Patricia Karvelas:
Treasurer Jim Chalmers has maintained the nation will not be bullied into weakening its Pharmaceutical Benefits Scheme in order to escape the tariff that Donald Trump has raised, and he’s my guest this afternoon.
Treasurer, welcome.
Jim Chalmers:
Thanks very much, Patricia.
Karvelas:
You’ve said that Australia is urgently seeking clarification after Donald Trump raised this 200 per cent tariff on basically drugs, medicines. How are you seeking that clarity; is it through your counterpart, Scott Bessent? Like how are you trying to find out what this means for us?
Chalmers:
In the usual ways we’re working through the potential costs and consequences of what’s been spoken about in the US overnight. We will work through this in the usual methodical way to understand any potential impacts on our own industries.
Some of these issues have been in the public domain for a little while now, some of the other issues around potential tariff on copper, for example, are relatively more recent.
And so, these announcements were only made overnight. When it comes to pharmaceuticals, there’s an indication that President Trump will take some time to think through these issues. And so we’ve got an opportunity to continue to engage with the Americans, also to engage with our own industries to properly understand the possible consequences of what’s been proposed overnight.
Karvelas:
You mentioned the US has been putting pressure on Australia, specifically on our Pharmaceutical Benefits Scheme. What does that pressure look like? Is it just the public statements, or has it been pressure behind closed doors?
Chalmers:
I think people have seen in the public statements, including from some of the American multinationals, that there is a view about the future of trade in pharmaceuticals. And we see with this announcement overnight about a potential tariff on pharmaceuticals that this issue is in play in the American system.
It’s given us an opportunity, every time this is raised, it’s given us the opportunity to point out that our Pharmaceutical Benefits Scheme is very near and dear to us. We won’t be diminishing it or trading it away in the interests of trying to secure a deal in this instance.
I think I even said in my Budget speech a couple of months ago that we will continue to maintain, indeed strengthen the Pharmaceutical Benefits Scheme.
It’s a very important part of our health architecture. It helps a lot of people. We’re making medicines cheaper, and that’s not on the table when it comes to the engagement and the negotiations that we’ve been having and will continue to have with our counterparts in Washington DC.
Karvelas:
Treasurer, the current average wait time for PBS approval is around 466 days. Drug companies have said they want it reduced to 60. Is reducing that time something that you would negotiate on?
Chalmers:
Our PBS is not up for negotiation, we’ve made that –
Karvelas:
But even that timeframe issue, that’s not about cost, which I understand does have an impact, but the timeframes, they say it just takes too long to deal with the Australian system.
Chalmers:
I was coming to that, Patricia. The point I’m making is that our PBS is not up for negotiation, we’ve made that very clear. When it comes to strengthening the PBS and making sure that it works better for Australians, obviously that’s an ongoing focus of the Health Minister, Mark Butler. He’s always trying to work out how do we make sure the PBS is as strong and effective, including cost‑effective, for Australians who desperately need these treatments and these medicines.
And so that’s part of the ongoing work of any half‑decent Health Minister, we’ve got one much better than that in Mark Butler.
But I want to make it really clear, because you couched your question in the context of negotiations, the PBS is not up for negotiation. This Labor government under Anthony Albanese strengthens the PBS, not weakens it, we’ve made that clear on a number of occasions now.
Karvelas:
Okay. So, no elements, because drug company, Eli Lilly has previously warned the company could pull out basically tens of millions of dollars that it spends on clinical trials in Australia unless there are improvements in the time it takes to get new drugs subsidised. Are we prepared to take those consequences? We would take a dramatic hit, wouldn’t we, to the way that we do these trials and work on these innovations?
Chalmers:
Drug companies have been making those sorts of contributions and those sorts of suggestions really for a long time now independent of developments out of Washington DC. And as I said, Health Ministers engage regularly with the drug companies and with the PBS architecture to make sure that it’s serving Australians, particularly Australians who are unwell who need these treatments and need these drugs.
But that threat that you’ve mentioned, that contribution from that particular company, for as long as I can remember, those sorts of things have been said.
Karvelas:
Okay. So are you suggesting you’ll stare them down and they won’t do any of this?
Chalmers:
Well those are your words, Patricia.
Karvelas:
They are. But I’m just trying to work out if you think there’s any move, you know, room for movement, or if it’s just hold the line, no negotiation, no movement on any of this.
Chalmers:
I don’t think I could be clearer, Patricia, in saying, firstly, the PBS is not up for negotiation. Secondly this Albanese Labor government has shown a willingness and enthusiasm and an ability to strengthen the PBS, not weaken it. And thirdly, when it comes to timeframes, when it comes to interaction with the relevant advisory bodies and all of the rest of it, that’s part of the ongoing and important work of the Health Minister. But it’s not about trying to work out how we can trade away elements of our PBS, it’s not about negotiating the PBS in the context of these announcements out of the US.
The PBS is not up for negotiation. We’re about strengthening it, not weakening it. We’ve made that clear, not just through the course of today, but through the course of the whole time that we’ve been in office.
Karvelas:
Treasurer, the Prime Minister will go on a 6‑day visit to China to meet President Xi Jinping and other senior officials. China will raise other issues, for instance, their desire to open the China‑Australia Free Trade Agreement to include AI, healthcare, I know they want the digital economy to be in there, perhaps green energy. Are we open to this?
Chalmers:
I think it’s important that I don’t pre‑empt or make predictions about the conversations that Prime Minister Albanese will be having with President Xi. This is a really important opportunity for Australia to continue to strengthen this crucial economic relationship with China.
It’s a crucial relationship, it’s got complexities as well, you mentioned some of them then, but we will go in the spirit of representing the Australian national interest. There will be matters raised like those that you’ve identified and other issues as well, but overwhelmingly our priority in this relationship has been to stabilise it in the interests of our workers and businesses and investors. We’ve been able to do that, but we recognise that there are complexities as well, and we’ll work through them.
Karvelas:
So just philosophically or in terms of your parameters here, going into this kind of trip and what you want to get out of it as a country, I know that it’s the Prime Minister’s trip, but is it for more trade with China. Do you want to increase our trade with China, particularly given the international trade environment and what we’re seeing with the United States?
Chalmers:
We’re always looking to strengthen our trading relationships with our key partners, and China being such a substantial part of our market is a huge priority for us. And I think the efforts that the Prime Minister, Foreign Minister, Trade Minister and others have put into stabilising this relationship are bearing fruit when it comes to our workers and businesses and industries, our export industries in particular.
So that will be our approach. And what you’ll see is the Prime Minister in making sure that our businesses are represented on this particular engagement, there’s a real focus on the economic relationship, it is mutually beneficial, it’s very good for Australia, it’s not without complexity, and we’ll work through that as well. But a really, really important opportunity to engage with our counterparts in China, to strengthen this economic relationship in the interests of our people.
Karvelas:
You invited your shadow counterpart, Ted O’Brien, to your productivity roundtable which is next month. He says he’ll put one thing up on the table, and that will be that the tax on unrealised capital gains through the superannuation change you’ve set must go because it’s bad for productivity. So that’s what he wants to take to the table. Will it make it on to the agenda?
Chalmers:
We’re not going to limit the things that people raise at the roundtable, you know, we’ve extended an invitation to the Shadow Treasurer in good faith, we’ve indicated to participants there that they will bring, they can bring all kinds of ideas.
I don’t think it augurs well for the Shadow Treasurer’s participation if that is the sum total of his ambitions for our economy and for our country. I would hope that he comes with a much more constructive approach than that, and if he doesn’t, I think it will show that they’ve learned nothing from the result on 3 May.
The Opposition in the last term said no to everything, they had an approach which was to obstruct everything, to make no real positive contribution to the future of our economy or the future of our country. I hope that the Shadow Treasurer and the Leader of the Opposition have learned from that. From the comments that Mr O’Brien has made today, I’m worried that he hasn’t.
Karvelas:
Are you going to rescind his invitation?
Chalmers:
No, of course not. The point I’m making is this is a real test for the Opposition. Are they going to come with constructive ideas about our economy, our country and our future, or are they going to continue the approach from last term which was judged harshly at the ballot box on 3 May?
It’s a test for the Opposition. I fear when I hear those sorts of comments that they might fall short, but I remain optimistic and hopeful that he would come to the roundtable in a spirit of making a contribution in good faith because I’ve extended that invitation to him in good faith.
Karvelas:
To be fair, he’s not the only critic of that particular tax. Paul Keating, who I know is one of your heroes, has been critical of the super tax. Have you spoken to him since his contribution last week?
Jim Chalmers:
I have. I speak to Paul Keating relatively regularly and not just about that issue. From time to time we do speak about that issue, but we speak about a lot of things in our economy and when it comes to economic policy in particular. I don’t think that would come as a surprise to anyone who knows either of us. I respect Paul Keating a great deal, and I respect him too much to relay the contents of the private conversations that we have.
I’m not pretending that there is unanimous support around Australia for the modest changes that we are proposing. I don’t just talk with Paul about that, I speak with a number of people about that.
I have to make sure that the superannuation tax arrangements are sustainable. These changes only apply to a tiny sliver of the population, and that’s why we intend to proceed with them.
Karvelas:
Yeah, but he suggests that a lot of young people will have balances of $3 million. Did you contest that in your conversation with him?
Chalmers:
I’m not going to go into the private conversations I have with Paul Keating, but people should be careful about the assumptions they make about his view I think – in that view, in general, about the amount of people who will be subject to these modest changes.
That assumes over a period of some decades that no government ever changes the threshold. That doesn’t happen in other parts of the tax system, but people want to assume that it will happen in this part of the tax system. And when it comes to Ted O’Brien that you mentioned before, if he’s saying that that amount of people will get caught up at some future point, 10 or 20 or 30 years down the track, that’s an indication that the Coalition wouldn’t intend to lift the threshold.
I think future governments will do that in the same way that that happens in the income tax system and in other parts of the system. Most of our tax system has thresholds of that nature.
Karvelas:
Okay. Just final question. Obviously yesterday rates were left on hold. The Reserve Bank Governor said in her press conference that I watched incredibly closely that it’s about timing, not the trajectory that we’re going on.
Jenny Wilkinson is of course now your Treasury head. Is she on that board representing the government or as an independent economic thinker?
Chalmers:
The Treasury Secretary is on the Reserve Bank Board as a representative of the Treasury, not the Treasurer, and that’s very clear.
Now the Secretary of the Treasury and I speak from time to time about monetary policy, we spoke briefly today about the outcome of the meeting yesterday. But there are very good reasons why I don’t seek to know how the Treasury Secretary votes in these discussions. I don’t speak with her about her vote before or after the meeting.
Karvelas:
So you didn’t even ask her, you didn’t say, ‘We wanted a 3’?
Chalmers:
No, I didn’t, and I think there are 2 good reasons for that. First of all, the votes are unattributed, and secondly, because Secretary Wilkinson is there as a representative of the Treasury, not the Treasurer.
Now I take the independence of the Reserve Bank very seriously. Probably a source of some frustration to you, Patricia, from time to time you ask me to make predictions about future movements in interest rates, I don’t do that, I don’t second‑guess decisions that they’ve taken. I speak with the Secretary from time to time about monetary policy, about the Reserve Bank’s forecasts in the general, but I don’t seek to speak with her before or subsequent to meetings about her vote for the 2 reasons that I’ve identified.
Karvelas:
Have the RBA made the next month a little bleaker in this winter, and I am from a cold state, for many people –
Chalmers:
You’re always welcome to move to Logan City, Patricia, or Brisbane –
Karvelas:
One day.
Chalmers:
– where it’s much warmer.
Karvelas:
One day. But is it a bleaker month ahead because of the Reserve Bank’s decision?
Chalmers:
I wouldn’t describe this that way. I mean the Reserve Bank Governor has made it clear in her own statement that the direction of travel on interest rates is clear. They want to spend a bit more time gathering more information about developments in the economy.
I think it’s a good thing that the Governor was able to run through the Reserve Bank Board’s thinking yesterday in the press conference. It’s one of the changes that I have encouraged, to make these deliberations more transparent, same as the publication of these unattributed votes. More transparency is a good thing, and the Governor’s run through their thinking in saying that the direction of travel is clear.
We’ve made a heap of progress together on inflation. Interest rates have already come down twice in the course of the last 5 months. She’s said that that’s her inclination in the future as well, but they want to wait for a bit more information before they take that decision.
Karvelas:
Treasurer, always enjoy talking to you. Thanks for coming on.
Chalmers:
Appreciate it, Patricia, thank you.