Patricia Karvelas:
Treasurer, welcome to Afternoon Briefing.
Jim Chalmers:
Thanks very much, Patricia.
Karvelas:
As a Treasurer who lives in Brisbane, just give me a sense of the anxiety across the city and region right now.
Chalmers:
I think people are really worried. I think people are scared about what the next few days might bring. Certainly, there’s a lot of information out there which suggests that it’s going to be a very difficult few days, if not difficult few weeks.
We’ve got this cyclone sitting just offshore now, expected to cross over late Thursday or early Friday. And obviously that will bring with it a heap of rain, a heap of winds. And so people are bracing for the worst, preparing for the worst, but hoping for the best.
Karvelas:
And Treasurer, people are really worried about their insurance companies and how they will deal with whatever damage is done to their properties. We know they’re already worried about this, they’re raising it when they’re speaking to reporters already. When the RBA cut rates, you called the big banks. Are you going to be calling the insurance companies to put them on notice ahead of this?
Chalmers:
I will be speaking with the insurance companies. And that’s to remind them, really, not that they might need reminding, of the really stressful time that people are going through. And what’s unusual about this cyclone, or the likely path of this cyclone, is that our friends to the north and Far North Queensland where these events are more regular, these are population centres that get hit but it’s very rare to see a cyclone this far south and likely to hit a population centre this big as south‑east Queensland and the northern part of NSW. And so, obviously, the insurance companies have got a big role to play here. We want to make sure that they’re doing the right thing by their customers, recognising that it’s going to be a really stressful time for everyone. And we want to make sure that the way that people deal with insurance companies doesn’t add unnecessarily to that stress.
Karvelas:
The National Emergency Management Agency is going to be convening today, the Prime Minister confirming that earlier when he spoke, bringing together a lot of these key agencies, obviously, insurance being one of them, supermarkets, banking companies, telcos. What do they need to do to ensure people are not left vulnerable?
Chalmers:
First of all, prepare well. I was part of some discussions yesterday with the Premier here in Queensland, Jenny McAllister – who’s our Emergencies Minister, making sure that everything that can be done in relation to telcos and supermarkets is being done. Making sure that we can get the shelves restocked, for example. Making sure that the emergency equipment for the telcos is in place. I’ve had exchanges with some of the major bank CEOs to make sure that their infrastructure is resilient enough to deal with what we expect over the coming days. And so preparation is key. And there’s been a lot of preparation. We don’t often get this much warning in south‑east Queensland for these sorts of weather events. And so a lot of preparation, but also making sure that all of the businesses in these really important sectors, they’ve got responsibilities to people, I’m confident that they’ll discharge those responsibilities the best way that they can and having a few days’ notice has been helpful in that regard.
Karvelas:
As you know, scientists say the range of tropical cyclones is increasing due to climate change and warming sea surface temperatures, and that, in fact, even Sydney could be hit in a, you know, sort of future scenario. Are we really prepared for those kinds of scenarios Treasurer, given the population centre point you were making? That clearly we do have cyclones in this country, but they haven’t sort of hit the population centres that we’re seeing now?
Chalmers:
I mean clearly, I think it’s self‑evident, scientifically self‑evident, that these sorts of natural disasters are becoming more frequent and that they’re, the pattern and the path of them is changing. I think that’s self‑evident. I don’t think that’s a political point to make. And that’s why we’re very focused in the medium and longer term on dealing with climate change, but also in the nearer term making sure that we find room in our budget for mitigation when it comes to flooding, for example, and in other ways. We have been redirecting spending in that direction to try and make sure that we are better prepared. But these natural disasters are becoming more frequent, more devastating, as you rightly point out in your question population centres like Brisbane, the Sunshine Coast, Gold Coast, Logan into the northern part of NSW are increasingly vulnerable. And that puts the responsibility, I think, on governments at all levels to do what we can to do more to prepare for the worst.
Karvelas:
Now, of course, there is a Budget in March. I’m going to get to the National Accounts for today in a moment, but you mentioned the budget there in terms of mitigation. We haven’t had the cyclone hit yet, but no doubt it’ll have an impact on your Budget, won’t it, Treasurer? And perhaps a significant impact.
Chalmers:
Of course it will. Our focus is on the human cost of these natural disasters. Our focus is on helping people prepare in neighbourhoods and communities right throughout this region and further south. But, of course, when the time comes, there’ll be a substantial economic cost and there’ll be a substantial cost to the budget as well. And I say to everyone who’s worried about the path of this cyclone, we know that Australians are there for each other in difficult times like these, and the government will be there for you as well. We’re prepared to do whatever it takes to help people prepare to help people respond, and then, of course, to rebuild as well. Now, that will come with a cost, but that’s not our primary focus. Our exclusive focus right now is on the human element of this. A lot of people who are very worried. Making sure that we’re doing everything we can to help people prepare.
Karvelas:
Now, let’s get to today’s National Accounts. Australia is now out of a per capita recession. You’ve been worried about the economy for some time. You’ve expressed it with me many times. Is this evidence that the economy has turned the corner?
Chalmers:
This is evidence the economy’s turned a corner. I think that’s the overwhelming sense that we get from today’s National Accounts. What we see here is a very solid, very encouraging rebound in growth. And just as encouraging is the fact that growth in our economy is now not as reliant as it was before on public spending. We’re seeing the private sector take its rightful place as the key driver of growth in our economy. That is particularly pleasing from our point of view. And so if you look at these numbers today, you see that growth is accelerating. Momentum is gathering pace in our economy. That’s a very good thing.
We don’t get carried away because we know there’s a lot of global economic uncertainty, there’s a lot of uncertainty just off the Queensland coast, as we’ve been talking about, we know that people are still under pressure. But we’re very encouraged by these National Accounts because they do show the economy has turned a corner in very welcome and encouraging ways. And the private sector, in particular, picking up is especially welcome.
KAREVLAS:
Ok, so if we accept that the Australian economy is turning a corner, the Trump administration’s move to unveil a suite of tariffs on allies and others does risk derailing this, doesn’t it? In a response to the new tariff regime, affected countries have imposed a wave of retaliatory measures. What will that do to suppress growth? What are you worried about?
Chalmers:
There is a lot of global economic uncertainty, and that’s part of it, but it’s not all of it. The Chinese economy is slowing, we’ve got a war in Eastern Europe, we’ve got a tentative ceasefire in the Middle East, political uncertainty around the world, economic uncertainty as well and we’re not immune from that. And that’s why, obviously, we monitor very closely the announcements being made about new policy directions from a new administration in the US. And to be blunt about it, we’ve got a lot at stake as Australians, as a very trade exposed economy when it comes to these escalating trade tensions around the world.
But the encouraging thing about the numbers that we’re seeing in our economy is that we are building together as Australians, a much firmer foundation to deal with this uncertainty, whether it be cyclones, whether it be global economic uncertainty, whether it be political uncertainty around the world. We’re building a better foundation together to deal with that, because we do have a lot at stake, but we’ve got a lot going for us as well and we see that in today’s National Accounts.
KAREVLAS:
And we have seen China retaliate already to the tariffs being imposed on them, the higher tariffs. How big will the collateral damage to the Australian economy be given we are so exposed to anything that happens with China?
Chalmers:
This is our major concern, really, the escalation of these trade tensions. When we asked the Treasury to model before the election the potential impacts of these sorts of scenarios, there were 2 sets of impacts. The direct impacts on our industries, but also the broader consequences of escalating trade tensions. And again, we’re not immune from that. We’re already in one way or another impacted by the substantial slowing in the Chinese economy. And what we’re seeing around the world risks slower global growth, it risks higher global inflation and that’s why it’s of concern to us. It’s why we monitor it so closely. And it’s also why it’s so important this foundation that we’re building together is becoming more robust.
If you take a step back and think about the position we’re in to confront this uncertainty, we’ve got inflation down, we’ve got incomes and wages up, we’ve got unemployment low, we’ve got the Liberal debt down, interest rates have started to come down, and now the economy is growing solidly as well. And all of those things are very important as we confront this international uncertainty together.
KAREVLAS:
And, of course, you did go to Washington to try and lobby for exemptions to our own potential tariffs. I’ve heard lots of different Labor senior people speak about this, really trying to pour cold water on whether we would get an exemption. Am I reading that right? Is there a sort of sense that you think this is going to be pretty hard?
Chalmers:
It remains to be seen. We’ve got a good case to make, and we’ve been making that case at a number of different levels, including in my case, directly to my counterpart Secretary Bessent and Director Hassett, and to some of the Wall Street leaders who are close to the administration. And so we’ve taken every opportunity we can to make our case.
I think Minister Wong put it best when she said it will be harder this time than last time to get this exemption. But that doesn’t mean we take either outcome for granted. We don’t think it’s determined yet. We know it will be overwhelmingly a decision for President Trump to take. And so we are engaging at every level we can to make Australia’s case. Australia is different to these other countries that have been the focus of the Trump administration. Americans run a trade surplus with us. They get tariff free access to our markets. We’re making a contribution on defence. We’ve got a lot of the critical minerals they need –
Karvelas:
– let me pick you up on the defence line –
Chalmers:
We’re pouring hundreds of billions of dollars of investment into the American economy and all that’s important –
Karvelas:
– let me put this to you because you mentioned money in defence, Trump’s pick for a top Pentagon post Elbridge Colby has said he wants Australia to massively increase its defence expenditure to counter China, arguing that basically we are not spending enough, knowing the figures of what we spend and saying it’s not enough. Will we consider this request? We’ve seen, for instance, in the UK a further increase there in terms of defence spending, a decrease there also on aid spending. Will we go further than the 2.4 per cent?
Chalmers:
I think that that number you referenced reflects the very substantial increase in defence spending, which is already underway, from 2 per cent closer to the figure that you referenced, tens of billions of dollars in extra investment in defence. It’s one of the big pressures on our budget, and it shows that we are prepared to invest in our capacity and our ability to work with our allies. And so the extra investment that we’ve been able to make in defence is a tribute to the deputy Prime Minister and the Cabinet for finding room in our budget to do that –
Karvelas:
– the Trump administration still doesn’t think it’s enough. They’re still saying it’s not enough.
Chalmers:
This is part of the positive story that we tell our colleagues. It was certainly part of my pitch when I met Secretary Bessent, Director Hassett in D.C. that we are increasing our defence spending. And it comes with a whole bunch of other ways that this economic relationship is a relationship of mutual economic benefit. It’s full of opportunities. We’ve got a good case to make and we’ve been making it.
Karvelas:
Just finally, teal independents led by Allegra Spender called to index tax brackets to inflation. Are you prepared to look at it?
Chalmers:
It’s not the first time they’ve called for that. They’ve asked me questions in the parliament about that before. I understand and respect their position. And I know that this has been a proposal that’s been bouncing around for a while. The difference between the approach that the teals can take and the approach that I have to take is I have to make it all add up. It’s easy to make proposals about changes which would cost the budget substantially.
We’ve actually found a very important way to return bracket creep, we did that with the tax cuts which started rolling out on the 1st of July. I’m very proud of that because we found the best way to return bracket creep in a way that supports labour force participation and brings all kinds of benefits by providing a tax cut to every Australian taxpayer. And if you look at today’s National Accounts, you can see the positive role that those tax cuts are playing. And so I respect and understand their position. I engage with them regularly on it, and that’s a good thing that they are making proposals like this but I have to make everything add up.
Karvelas:
Okay, just finally, Treasurer, does this cyclone mean that you will ultimately be delivering your Budget in March?
Chalmers:
Obviously, we’ve been working towards a Budget towards the end of March for some time now. We’ve been meeting the Expenditure Review Committee, putting the Budget together. And we obviously understand and acknowledge that it’s up to the Prime Minister, in consultation with us as his senior colleagues, to work out when he calls the election. But we’ve certainly been preparing for that Budget at the end of March. I think I’ve said that countless times publicly that that’s what we have been working towards. I’ll leave the kind of political commentary about election timing and the like to others. Our focus is on dealing with this cyclone, preparing for it and then responding to it. Our focus is on developments in the economy and around the world. And I’ll leave the election timing commentary to others.
Karvelas:
Treasurer, always great to speak to you. Thank you.
Chalmers:
And you, Patricia. Thank you.