LAURA TINGLE:
Treasurer, welcome back to 7:30.
JIM CHALMERS:
Thanks very much, Laura
TINGLE:
You’re giving a speech tonight which has already been widely telegraphed in part. Some media are reporting it as you having a fairly gloomy prognosis on the impact of a Trump presidency, some saying that you seem to be saying, ‘don’t panic.’ How would you characterise your message?
CHALMERS:
The main point of my speech tonight is that Australia is well placed and well prepared but not immune from any escalation in trade tensions. We’ve got a very strong record in this country of playing the cards that we’re dealt when it comes to the leaders that other countries choose to lead them and I have a level of confidence that we can navigate this change in the United States in a way that’s consistent with our own national interest. Of course, there are risks whenever there are changes of administration or big changes in policy but I’m confident but not complacent that we can navigate those changes because we are well placed, we are well prepared, but we need to recognise we’re not immune.
TINGLE:
But how perilous are they, potentially, at a global level?
CHALMERS:
Well, in advance of the American election, I asked the Treasury to do a bunch of work so that I could brief my Cabinet and NSC colleagues on the various scenarios that might come out of the election in the US and one of those was an escalation in some tariffs as former President Trump and incoming President Trump has indicated a policy that he wants to pursue. And so we did a bunch of modelling, the Treasury did, and the main conclusion there is that the direct impact on Australia would be relatively mild but the broader impact on our major trading partners and on the global trading system might be more significant and in that regard, that is a little more concerning to us.
TINGLE:
Well obviously we don’t know exactly how the foreshadowed tariff measures will directly hit us. How confident is the government that Australia will once again be able to get exempted from them?
CHALMERS:
Well, obviously there’s a lot of work to happen and you’re right to point out in your question I think Laura that there’s an element of uncertainty. There’s not always a direct correlation between what might be talked about on the campaign trail and the policies and proposals which are implemented by congresses and senates and presidential administrations and so I think that’s an important caveat on what we’re thinking about. Obviously we do a lot of work to make sure that when there are changes of policy that they work for us not against us and so that work is ahead of us and the thinking that we’ve put into it has prepared us well for it.
TINGLE:
So to give viewers some sort of sense of magnitude, how do Treasuries forecasts the potential impact compare, presuming that those tariff cuts all go ahead? For example, with the effect of Chinese trade restrictions on Australia in the past few years?
CHALMERS:
Well, first of all, it’s very pleasing that almost all of those trade restrictions from China have been lifted in the last couple of years. I pay tribute to Don Farrell and Penny Wong and the Prime Minister for getting those restrictions lifted.
They were quite specific on specific exports. They had a big impact in a limited amount of areas. What we’re talking about here potentially – and again, there’s an element of uncertainty around it – what we’re talking about here is something broader and so when treasuries around the world, not just ours, prepare for different scenarios, they think about the impact of the escalation of tariffs. For example, for Australia, it would mean harder markets for our exporters, it would mean less demand for our dollar. As a consequence, that would push up the price of imports and mean prices were higher in our economy, so that combination of weaker exports and higher prices would slow our economy. But again, our expectation is the direct impacts would be relatively mild but the broader impact on the system a bit less certain but concerning.
And so, what I try and do in my speech tonight is I try and draw a helpful distinction between what a lot of countries, including us, are doing, which is de‑risking our supply chains, versus something which is a bit more damaging, which is decoupling, descending into these kind of trade blocs that don’t trade with each other or speak with each other, that would be more concerning.
TINGLE:
Well, even before Donald Trump returns to the White House in January, you are painting a fairly grim picture about the global economic outlook in the speech. I mean, the IMF is not expecting things to improve for 5 years. The Chinese economy is brittle and a cause for concern in its own right. Despite all this, you say you are confident but not complacent about a soft landing in Australia. Why is that? Where is the sort of reason to think that we won’t fall into a big hole?
CHALMERS:
Well, the confidence comes from the progress that we’ve made – halving inflation, getting real wages moving again, creating a million jobs, giving everyone a tax cut at the same time as we deliver 2 surpluses for the first time in almost 2 decades and that’s a tribute not just to the government but to the whole country the progress that we’ve made, and that does give us an element of confidence, if not complacency.
But when it comes to the world I’m optimistic about the future but I’m realistic about some of these pressures that you mentioned in your question. Growth is weak in the economy, we’ve got 2 major conflicts, one in Eastern Europe and one in the Middle East, there is weakness in the Chinese economy despite the welcome steps that the authorities have announced, there is an element of political uncertainty coming out of the US, and so we’ve shown a capacity to navigate these sorts of pressures relatively successfully but we can’t be complacent about that.
TINGLE:
Well, both you and the Prime Minister say we need a global economy which is open and where everyone plays by the rules but based on your own analysis, that’s not the world we are now living in, let alone where Mr Trump’s going to be taking the US. Do we need to abandon the pretence that that is, you know, a world that we can even aim for? And do we need to also be increasing the rate of intervention in our economy, as is happening now all around the world?
CHALMERS:
First of all, you’re right to point out that this is not just a US phenomenon. Right around the world, we’re seeing an increase in protectionist measures. Economies and countries right around the world are engaging in this in one way or another. What makes that problematic for Australia is about half of our economy is trade. The proportion of our economy which is trade is much higher than the Americans – it’s about a quarter, Europe – it’s about a third, for us it’s about half of our economy, and so we’ve got a lot at stake here. Nobody wins from a trade war but we have more at stake than most and that’s why we put so much thinking and so much effort into navigating these challenges that we have before us.
Here again, I think there is a useful distinction between de‑risking and decoupling. Some of the measures that countries are taking make a lot of sense in a world where COVID taught us that our supply chains are not especially reliable or resilient – not reliable or resilient enough. And so a lot of countries, including us, with our Future Made in Australia agenda, are trying to strengthen those supply chains. But for us, it’s about engaging with the world, not retreating from the world, becoming an indispensable part of the global net zero transformation and that’s why we have different interests and priorities.
TINGLE:
Here, for example, does the Trump victory suggest that we should even be thinking about scaling up that Future Made in Australia type response?
CHALMERS:
I think whenever there’s a big change in the global economy, like the change of administration in the US, the onus is on us to make sure that our policy settings are appropriate. I believe that they are. And I also believe that Australia has a lot to gain from this de‑risking agenda and a lot to lose from decoupling and so our priorities are pretty clear. We work as a team on foreign and economic policy to make sure that we play the cards that we’re dealt and we do that in a way which is advantageous for our workers and our businesses and our investors.
TINGLE:
Analysts in the U.S. are saying that American voters overwhelmingly voted on the economy and the cost of living. Why should we think the economic experience of Australians in the past couple of years is any different to that of their US counterparts?
CHALMERS:
Well, first of all, we didn’t need an election in the U.S. to tell us that cost of living is the main game. It’s been the main focus of the government and certainly my main focus is as Treasurer, so that has been evident to us for a long time and that reflects our policy agenda, our economic policy agenda in particular – fighting inflation, providing cost‑of‑living relief, getting the budget in much better nick, delivering those 2 surpluses.
The situation is a little bit different in the 2 countries. For example, we’ve had a much bigger emphasis on getting wages growing again. When we came to office, American wages were growing about 5 per cent, Australia about 3 per cent. Now both are about 4 per cent, give or take. But a big part of our agenda has been making sure that the minimum wage has been rising and that wages in industries dominated by women have been rising and that’s because we think that wages growth is a big part of the solution to these cost‑of‑living challenges, not part of the problem. And so because of that, we came to office, real wages were falling quite substantially, now they’re growing again, that’s a good thing. That’s deliberate, not accidental.
TINGLE:
Peter Dutton was borrowing a line from Donald Trump on the weekend saying that people will be asking themselves the question ‘are you better off today than you were at the time Mr Albanese was elected?’ It’s a fact, isn’t it, that despite all the cost-of-living measures that you’re talking about, the impact of inflation and interest rates alone mean most people won’t be feeling better off than they were when you were elected. What do you do about that?
CHALMERS:
Well, first of all, that slogan was from, I think, 1980. I think candidate Ronald Reagan was talking about that in 1980. Peter Dutton can rip off slogans from 44 years ago but he can’t come up with any credible or costed economic policies and that should be his focus. He’s opposed our cost‑of‑living relief at every turn and Australians need to know about that. But on the substance, the main substance of your question, we know we’ve got a lot of ground to make up. Australians are doing it really very tough and they’d be doing it even tougher were it not for our cost‑of‑living help – the tax cuts, the wages policy, the energy rebates. We always try and make sure that we do as much as we responsibly can, affordably can, conscious of the impact on inflation. We keep that under more or less constant review but we know people have got a lot of ground to make up. We know that they’re under pressure but more than acknowledge that, we’re doing something about it and the Liberals and Nationals have opposed us doing that at almost every turn.
TINGLE:
Treasurer, thanks so much for your time tonight.
CHALMERS:
Thanks.