Patricia Karvelas:
Treasurer, welcome to the program.
Jim Chalmers:
Thanks very much, Patricia.
Karvelas:
Jim Chalmers, you’ve been celebrating today’s inflation data. Are you happy because you can see an RBA rate cut on the horizon?
Chalmers:
I’m happy with these numbers because I think they’re a powerful demonstration of the progress that Australians have made together in this fight against inflation. For a few years now, inflation has been really the defining challenge in our economy, and there’s still more work to do, but to have inflation in the low 2s, to have underlying inflation within the Reserve Bank’s target band, to have monthly inflation with a one in front of it, to see inflation come down really across the board in these numbers released today, that’s very positive news, it’s very welcome news. They are, from my point of view, an outstanding set of numbers because they show that progress that we’ve made together as Australians.
Karvelas:
Can you understand why Australians might be angry or disappointed that interest rates were kept on hold at the last meeting, now that unemployment has ticked up and inflation is at a 4‑year low?
Chalmers:
Well, as I said at the time, Patricia, and I think as you and I spoke about at the time, I think it’s just self‑evident that millions of Australians would have liked to have seen more rate relief the last time the Reserve Bank Board met. I don’t think that would be a big surprise or a particularly controversial statement but the Reserve Bank takes these decisions independently. They weigh up the data that they get, whether it’s inflation, unemployment, the fact that we’ve had soft growth in our economy for a little while now, they weigh all of that up, they come at these decisions in a considered way and an independent way, and they make their decision public.
My job is to focus on doing our bit in the fight against inflation. That means responsible cost‑of‑living help which we’re rolling out, it also means managing the budget and the economy in the most responsible way that we can. And so, we’re encouraged when we see numbers like today, because it gives a sense that the outcomes that we’ve been seeking, whether you’re the Reserve Bank or the government or the community more broadly to get inflation down, we are making good progress.
And unlike the rest of the world or certainly unlike the major advanced economies, we got inflation down without a big spike in unemployment, we’ve kept the economy ticking over, inflation is coming down in Australia at the same time it’s going up in the US, the UK, Canada and New Zealand.
Karvelas:
Yeah. I think that’s broadly true, but the Australian Council of Trade Unions Secretary, Sally McManus, has said that every day the RBA waits before it cuts rates makes it more likely that unemployment will go up. Do you agree with that broadly, that unemployment, you know, has had a spike, and there is more risk if we wait any longer?
Chalmers:
Look, I respect Sally, and I work closely with her, but I choose my own words when I describe the situation, and there are good reasons –
Karvelas:
Well, just reflecting on unemployment then and the impact of keeping rates at this level and the impact it’s having on unemployment.
Chalmers:
Well, there are good reasons, Patricia, whether it’s on this occasion or on other occasions, I don’t say anything which could be misconstrued as second‑guessing the decisions taken independently by the Reserve Bank. My job is to focus on the fight against inflation, rolling out this cost‑of‑living help, making our economy more resilient in the face of global uncertainty, dealing with these persistent structural issues in our economy and our budget – that’s my focus.
The Reserve Bank and the government have got the same objective, to get inflation down, and we’ve made good progress, but we’ve got different responsibilities, and I’m respectful of that.
Karvelas:
But you must be concerned about the broad health of the economy, and growth, and you know, the heartbeat of the economy given the kind of delicate balancing act we’re in at the moment.
Chalmers:
It’s certainly the case that growth in our economy is softer than we would like, it’s certainly the case that even though we’ve averaged the lowest unemployment rate of any government in the last half a century, that there is softness around the edges of the labour market, that is true. It is the case that people are still under pressure despite this quite remarkable progress that we’ve made on inflation. We’re upfront about that. There’s no shortage of economic challenges, but for the 3 years that we’ve been in office, we’ve been working as hard as we can to get that inflation down that we inherited, remembering it was higher than 6 per cent and absolutely roaring when we came to office.
We’ve got headline inflation down to about a third of what we inherited, we’ve got underlying inflation almost half of what we inherited, monthly has a one in front of it. So that is, as I said before, a demonstration of the progress we’ve made together, but we don’t pretend that all of the challenges in our economy are solved. We’re making good progress on this one, there are no shortage of others.
Karvelas:
There’s a bit on your agenda at the moment. You’ve got these meetings on productivity next month, as you know. The Productivity Commission Chairwoman Danielle Wood has an interim report coming your way, I think Thursday, that’s tomorrow, that’s very soon. It’s going to make recommendations, including an adjustment of the corporate tax rate potentially to boost business investment.
I spoke to Danielle Wood on Friday on this show, and she ruled out a cut to the 30 per cent tax rate just on its own but says there does need to be movement on this. Do you agree broadly that the company tax rate is uncompetitive?
Chalmers:
First of all, we’ll see what the Productivity Commission says when Danielle Wood releases the report. There’s a number of these reports coming out over the course of the next couple of weeks. We value and respect, we’re grateful for the input from the PC, it’s an important thing that we will consider between now and the roundtable, at the roundtable and subsequent to that as well. That’s the first point.
When it comes to company taxes, I don’t have an ideological view about this, we’ve got to make sure that any changes we make to the tax system that we can afford, that we can pay for them, and a lot of the discussions I’ve been having with CEOs and others in the lead up to the Economic Reform Roundtable has been encouraging them to grapple with the same sorts of trade‑offs that the government grapples with. It’s the easiest thing in the world to propose big tax cuts or to propose big spending items, but the government has to go about this in a responsible way, and so we’re looking for those trade‑offs, we’re hoping that people understand those trade‑offs, and consider potential changes to the tax system in their entirety rather than individually. We’ve had –
Karvelas:
Oh, absolutely. You can’t do it in isolation, I respect that. But on the broad concept, if you could reflect on whether you think that the Australian corporate tax rate needs to be made more competitive.
Chalmers:
I’m certainly up for considering changes that make us more attractive as an investment destination, I’m certainly interested in the more efficient attracting and deploying of capital in our economy. I think one of the reasons why we’ve had this productivity challenge for a couple of decades now is that we haven’t had what the economists call the appropriate amount of capital deepening, and so we’re looking for ways to address that. There’s more than one way to do that though. I know that there will be views about the company rate, the headline company rate, but in the discussions that I’ve been having with people who are either attending the roundtable or are interested in providing ideas to us, there are a whole range of ways that we could go about that, not just that one.
Karvelas:
Yeah, fair enough. Just on AI, that’s a big point of conflict, I think, where lots of – lots of different views, AI is one of the reasons that the Commonwealth Bank is getting rid of some of its workers, at the same time the ACTU wants a rule that employers guarantee workers’ job security before introducing AI. Are you open to an idea like that?
Chalmers:
Well, first of all, I think we need to recognise that when a change is as consequential as artificial intelligence is, it will be contentious, and it will be contested and that’s what we’re seeing right now. I welcome the fact that so many people are providing so many different perspectives on artificial intelligence. I saw part of Scott Farquhar’s contribution at the National Press Club today which I thought made a heap of unsurprisingly important points. This will be a game changer for our economy, and it’s for us to decide whether Australians are ultimately beneficiaries or victims of this game changing influence on our economy in the years ahead.
Karvelas:
Isn’t the truth that they will be both, and we – and you need to sort of say that, because Australians are clearly going to lose their jobs; not all Australians, but there will be jobs lost, it’s inevitable, it’s happening.
Chalmers:
I’m an optimist about artificial intelligence. I believe that we can maximise the opportunity and manage the risks. I’m certainly alive to the risks in the labour market, but historically what we’ve seen, big changes in technology, and this one will be transformational, and it will be a game‑changer in the economy. I believe it shouldn’t be beyond us, and it’s not beyond us to work out the best version of this for Australia, including for Australian workers, and so I welcome the views put forward, whether it’s Scott today at the Press Club, the union movement, the business community. I think this will be one of the key things that we grapple with at the Economic Reform Roundtable, because it is such a consequential influence on our economy in the years ahead, decades ahead, and so we owe it to the Australian people, and particularly the Australian workers to do everything we can to get it right.
Karvelas:
Just finally on Palestinian statehood, the Opposition Foreign Affairs spokeswoman, Michaelia Cash, says that recognition of a Palestinian state should come only once peace has been reached in Gaza, and I’ve spoken to other Coalition people, that basically the argument, they’re saying, is that this is a reward for Hamas. What’s your response to that?
Chalmers:
Oh look, to be honest with you, Patricia, I don’t pay a lot of attention to what Michaelia Cash says about this – I think she’s always looking for the most divisive sound bite, whereas we as a government are working through these issues in a considered and methodical way because that’s how sensible governments and great countries like ours work through these issues.
Karvelas:
But they have us reframing that it’s a reward to Hamas that’s clearly being mounted by some.
Chalmers:
Well, obviously not. When you consider the conditions, the obstacles that the Prime Minister and other leaders of other like‑minded countries have identified, clearly an obstacle is working out, making sure that there’s no role for Hamas.
I thought that statement that was released by the 15 countries, including by Penny Wong, was really, really important. First of all, it denounced the terrorist act on 7 October; secondly, it demanded a ceasefire, access for humanitarian workers, release of the hostages; but it also called on countries to work towards recognition as part of progress towards a two‑state solution.
From my point of view personally and as a member of the government, there is real momentum here. That momentum, that progress is welcome, but it’s also conditional, and those conditional aspects are the issues that the Prime Minister was talking about in the press conference he gave earlier today here in Canberra.
Karvelas:
Treasurer, great to have you on the show, thank you.
Chalmers:
Appreciate it, Patricia, thank you.