PATRICIA KARVELAS:
Many of you may be waiting very nervously as the Reserve Bank prepares to make its latest decision on whether to hold or to raise rates. While inflation has dropped even more than analysts expected, it's still well above the central bank's target range of two to three per cent. And with new figures showing household savings are dropping and nearly 150,000 households are sitting at the edge of this mortgage cliff, how much more can people take? Jim Chalmers is the Treasurer and he's my guest this morning. Treasurer, welcome.
JIM CHALMERS:
Thanks very much, Patricia.
KARVELAS:
There's a lot on the line here ‑ nearly 150,000 households will come off fixed rates over the next three months. What happens if they can't make these repayments?
CHALMERS:
Well, a couple of things about that, Patricia. First of all, I've spoken to the bank CEOs about this challenge and the advice that they have for customers and the advice that I have for customers is if you think that you will be in trouble because of changes in your loan, whether it's coming off a fixed rate or whether it's the impact of these rate rises, the best thing to do is to engage with your bank as soon as possible. The banks have ways that they will try and accommodate you if they can to try and recognise that people are under substantial pressure right now. Each of the banks have a process for working out what they can do for people ‑ if these rate rises that we've seen since before the election last year and continuing after, combined with people carrying on fixed rates on the variable rates ‑ if there's something that the bank can do to make it a little bit easier, they're prepared to have that conversation with customers. The second point is this has been a challenge ‑ coming off fixed rates on to variables ‑ has been a challenge for a large chunk of this year. The biggest chunk of people coming off fixed onto variable was last quarter, so it's peaked. Something like 19 per cent of people with a fixed loan last quarter came off. This quarter, it's something like 17 per cent on the latest numbers that we have, so still a substantial number of people but it peaked earlier in the year. A lot of people are under pressure, whether it's coming off a fixed rate onto a variable, whether it's all of the other cost‑of‑living pressures in the system. We know that people are under the pump but as you said rightly in your introduction, we are starting to make some welcome progress in this fight against inflation which has been pushing up interest rates.
KARVELAS:
Okay and there are people who are having to sell their homes too. There are figures that demonstrate that in recent times, we're seeing people with relatively new loans having to sell. What is your understanding of the rates of people who are having to actually sell their homes?
CHALMERS:
There are instances of that, of course, and that is one of the consequences of this tightening of interest rates that has been occurring since May last year and it is putting people under substantial pressure, we understand that ‑
KARVELAS:
Do you expect more people will have to do that?
CHALMERS:
It remains to be seen. Certainly the interest rate rises which are already in the system ‑ as I said, beginning in May last year ‑ interest rates take a little while to flow through in their full impact and so obviously a lot of Australians with a mortgage are bracing for that. The Reserve Bank, as we know, takes these decisions independently. They'll take a decision today and they'll announce that publicly at 2.30. Really my focus and the government's number one priority is to roll out these billions of dollars in cost‑of‑living help that we've budgeted for in a responsible way and in a way that takes the edge off these cost‑of‑living pressures rather than adding to them, makes the job of the independent Reserve Bank easier rather than harder ‑ that's our focus and that's our responsibility.
KARVELAS:
So Treasurer can Australians cope with another rate rise today?
CHALMERS:
Well, I'm wary of getting in ahead of a decision taken independently by the Reserve Bank for all of the reasons ‑
KARVELAS:
Sure, that's why I asked do you think they could cope with a rate rise?
CHALMERS:
I understand but I am especially careful about pre‑empting or second guessing decisions taken by the Reserve Bank. I have my own job to do. Australians are under the pump. We are seeing the impact of the rate rises which are already in the system. We are making welcome progress in the fight against inflation but we're not there yet and the Reserve Bank will weigh up the fact that inflation is moderating, we had a soft retail trade figure last week ‑ they will weigh that all up in the usual way and they'll come to a decision. Whether rates go up or not today, Australians are still under the pump, we recognise that ‑ that's why the government's main priority is rolling out these billions of dollars in cost‑of‑living help.
KARVELAS:
Sure, I understand that decision isn't yours and it shouldn't be yours, that's not the way our system works, the Reserve Bank is independent, but I'm asking you as Treasurer ‑ do you think people can handle another rate rise?
CHALMERS:
Well, I put it this way, Patricia, the rate rises which are already in the system have made life harder for people, that's self evident. I've said probably the last half a dozen times that you and I have spoken that we understand that whether it's inflation which has been higher than we'd like for longer than we'd like, whether it is these interest rate rises since before the election last year, whether it's the global economic uncertainty, it's putting people under pressure and slowing our economy already. We're already seeing the impact of the rate rises which are in the system, we're seeing that in a heap of data that we've been getting in the last few weeks or months, the Reserve Bank will weigh that up and they'll come to a decision independently.
KARVELAS:
Looking at your housing policy which is before the parliament, you achieved a $20 billion surplus in the last financial year but you won't stump up more money for Australians living rough and in dangerous situations to get the Greens over the line. Why?
CHALMERS:
That's not true, Patricia ‑ we provided $2 billion extra out of the last financial year's surplus for public housing and we did that deliberately because we could do that in a responsible way ‑ we could provide this accelerator for social housing to build more homes. Our objective here is to build more homes and that's why it beggars belief that the Greens are trying to block that in the Senate. Whether it's the $2 billion extra that we kicked in in June for this important objective, whether it's the Housing Australia Future Fund, whether it's our other changes in housing in our housing agenda, whether it's the biggest increase in rent assistance in 30 years ‑ we've got a big, broad ambitious housing agenda and we are pouring billions of dollars into it including an extra $2 billion out of last year's Budget to build more public housing in this country.
KARVELAS:
The Greens say the party is willing to consider any number between $500 million and $2.5 billion in additional spending. You do have a surplus and there is ‑ which you identify too ‑ a great need in the community, no one disputes that. So why not offer something higher to get their support?
CHALMERS:
Well, first of all, we've been engaged on this for a long time now and we have moved considerably in these negotiations. There have been a number of changes that we've made in consultation with the Senate crossbench, not just the Greens but more broadly as well as part of our broad and ambitious housing agenda and as I said, we are investing billions of new dollars into building more homes in this country because we've got a desperate shortage and so the point that I would make to the Greens, and to the Coalition, frankly, is it's time to end the ambit claims and the political games in the Senate and to build more homes for people who desperately need it but there's a second point here, Patricia, and I'm pleased you've given me the opportunity to explain it. The surplus for last year was last year ‑ it's no more possible to spend more out of last year's surplus than it is to spend out of the 2007 surplus. The surplus for last year which will be $20 billion or just north of that is an important part of the fight against inflation but it hasn't come at the cost or the expense of helping people with cost of living ‑ we've been able to do both of those things and we've been able to commit $2 billion to build more social housing but it's not possible now in the following financial year to spend down from the previous year's surplus, and that gets lost too frequently in this conversation. People say all the time, what are we going to do with that $20 billion ‑ that $20 billion is now banked. It is paying down some of the trillion dollars of debt that we inherited from the Liberal Party. It's no more possible to spend that than it would be to spend surpluses from 15 or 20 years ago ‑ that's an important thing that people need to recognize. The current year's Budget is in deficit and there are deficits in the following years. The pressures on the Budget are intensifying rather than easing despite the really good progress that we've made so far on Budget repair.
KARVELAS:
Okay, but do you accept that you will need to do more than what you've already offered given there is a housing crisis in this country?
CHALMERS:
I think it's time for anyone in this Senate who genuinely wants to build more houses to vote for it. The time has come for people to stop pretending that they want more homes and to actually vote for more homes. It's time for people to put fighting for vulnerable people ahead of fighting the Labor Party.
KARVELAS:
But you're also fighting the Greens, you could make the same argument.
CHALMERS:
We're trying to build more social and affordable homes, Patricia.
KARVELAS:
You could build even more.
CHALMERS:
We're trying to build 30,000 social and affordable homes including for women and kids fleeing domestic violence, that's our objective.
KARVELAS:
Okay. So is there any circumstances you're willing to go back to the negotiating table with the Greens and consider a higher amount of spending on housing?
CHALMERS:
Well, we've been in discussions not just with the Greens but with the Senate crossbench and others for months now and if you look at the list of proposals and suggestions that we got from the Senate crossbench some time ago, there's been considerable movement on a large number of them, including ‑
KARVELAS:
I think that's right but is there more to come?
CHALMERS:
We want the package that will be before the Senate again, we want that to be passed so that we can build more homes for people and we want to put the outcome ‑ which is more public housing, and more affordable housing ‑ ahead of the politics and we want everyone in the Senate to do the same thing.
KARVELAS:
Okay, there's another big issue which is another sticking point it seems with the Greens and the crossbench. They are going to refuse to back your changes to the Petroleum Resource Rent Tax, that's the PRRT. It was in the Budget, you raise the revenue, but you went with a lower option in terms of how much money you're generating. Will you consider amending it?
CHALMERS:
Well, first of all, it's not a surprise to hear the Greens party put forward a different proposal ‑ that's entirely within their rights and it's entirely expected but we intend to legislate the change that we announced in the Budget. The change that we announced in the Budget was the product of a methodical and considered process that ended up with three recommendations from the Treasury or three options from the Treasury and we chose the option that gives the biggest return to Australians sooner, out of the three options that were presented and in doing so, we did recognise that we need to ensure that we can supply gas to our people and we can honour our international obligations. We think that gas has a role to play in the net zero transformation, I think that's really clear. For all of us who are passionate about the net zero transformation and the vast economic and industrial opportunities of cleaner and cheaper energy, we have to recognise as well that for the time being, gas will have a role to play in that and so what we've been able to do here is to get more tax from offshore LNG sooner to help fund our priorities ‑ whether it's bulk billing in Medicare or cost‑of‑living help for Australians doing it tough ‑ we've found a way to do that but in the most responsible and methodical way consistent with the Treasury advice.
KARVELAS:
Okay but the critique is that it's not enough so it leaves you with the Coalition. So given you're getting pushed from the Greens and the crossbench to go further, have you confirmed with the Coalition that they will support your changes?
CHALMERS:
Well they've indicated that they will but obviously, we take no outcome in the Senate for granted until it happens. I think this does, frankly, put pressure on Peter Dutton and Angus Taylor and the Coalition to vote for an extra $2.4 billion in revenue so that the LNG offshore producers pay more tax sooner ‑ that's the opportunity before the Senate. We're not surprised that the Greens would like us to go further, we expect the Coalition's support in the Senate, that's been the indication but we'll wait and see.
KARVELAS:
Just on another issue before I let you go Treasurer. Last night Peter Dutton said he doesn't believe he received a briefing five years ago from the Australian Federal Police the AFP which says it did inform the then Home Affairs Minister about an investigation into the director of a company who was accused of bribing foreign officials. Now there's no suggestion ‑ can I say ‑ Peter Dutton did anything wrong. Does his defence stack up to you?
CHALMERS:
Well, this whole matter is in the capable hands of my colleague, Clare O'Neil and she's made an announcement about how we get to the bottom of this, it's obviously crucial that we get to the bottom of what's happened here and we do that in a considered way. That's the process that Clare has put in place and we'll see what it turns up.
KARVELAS:
Thank you so much for joining us, Treasurer.
CHALMERS:
Thanks, Patricia.