economy, it’s a very good outcome in our economy. It’s been an especially tough period for people and we know that they’re still under pressure but together we’ve made a heap of progress in the economy and when it comes to wages and living standards and employment, and importantly, inflation. The Reserve Bank will consider all of that when it next meets and they’ll come to a decision independently.
Tingle:
Just one final question on inflation. The dollar has obviously been under a lot of pressure in the last few weeks, what sort of impact’s that going to have on inflation and on your Budget?
Chalmers:
Well when the dollar is low it makes imports more expensive, and so people do keep an eye on that from the point of view of inflation. It’s actually come up a little bit over the last day or 2. The primary influences on our dollar are not actually Australian developments. The big influences on the dollar are what’s happening in China and what’s happening in the US. That plays out in the value of our dollar here. Primarily the Reserve Bank looks at inflation and they look at the jobs market. Like everyone who is observing our economy right now, they would have noticed that the dollar has been especially low, that has the potential to have implications for inflation but I don’t think it’s anybody’s primary concern.
Tingle:
Treasurer, thanks so much for your time tonight.
Chalmers:
Thanks so much Laura.