NATASHA EXELBY, HOST:
Treasurer Jim Chalmers has been kind enough to join us from Canberra this morning. Treasurer, thank you so much for your time. A very busy morning. I don’t imagine you got much sleep last night. You’ve been very open about the fact that inflation will get worse before it gets better. So without having a crystal ball, how bad will it get? How long will it take to stabilise? And what’s your plan to help Australians keep food on the table?
JIM CHALMERS, TREASURER:
Well, good morning, Tash. And what today is all about, it’s about bringing Australians into our confidence about the sorts of economic conditions, particularly the economic challenges that we’re confronting as we put together the Budget in October. We expect inflation to peak higher than 7 per cent in the forecasts that we’ll release today from the Treasury. But it is important to remember that we expect inflation to start moderating next year before it comes down to more normal levels.
So Australians do need to brace for a pretty difficult period ahead when it comes to the cost of living. I think people understand that. It will get more difficult before it gets better, but it will get better. So our economic plan in the Albanese Labor Government is focused on responsible cost‑of‑living relief in areas like child care and medicines. It’s focused on dealing with some of those issues in the supply chains which are pushing up prices, and so our policies around skills and cleaner and cheaper and more reliable energy and investments in the economy. And we’ll also be trimming the Budget of so many of the rorts and waste which have been a defining characteristic of the Budget for too long now. That’s our economic plan.
But there’s no use tip‑toeing around what will be a difficult period for Australians. We know that they are doing it tough, and that’s why I want to bring people into our confidence today about these economic conditions, what it means for them and what their government can responsibly and realistically do about it.
EXELBY:
You speak about the waste there from the previous government, and in Question Time yesterday you did state that Labor is inheriting 10 years of mismanagement by the previous government. But inflation is a global problem. It’s existing in the US, Europe, China. Why are you insistent on blaming the former government when this is clearly a global issue?
CHALMERS:
Well because this wasted decade of missed opportunities and messed up priorities has meant that we are more vulnerable to these kinds of economic shocks than we should be. And so our task, which we embrace enthusiastically, is to try and make us more resilient to these kinds of global pressures.
Yes, this inflation problem is primarily global, but it’s not exclusively global. There are issues in our own economy which have been hanging around for a really long time now and which have been deliberately ignored and deliberately neglected. And so our task as a new government is first of all to be up‑front about these economic conditions that we’ve inherited, to be realistic and responsible about what we can do about it. But also, as I said, to bring people into our confidence so that they know the kinds of conditions that we’re dealing with as we put together the Budget in their interests.
EXELBY:
Sure, but, I mean, there is a war in Ukraine, the biggest one in Europe since World War II, and we’re facing a global pandemic. So exactly how much can you do to help us on a domestic front when we’ve got those international issues happening?
CHALMERS:
The international issues are a big part of the story – there’s no use pretending otherwise. We’ve got concerns about the American economy, the Chinese economy has slowed considerably, and then you’ve got all of those energy and food security issues coming out of Russia’s invasion of Ukraine. So that is a big part of the story. I’ll be speaking about that at some length today when I address the Parliament. And that has implications for growth in our economy.
But our job is to recognise where we can make a meaningful difference in areas like energy, skills, infrastructure, a Future Made in Australia – all the elements of our economic plan which were important and relevant when we announced them but especially so now. And so the October budget will be about budgeting for those commitments.
People understand that we can’t clean up 9 years of mess in 9 weeks. It will take some time. We can’t flick a switch and make inflation disappear or a trillion dollars in debt disappear or some of these global issues disappear. But there are areas that we can focus on. That hard work has already begun in the lead‑up to the Budget in October.
EXELBY:
The International Monetary Fund has said the world is on the brink of a recession. Is Australia on the brink of a recession?
CHALMERS:
No, that’s not our expectation. Our economy is continuing to grow, but so are our challenges in the near term. But the expectations of the Treasury and other private sector forecasters about our own economy is that it will continue to grow despite this heavy weather.
I am personally quite confident that we will weather the storm, but we need to brace ourselves for that heavy weather in the meantime, in the near term because some of these issues that you rightly point out are global and some of the domestic issues as well will buffet our economy for some months.
EXELBY:
The United States interest rates rose by a whopping 0.75 per cent overnight. Can we expect a similar hike from the Reserve Bank next week? And what’s your position on another rise when Australians are already doing it so tough?
CHALMERS:
Yeah, well, I try to avoid pre‑empting a decision of the independent Reserve Bank or second‑guessing their decisions. The Reserve Bank Governor has himself said that people need to expect that interest rates will rise further this year. He’s made that quite clear on multiple occasions. And my view about that is obviously when interest rates rise people need to find more money in their household budgets to service their mortgage at the same time as they’re trying to meet some of these other skyrocketing costs of living.
It is difficult when interest rates rise. Some people can accommodate interest rate rises, but many others can’t. And so that is one of the issues in our economy. One of the reasons why we’ll be downgrading our expectations for growth in the Australian economy is because rising interest rates will bite. They will have an impact on our own economy, as will these global factors that we’ve been talking about.
EXELBY:
Treasurer Jim Chalmers, you have a very busy day ahead of you, so thank you so much for sparing a little bit of your time to speak with us. Have a great day.
CHALMERS:
Thanks for the opportunity, Tash.