Patricia Karvelas:
Let’s begin today with the latest economic growth data from the ABS. Australia’s economy grew by 0.4 per cent in the September quarter following growth of 0.7 per cent in the June quarter. It’s below market expectations, but the annual rate is growing quicker than it has in more than 2 years, a boom seemingly caused by investment in artificial intelligence and data centres. I spoke to the Treasurer, Jim Chalmers, about the economic outlook a short time ago.
Treasurer, welcome back to Afternoon Briefing.
Jim Chalmers:
Thanks very much, Patricia.
Karvelas:
The Australian economy rose 0.4 per cent in the September quarter. Economists and the market had expected GDP growth of around 0.7 per cent for the quarter, so it did come in slower. Does that concern you?
Chalmers:
No, these are very positive and very promising numbers. The reason why the quarterly figure was a couple of klicks south of what the market expected is because they’ve revised up now, the quarter before that, and also because of the impact of what’s called inventories, particularly when it comes to coal and gold. And so there are a couple of reasons for that.
Overwhelmingly, these are very promising, very positive numbers and the main reason for that, the big story behind these numbers, is the resurgence in private investment, whether it’s new business investment or investment in housing. Really the stand‑out conclusions from these National Accounts is the way that the private sector is growing really quite strongly, and that’s driving growth in the quarter and through the year.
Karvelas:
But is our growth still too sluggish in your view?
Chalmers:
Well, this is the fastest annual growth in 2 years, 2.1 per cent is faster than it’s been for the last couple of years now. And as I said, the composition of that growth matters a great deal as well. The reason I’m really encouraged, really heartened, really positive about these National Accounts is because you can see the private sector, particularly new business investment, is absolutely galloping in this quarter, and housing investment’s picked up as well. Even productivity now, we’ve seen 4 consecutive quarters of growth, not getting carried away about that.
But really right across the board, the big story here’s the recovery in the private economy. It is the strongest annual growth in a couple of years now. It’s been driven by the private sector, and that’s very welcome.
Karvelas:
Well, MYEFO is getting closer, Treasurer, later this month in fact now that we’re in December. You must have settled on whether to extend the energy rebates. Is that now settled? Have you made a determination about whether you need to rein in these rebates?
Chalmers:
We haven’t settled a handful of final decisions for the mid‑year budget update. Clearly, we were waiting for these National Accounts to help us to update our forecasts for the economy that flows through to some of the forecasts for revenue and the Budget more broadly. People would expect us to consider these numbers that are out today. We’ve still got a handful of decisions to make.
But we’ve been pretty clear over the course of the last couple of years, and certainly over the last couple of weeks that people shouldn’t expect that to be a permanent feature of the budget. It’s been an important way that we’re helping Australians with the cost of living, but not the only way. We’ve got tax cuts coming, cheaper medicines, Fee‑Free TAFE, student debt relief, all of these other ways that we’re helping with the cost of living. So we haven’t taken a final decision, but we’ve been very upfront in saying that people shouldn’t expect those energy bill rebates to be a permanent feature of the budget going forward.
Karvelas:
You have been really clear about that, and you just mentioned you’ve been waiting for National Accounts to give you a further steer. So now that we do have that data published, what is that further steer? What do you read from today’s figures that, you know, will shape your final decisions around MYEFO?
Chalmers:
Well, first of all, the main reason we wait for the National Accounts in this instance is because we want to get the firmest read that we can on the recovery and the private sector, and I’ve explained a couple of different ways that we’re very encouraged by that. Really, the public demand, government spending’s not making the big contribution here, the big running when it comes to growth in our economy, it’s the private sector and that’s a good thing.
Now when it comes to some final decisions, a handful of final decisions, we typically leave to the very end of the process a couple of things to finalise. That’s one of them. But again, you know, to be really upfront with your viewers, we’ve never said that this would be a permanent ongoing feature of the budget. Really important way that we’re helping with the cost of living, but not the only way that we’re helping with the cost of living.
We’ve got to be as responsible as we can with the budget. That’s how we’ve delivered a couple of surpluses and found $100 billion in savings. That’s how we’ve got the Liberal debt down by almost $200 billion. So, people should expect us to be very responsible with the budget. That’s been a defining feature of this Albanese Labor government, and they should expect to see more of that in the mid‑year update later this month.
Karvelas:
Well, of course inflation is pretty stubborn, 3.8 per cent. You expressed disappointment around that. Should Australians then be prepared for a difficult year? Does that stubborn inflation figure make you re‑think your budget strategy and think you’ve got to take some money out of the economy to take the heat out?
Chalmers:
Obviously, all of the economic indicators influence our decision‑making in budgets and budget updates, and you’re right in implying in your question that the main game will be in May. The mid‑year budget update won’t be a mini budget, it will be an opportunity for us to update our forecasts. And really the main thing we’ve been focused on in this mid‑year update is how we make room for some of these spending pressures which have grown since the last time the budget was updated – natural disasters, veterans and the like – are important parts of that.
So that’s been the main focus, the main game for budget policy will be the Budget in May. In every budget that we hand down, Katy Gallagher and I and the Expenditure Review Committee, we’re always on the lookout for ways that we can reprioritise spending to higher priority areas, and because we’ve found those savings in earlier budgets we’ve been able to strengthen Medicare and invest in bulk billing and build Urgent Care Clinics and cut income taxes 3 times by making the room. People should expect to see more of that in May.
Karvelas:
And should they – I mean, like, if I can use the A word – is this kind of going to be an austerity budget, the Budget we see in May?
Chalmers:
Not how I would describe it. You know, in every budget and every budget update there are difficult decisions. We’ve made a bunch of them already without which we wouldn’t have already ticked over $100 billion in savings, which has helped make room for some of those higher priority areas that I’ve just run through.
But in every budget, including in the May 2026 Budget, which will be the government’s fifth budget, we’ll be on the lookout for ways to reprioritise spending to those areas where we can do the most good and get the most value for money. That is the essence of responsible economic management, and our government’s been defined by that.
Karvelas:
And also, I mean there’s a lot of talk, and you know it’s political talk, about when the government will potentially deliver bigger reforms. The conventional thinking, as you know, as a student of politics as well, is that it should happen, you know, mid‑term. That would be next year. If you don’t get the hard work done next year, we are re‑entering an election cycle. Is that what we should expect that we’re going to see some bigger reforms, perhaps even taxation reforms next year, Treasurer?
Chalmers:
Certainly some of the momentum and consensus that we built at the Economic Reform Roundtable will be a really big influence on our thinking in the lead‑up to the May 2026 Budget. But we haven’t waited for that. I mean think about even in the course of the last few days, we’ve fast‑tracked the reforms to the EPBC Act. I’ve agreed with state and territory Treasurers a whole bunch of very meaningful reforms in national competition policy and reforming the federation. The colleagues yesterday released our artificial intelligence plan, again that was a key feature of the discussions at the Economic Reform Roundtable, and so we have kept the wheels of economic reform turning. It’s not always recognised on the editorial pages of our major newspapers, but that has been the case.
You know, whether it’s been blitzing the backlog of housing approvals, freezing the construction code, cutting tariffs, another 500 nuisance tariffs, whether it’s been our national competition policy, a second tranche of Foreign Investment Review Board reforms, we’re actually doing a lot of reform, and that will be the focus in May but we’re not waiting until May.
There is way more economic reform going on than people typically give the government credit for, and that’s because we realise that if we want to lift living standards, and we do, we’ve got to make our economy more productive. And again, that’s why today’s National Accounts are so positive and so promising, because in order to get more productivity we need more business investment in particular, and business investment in these figures is absolutely galloping. That’s a good thing for our objectives which is an economy which is more productive, more resilient, and a budget which is more sustainable, and the Budget that we hand down in May of 2026 will be about advancing that already very substantial reform agenda.
Karvelas:
Treasurer, the RBA Governor this morning said you’re just not going to get there on your target of 1.2 million homes. She’s right, isn’t she?
Chalmers:
I’m aware of those comments, but I haven’t seen them yet. Ironically, I was at an opening of a 500‑home apartment complex in Bowen Hills in Brisbane, which is part of the really encouraging investment we’re seeing in housing, which we can see in these National Accounts.
Look, I acknowledge that our housing target is ambitious, but I believe it’s achievable. It’s for 2029, we’ve seen a welcome uptick in housing investment in these National Accounts, and we need to sustain it in order to hit our goals.
But I believe we can hit that target if everybody does their bit. The Commonwealth’s doing its bit. Tens of billions of dollars of investment, some great work by Clare O’Neil and before her Julie Collins, working with the states and local government, the industry and investors to build the homes that Australians desperately need. When we came to government, we were playing catch‑up, there’d been a decade of inaction, we’re doing our best to turn that around. We do acknowledge that the target is ambitious, but I believe it’s achievable. It will require all of us to do our bit, and we’re doing our bit.
Karvelas:
Well, the Reserve Bank Governor also says these loans taken out using the government’s 5 per cent deposit scheme are inherently more risky. That’s also true, isn’t it?
Chalmers:
Well, we’ve gone out of our way to make sure that we’re implementing that policy in the most responsible way that we can. We believe it’s a responsible way to get those deposits down at the same time as we build more homes, and that’s really been the focus, is building more homes at the same time as we make those deposits more manageable, to get more first home buyers through the door and into a home of their own.
So we believe it’s a responsible way of going about it. It’s not our only housing policy. Overwhelmingly our housing policy is on building more homes, and there’s about 500 of them that I’ve just had a wander through in Bowen Hills in Brisbane, which are part of that effort.
Karvelas:
I just want to talk to you about AI. Have you just caved in to business demands on AI? There was a lot of talk of guardrails and legislation. Is this just about keeping business happy? I mean right now you’re trying to police social media, but it looks like on AI the government looks like it wants it to rip.
Chalmers:
Of course I don’t agree with the way that you’ve characterised that, Patricia. We’re all about maximising the benefits of artificial intelligence and minimising the risks, and I think that very good plan that Tim Ayres and Andrew Charlton released yesterday is all about making sure that we secure the opportunity, but also that people are safe, and that everybody benefits from what will be an absolute game‑changer in our economy.
I believe that we are charting a responsible middle path here. We’re attracting the investment, we’re making sure that we’re maximising the opportunity, but we’re not forgetting our responsibilities to people, especially to workers when it comes to this. And I think the plan that Tim and Sandy released yesterday reflects those objectives, making sure that our people, our businesses, our country, our communities are beneficiaries of this game‑changing development in our economy rather than victims.
Karvelas:
As you know, the Communications Minister has been talking about the social media ban, and also just the concept of Big Tech. Do you see Big Tech and the way it’s predatory on children, and that’s how she’s basically described it, as our equivalent of Big Tobacco?
Chalmers:
Look, I think this area is full of challenges, and people will choose their own ways to describe that. We work closely with all sectors of the economy. Clearly there’s an issue here that we’re addressing.
This is all about making sure that our kids are safe online. It’s a very, very important objective. Anika, Michelle before her, the Prime Minister, the Cabinet is very engaged on this in landing this really important reform. Because again, we want to make sure that as the pace of change in technology accelerates that people are safe, and people are beneficiaries of that rapidly accelerating technological change rather than fall further and further behind. And one of the ways that that’s most important to us is to make sure that we get kids off the screens and out and about playing sport and doing healthy things where they can be kept safe.
Karvelas:
Thanks so much for joining us, Treasurer.
Chalmers:
Thanks.