NATALIE BARR:
Jim Chalmers joins us now from Circular Quay, not the airport, in Sydney. Good morning to you.
Treasurer, why are you so confident when the big banks are now pushing out their forecast for any interest rate cut to next year, and at least one economist is forecasting a rate rise in August?
JIM CHALMERS:
Good morning, Nat. First of all, the expectations of the major banks when it comes to future movements in interest rates, they typically bounce around a bit in response to different kinds of data when it comes out, and sometimes the commentary about that doesn’t quite match the market expectations for rate rises or rate cuts into the future.
My job is to focus on where I can have an influence, and when we talk about a soft landing on a narrow runway, what we’re talking about there is providing cost‑of‑living relief to people who are doing it tough, and fighting inflation and getting the budget in better nick, without smashing the economy or putting additional pressure on people who are already under the pump.
So that’s what a soft landing would like look. And so the commentary that we’ve provided this week is all about recognising, first of all, people are under pressure; we’re responding to that with really substantial cost‑of‑living help in the Budget, but we’re doing that in a responsible and in a balanced way which recognises that the economy is already quite soft, and people are already under pressure.
BARR:
So we know that there’s the separation of powers; the RBA does its own thing, Michelle Bullock would not be told what to do, but if you were a betting man, what would you say when interest rates are going to come down?
CHALMERS:
Well, I wouldn’t bet on that that’s the first point I’d make about that, Nat –
BARR:
– What? –
CHALMERS:
– I don’t –
BARR:
– this year? –
CHALMERS:
No what I mean is I don’t make predictions about future movements in rates, I certainly wouldn’t bet in either direction. The point that I’m making about interest rates is that is a decision taken independently by Michelle Bullock and her colleagues on the Reserve Bank Board.
My job is to play a helpful role in the fight against inflation and we’re doing that, turning big Liberal deficits into Labor surpluses, providing cost‑of‑living relief in the most responsible way, and because of that approach we have seen inflation come off really quite substantially since its peaks a couple of years ago, but it’s still too high, it still requires our attention, but we’re fighting that inflation without smashing the economy –
BARR:
Gee, it’s going to be tough –
CHALMERS:
– and that’s the balanced approach in the Budget.
BARR:
– before that May election though, isn’t it, if they don’t come down?
CHALMERS:
I don’t see the future movement of rates in political terms, Nat. I know that there’s a lot of commentary about that. I don’t take decisions about interest rates, I don’t tell Michelle Bullock how to do her job, as you rightly predicted a moment ago.
My job is to get on top of this inflation challenge without smashing the economy and to provide that cost‑of‑living relief in a responsible but in a meaningful way to respond to the pressures that people are feeling right around the country.
BARR:
Okay. Just still on the cost of living, the Centre for Policy Development yesterday released this proposal: free childcare for disadvantaged families, $10 a day for all others. They say it will cost the government $7 billion. But the increase in productivity would be amazing. What’s your take on that?
CHALMERS:
Early childhood education is good for children, it’s good for families and it’s good for the economy, and that’s why we’re already investing billions and billions of dollars –
BARR:
For free. They say free.
CHALMERS:
– in early childhood education and care. I’m getting to that, Nat – as the Prime Minister said in response to that report yesterday, we are interested in exploring ways to take more steps towards a more universal early childhood education system when we can afford to do that.
So the contribution yesterday was a welcome one. As the PM said, we are grappling with these sorts of issues, but we are already investing billions of dollars to make it easier and cheaper for parents to get their kids into early childhood education, and when they do, it’s good for people if it means they can work more, it’s good for the economy, and it’s good for children to get them learning as soon as possible.
BARR:
Okay. Good news. It doesn’t sound like you’re ruling it out there. Treasurer, thank you very much for your time.
CHALMERS:
Appreciate it, Nat. All the best.