PATRICIA KARVELAS:
The Prime Minister is now in China. I understand your time as acting prime minister has literally just ended but let's go to the China visit. What is your benchmark for success from this trip?
JIM CHALMERS:
Well Patricia, a bit like yourself today, I sub in for short but enthusiastic bursts off the bench, and that's what we've seen in the last day or so. This is a really important visit by Prime Minister Albanese. It's the first official visit by a prime minister into China since 2016. I think it recognises that a stable relationship is in the interests of both countries. Now, we are clear-eyed about the complexities and the challenges of managing this relationship but we give ourselves the best chance of prospering together if we engage with one another. And we've already seen some of the fruits of that effort, something like 95 per cent of the trade restrictions by dollar value have been lifted. That's good for our businesses, our exporters and our workers, and that's why it's so important that this engagement has been happening for some time and why it's so important that this official visit is taking place this week.
KARVELAS:
But for it to be a real success, do those restrictions on beef and lobster need to be removed by the end of the year?
CHALMERS:
We've made no secret of the fact that we'd like to see the trade restrictions lifted and something like 95 per cent of them by dollar value have been lifted. That's a very good thing. I pay tribute to the PM and Minister Wong and Minister Farrell and others for getting those kinds of outcomes which are good for our local economy, our local workers and businesses and exporters, as I said. That's been good progress, we want to see the trade restrictions lifted, but that's not the primary purpose of this meeting this week. This week is part of a bigger and broader effort to stabilise a really important economic relationship and we've seen some of the fruits of that already.
KARVELAS:
Let's talk about Tuesday's Reserve Bank meeting. You said that the jump in inflation we saw in those latest figures does not materially change the inflation outlook going forward. So if Michele Bullock and the Reserve Bank raises interest rates on Tuesday, have they misread the data?
CHALMERS:
That's not how I'd characterise it, Patricia. I've said before and I'm happy to repeat again today, the Reserve Bank has its own job to do, it's an important job, they'll do that independently. Whatever their decision on Tuesday, they'll have opportunities to explain it publicly. I'm focused on my job, which is to get the Budget in much better nick, to roll out billions of dollars of cost-of-living help in a way that takes the edge off inflation rather than add to it, and invest in energy and housing and skills. And what we've seen in the last couple of weeks, whether it's the International Monetary Fund saying that our budget settings are helping rather than hampering the fight against inflation, whether it's Governor Bullock saying that our budget strategy is very helpful and very positive, a good budget strategy for the times, or whether it's the Australian Bureau of Statistics which said that our policies actually took half a percentage point off inflation in that most recent data. So I'm focused on my job, the Reserve Bank has got its own job to do. They'll do that independently and appropriately, and they'll meet on Tuesday.
KARVELAS:
Aren't you intervening into their job by talking about the material changes and saying there's no material changes? Are you jawboning the RBA?
CHALMERS:
Of course not, Patricia, and I'm pleased you asked me about that because I've seen some frankly ridiculous commentary about this in recent days. By the bizarre logic of some of that commentary, the Treasurer of Australia is not allowed to comment on the Treasury's forecasts for inflation on the day that the inflation figures come out – that is plainly and frankly ridiculous.
KARVELAS:
But if you're concluding that there's no material change, aren't you then saying that you don't think there should be a change in rates? Because if there's no material change, why should there be a change in rates?
CHALMERS:
I'm referring in a factual way on the day of the inflation figures, since then and I'm happy to repeat again today, that the Treasury as a consequence of that inflation data that we received not that long ago hasn't changed its estimation or its expectation of when inflation will return back to the target band. I said that then but I also said on the day and I've said since and I'm happy to say again today, it's entirely appropriate for the Reserve Bank to come to their own conclusions on that independently. No doubt they have been working through the inflation data and weighing that up against the evidence that our economy is slowing and some of this global uncertainty and they will make their decision independently. They've got a job to do. I'm focused on my job.
KARVELAS:
Okay, I've got a question on your job. The IMF has also urged governments, particularly the states, to delay or to axe infrastructure spending as a way of taking some heat out of the economy. Do you back that? Do you think that's what should happen?
CHALMERS:
The IMF, I think, has made an important point, which is that we need to roll out our infrastructure investment in a way that gets us value for money, but also in a more measured and coordinated way, and I think that's a point well made. And this is one of the motivations for the infrastructure review that my colleague Catherine King has been undertaking. We are concerned that when the number of projects went from something like 150 projects to about 800 projects announced by our predecessors, there was a lot of announcement but a bit short on delivery. And because of the pressures in the labour market, and the pressures on building costs and other costs, we have seen big blowouts in the program. I think the independent review identified something like $33 billion in blowouts in cost. So of course, that is a concern to us.
KARVELAS:
But you also think there should be a pulling back of infrastructure delays, even axing some projects at the state level to take the heat away from inflation. Is that a direct link that you see?
CHALMERS:
Yes, I do, Patricia. I do think we're going to need to make some difficult decisions about the infrastructure pipeline, which factors in those $33 billion of blowouts from projects announced by our predecessors and which factors in our inflation challenge. I do think we need to be up‑front about that and the work that Catherine is doing engaging with the states is to work out how we get maximum value for money, how we get the right infrastructure for our people and for their economy, without putting additional upward pressure on inflation. That is a key motivation for this infrastructure review that we will make public before long. And so I think in that regard, the comments from the International Monetary Fund are important, they are welcome, and they are consistent with the way that we are coming up this challenge.
KARVELAS:
We talked about the Reserve Bank on Tuesday. Of course they have an all-important meeting on Melbourne Cup day that everyone will be watching. You still actually need to appoint a Deputy Governor of the RBA. Where are you at with that and has Michele Bullock, your new governor who was the deputy, been involved in those discussions?
CHALMERS:
Michele Bullock has been deeply involved in our work to appoint a new Deputy Governor of the Reserve Bank. I'm hoping to announce the new deputy governor before the meeting of the Reserve Bank on 5 December. So after the meeting on Tuesday, but before the meeting in December, I hope to announce the new Deputy Governor of the Reserve Bank. We have been interviewing a number of candidates from the shortlist – some internal some external, some from Australia, some from overseas.
KARVELAS:
Are there any names you can share with us?
CHALMERS:
I'm not prepared to share any names today. We've got some more due diligence to do and I want to make sure that I take it to the Cabinet colleagues in the course of the next month, but we're choosing between internal and external, Australian and overseas. We have been consulting very, very closely with Michele Bullock because we need to make sure that the deputy is someone who can work closely with her but also complement some of these other appointments that she will make: the Assistant Governor Economic, the Chief Operating Officer.
KARVELAS:
But you've got somebody in mind?
CHALMERS:
Obviously we're narrowing down a shortlist. It's quite short, Patricia, the short list, but we've got some more due diligence to do and I want to take it to the Cabinet colleagues, which is appropriate. But I hope to announce the new Deputy Governor before the Reserve Bank meets early in December.
KARVELAS:
Have you finalised the RBA legislation? And I'm wondering when it will be tabled and whether you will have in that legislation a full execution of all the recommendations?
CHALMERS:
I'll be introducing the Reserve Bank Review legislation in the last week of November. It has come after a long period of consultation with the Reserve Bank, with the Opposition and with others. And there's been I think a really welcome public debate about the recommendations of the review that I released early in April. That's been a good thing. And so we've taken into consideration all of that feedback, all of that consultation and collaboration. And what people can expect to see in the RBA Review legislation is keeping faith with the recommendations of the review but there have been a couple of instances where after that consultation and collaboration, we think we've got a better way to land the spirit of the review. One example I'm prepared to share with you, Patricia, is you will recall in the RBA Review, there was a conversation about a line‑ball call about who chairs the new Governance Board of the Reserve Bank. The line‑ball call according to those reviewers was between the Governor and an external chair. I intend to legislate the Governor chairing that new Governance Board, at least for the first five years until we review it and make sure it's working as we intended. That's been one example, a welcome example, of where the consultation has landed a position, which recognises the review said it was a line‑ball call. We'll go with the Governor in the first instance –
KARVELAS:
Why, though? What's the rationale? Why does the Governor need to chair that board?
CHALMERS:
We think given that there is a big change management program that we're asking the Reserve Bank to do, that it is appropriate, at least initially, for the Governor to chair the three boards – Payments Board, the Monetary Policy Board and the Governance Board. We recognise that the reviewers said it was a line‑ball call, there were good arguments in both directions. We've done the consultation, and we've landed here. My interest here and my objective here is to land this change management program at the Reserve Bank. I'm confident that Governor Bullock will help us do that. And that's why at least initially, she will chair the three boards.
KARVELAS:
And was it Michele Bullock who asked for that. Has she been lobbying – or lobbying is too strong a word – but asking to chair that board?
CHALMERS:
I think lobbying is too strong a word. But we have had really a heap of conversations. I talk with Michele Bullock I think at least weekly. I met with her in person again last week. And the Reserve Bank has a view, the Opposition has a view too and I welcome their input, and there's been a good public debate about it as well. We think this lands the best combination, in order to implement this change management program at the Reserve Bank. This Reserve Bank Review legislation, which I'll introduce at the end of November, this comes really as part of a flurry of legislative activity in our portfolio: legislating the Reserve Bank Review, legislating the objective of super, a fairer approach to superannuation tax concessions, the first tranche of the PRRT legislation, the first tranche of the response to what happened at PwC to be legislated. The pace of legislative activity in the Treasury portfolio is actually quickening rather than slowing as we approach Christmas, and we've also obviously got the mid-year Budget update. So a lot of work going on but this Reserve Bank Review implementation is a big, big priority for the government.
KARVELAS:
Treasurer, I just want to take you to a very significant speech you delivered this week, where you said we look like we might not be on track to meet our net zero ambitions and that we need more intervention and more investment from industry. You flagged more government interventions, what does that intervention look like? And might you look at altering the safeguard mechanism?
CHALMERS:
What I tried to do during the week, Patricia, is to say that we've got these ambitious but achievable targets when it comes to the energy transformation, and we've got vast industrial and economic and employment opportunities, which flow from our goals to be a renewable energy superpower. And we are making good progress across both of those fronts. But from my perspective, as Treasurer, what I've tried to say is that what we need to do is not just to attract and commit more private and more public capital, but we need to be able to absorb and deploy that investment in the most efficient and effective way. And so some of the things that we need to consider as we work towards the next Budget, is to make sure we get the skills base, the technological base, the relationship with the states right, as well. And so I identified in that speech in conjunction with the relevant ministers, the big opportunities we've got in areas like critical minerals, green steel, hydrogen, battery manufacturing.
KARVELAS:
But is it about picking winners, ultimately? Is that the way that works if a government chooses what to invest in rather than having a mechanism that makes those decisions?
CHALMERS:
The mechanism is to apply what we would consider to be a new set of net zero industry policy tests around supply chains and national security and value for money, and what's best able to deliver our emissions reductions goals. And when you do that, some of these comparative advantages that Australia has become quite obvious, and I've just rattled through them. Now the incentives and the way that we work with the private sector, who will be the primary driver, the way that we work with the states that might be different for each of those four technologies that I’ve identified. But what I tried to do in that speech is to say that this will be a focus between now and the May Budget – attracting and committing capital is part of it, making sure we can deploy it is part of that as well. The energy transformation is absolutely central to our goals in this defining decade. We've got to get it right. We've made good progress and we've got a bit more to do.
KARVELAS:
Treasurer, thanks for joining Insiders.