Natalie Barr:
Well, economists are all but certain interest rates will hit their highest level in 15 years after the RBA meets today, and many are laying blame at parliament’s door. But Treasurer Jim Chalmers has shot down claims government spending is responsible for stubbornly high inflation, instead pointing to the Iran war. It comes as the average Aussie mortgage holder prepares to pay an extra $100 a month while home values plummet. For more, we’re joined by Treasurer Jim Chalmers. Good morning to you. Now, you’ve blamed the war in the Middle East for our soaring inflation, but government spending has climbed to 26.9 per cent of GDP. That is the highest level outside the pandemic since about 1986. Do you concede that spending is contributing to our inflation crisis?
Jim Chalmers:
Well, good morning, Nat, to you and to all your viewers. Look, we’ve got an inflation challenge in our economy, which is made much worse by the war in the Middle East. That’s not an opinion; that’s a fact. I think we’ll see that in tomorrow’s inflation numbers. When it comes to government spending, we’ve been able to get that down quite substantially since we’ve come to office. Spending as a share of the economy has come down considerably in the last 4 or 5 years or so. And that’s been a deliberate policy from us to find savings so that when we’re funding things like strengthening Medicare and boosting bulk billing, investing in public hospitals so that we’ve been able to make room for that. So, we found about $180 billion in savings.
We’ve delivered 2 surpluses. We’ve got the deficits way down. We’ve been able to manage our public debt to levels. which are much, much lower than other countries. But we know that there’s always more work to do. I think people understand people who might be bracing for an interest‑rate rise later today from the independent Reserve Bank. I think people understand that there are inflationary challenges in our economy. But when you see what’s happening with global oil prices, when you see what’s happening with the re‑escalation of the war in the Middle East, obviously, factually, that is one of the big drivers of that inflation that people are having to deal with right now.
Barr:
Yeah, but you’ve got economists and even the RBA Governor saying your high government spending is contributing to this. Do you accept that it’s still too high and you’re the guy?
Chalmers:
I accept that there is always more work to do to get the budget in even better nick to build on the very substantial progress that we have made already. If you look at that Final Budget Outcome we released yesterday, the budget deficit for this year is around half what we inherited when we came to office. It means that even in that one year, even since the Budget – the Budget – $6 billion stronger debt is $10 billion lower. That’s because of our responsible economic management. Finding the savings, banking, the upward revisions to revenue, limiting spending growth to less than what we saw under the former government. All of that recognises that governments have a role to play in managing the budget and the economy in the most responsible way that we can, providing that cost‑of‑living relief in the most responsible way that we can and also dealing with these longer‑term challenges in our economy like productivity.
Barr:
Okay, so if, if you say you’re doing the best with your numbers, why are we so bad on a world scale? We have the second‑highest cash rate in the developed world. Look at these numbers. You know them; Iceland’s the only one higher than us. And we’re not talking sort of tin pot countries, we’re talking the US, UK, New Zealand, Canada, Denmark, Sweden, Singapore. They’re all lower in interest rates than us. Why?
Chalmers:
Well, the first point is that inflation and interest rates are going up right around the world. The second point is if you want to make comparisons with other countries, you’ve got to make the full comparison. You know, we’ve got stronger economic growth than almost every major advanced economy, stronger jobs growth than the major advanced economies. We’ve got lower debt, much, much lower debt than the major advanced economies and so when you make those comparisons, it’s important to make the whole comparison –
Barr:
– But Jim, people don’t feel that though. I can promise you, people on the text line are saying all the figures. That’s great, but on my kitchen table, this is my problem. So, that’s what they’re living with –
Chalmers:
I totally understand –
Barr:
– they’re living with the high interest rate, they’re living with them going up.
Chalmers:
I totally understand that. Nat and I get the same feedback, of course, when I engage and move around communities like my own one here in Logan City and indeed right around Australia. We know that people are under pressure. We know that when interest rates go up, that adds to the pressure that people feel, that people feel already, and that’s why we accept our part, our responsibility for our part in this fight against inflation. That means continuing to improve the budget as we have been doing. It means providing that cost‑of‑living help via tax cuts and more bulk billing, stronger wages, helping first‑home buyers in a difficult housing market –
Barr:
But you’re the highest taxing –
Chalmers:
– doing all that in the most responsible way that we can. And it also means dealing with these longer‑term economic challenges.
Barr:
With – on tax, you are on target to become the highest taxing Treasurer in Australian history. That’s what people are feeling.
Chalmers:
Well, our tax levels are lower than what they were under Peter Costello. That’s an important point that I think people are missing.
Barr:
How many years ago was that?
Chalmers:
But even that story today acknowledges that taxes were higher under Peter Costello. A lot of people from the other side of politics point to Peter Costello as a model. He had higher taxes in his budgets than I have in mine. So, I just think that’s an important bit of perspective and we’re cutting taxes, we’re cutting income taxes 5 times in 3 different ways. Our opponents said that they would repeal those tax cuts. So, were it not for the tax cuts that we’ve got in the system, taxes would be higher than what they are right now. We see those tax cuts as a really important way of providing cost‑of‑living help at a time when people are under genuine economic and financial pressure around the kitchen table. As you rightly point out, Nat. We know that people are doing it tough. We know that higher interest rates make life harder for people, and that’s why we’re managing the budget in a responsible way, providing that cost‑of‑living relief where we can and dealing with some of these longer‑term economic challenges at the same time.
Barr:
Okay, Treasurer, thank you for your time.
Chalmers:
Thanks so much Nat.