PATRICIA KARVELAS:
Treasurer, welcome back to Breakfast.
JIM CHALMERS:
Thanks for having me back on your show, Patricia.
KARVELAS:
In your speech you were warning that GDP growth figures due next week are expected to be weak. How weak?
CHALMERS:
Well, as you rightly said in your introduction, Patricia, I have a sense from all of this engagement that there's an assumption that there will be a soft landing in the big economies around the world, but that's not assured. We've seen Japan and the UK go into recession in recent months, and we've seen weak growth in a lot of countries around the world.
So the point that I've been making is we are not immune from that, and we're not complacent about that. We don't yet know what those December quarter National Accounts will say about GDP growth towards the end of last year, but we do know enough about the end of the year that markets expect growth in our economy to have been quite weak. So we've got a lot going for us: inflation's moderating even though people are still under pressure, we've got the return of real wages growth, we've got a budget in much better nick than what we inherited, but we do anticipate that growth in our economy will be quite weak.
KARVELAS:
Economists say the Australian economy may have contracted in December for the first time since the depths of the pandemic. Is that what you think has happened?
CHALMERS:
It remains to be seen and again we'll see next Wednesday what those figures tell us. But I've tried to be upfront with your listeners, but also in these engagements here and at home, to say that we understand that the inevitable consequence of higher interest rates and persistent inflation and global uncertainty means that we are expecting quite weak growth in our economy.
Inflation is still our major concern, but at some stage the balance of risks in our economy and in the global economy is going to shift from inflation to growth, and if and when that happens, we'll make sure that our budget settings and our economic policies reflect the economic conditions as well. We did that in the first two budgets, and we'll do that in the third.
KARVELAS:
Okay. You're saying at some point it will shift. Are we at real risk of a recession?
CHALMERS:
I don't like to engage in that kind of commentary. I mean certainly the Treasury forecast that we put out in the mid‑year budget update in December anticipated the economy to continue to grow, but really quite slowly, compared to the standards we've been accustomed to, and inevitably when you've got these higher interest rates in the system, the full effect of those still to be felt, you've got all this global uncertainty, you've conflicts in two parts of the world, and people have been under pressure, inevitably our economy will slow; we think it will slow quite considerably. It remains to be seen what those numbers say next Wednesday, but the Treasury forecast, the Treasury assumption is that we'll continue to grow but quite weakly.
KARVELAS:
And you say settings have to change to meet the economic circumstances, which is obviously, you know, fairly obvious. But are you in a situation where quite soon you're saying you might need to actually stimulate the economy?
CHALMERS:
No, what I'm saying is inflation's our major concern, but it's not our only concern. We need to make sure that as we do our best to ensure that inflation continues to moderate in our economy, we've had some really welcome and really encouraging progress on that front, but we're not there yet, we need to recognise as well that the impact of higher rates and global uncertainty and some of these other factors is weighing pretty heavily on our economy.
And so I think one of the reasons why our economic policies and our budget settings have been effective over the course of the first couple of budgets is we've done our best to really carefully calibrate our budget settings to the economic conditions. And the point that I made earlier today in Brazil was that the balance of risks are changing in our economy and in the global economy, and we need to make sure that our economic policies are responding to that.
KARVELAS:
Inflation is going down, but you're warning that there's a chance the global economy won't land softly. So that does mean that you think that the RBA needs to start cutting rates earlier?
CHALMERS:
Well, I'm not going to give that advice to the Reserve Bank for all the reasons that you and I have discussed previously.
KARVELAS:
Okay, but that's the logical conclusion, isn't it?
CHALMERS:
Well, there's other things that are important in this regard too. What the ABS showed with the most recent inflation data, and indeed earlier inflation data, is our efforts to take some of the edge off inflation are working: the energy rebates, cheaper early childhood education, rent assistance, and in other ways, are taking some of the sting out of inflation.
One of the reasons it's moderating in welcome and encouraging ways is because of our policy agenda working, and that gives us the confidence, I think, that we've done the right thing in the first two budgets, we'll do the right thing in the third budget as well, and when we put that budget together, we will recognise that inflation's the primary challenge in our economy but not the only challenge in our economy.
We're very focused on the fact that the UK and Japan, two big economies, have gone into recession towards the end of last year, and a lot of other countries have had especially weak growth as well. We're not immune from that, we're not complacent about that, we expect growth in our economy to be quite weak, and as we deal with this inflation challenge we also need to deal with the fact that people have been under pressure, and that's had consequences for growth in our economy as well.
KARVELAS:
So how agile do you have to be in constructing the May Budget, Treasurer, if things are changing this quickly?
CHALMERS:
You always need to be agile, and you always need to make sure that your settings are as calibrated and as methodical as they can be in the economic conditions that you confront ‑
KARVELAS:
So does it mean more cost‑of‑living relief on the table then, given the economic outlook?
CHALMERS:
We've made it pretty clear, including with our cost‑of‑living tax cuts, that where we can make a meaningful difference to easing some of the pressures that people are under in a responsible way that doesn't add to inflation, we've been in the cart for that, and we would say that we'll consider that in the context of the May Budget as well if we can afford to do that, and if there's a case to do that, to provide additional cost‑of‑living help.
But our priority obviously in the last couple of months has been, or the last month, has been to ensure that we're rolling out these tax cuts for every Australian taxpayer, and bigger tax cuts for more people to deal with these cost‑of‑living pressures. They'll come in on 1 July, and I think they'll make a meaningful difference when they do.
KARVELAS:
Treasurer, to another issue, the Coalition is expressing serious concerns with your proposed Reserve Bank of Australia reform. Are you willing to negotiate with the Greens?
CHALMERS:
It's not my preference, but what I've tried to do all along is to make this above politics. I've sought bipartisanship all along; you and I have talked about it on a number of occasions. I'm disappointed, but I'm not surprised to see that the Liberals and Greens are teaming up again and they're playing political games with the central bank.
What I've tried to do and what I have done is consult with the Opposition, briefed the Shadow Treasurer on multiple occasions for more than a year now, but in order for us to land a sensible outcome here and bed down the recommendations of the Review, we need to know that he speaks for the Opposition.
But in the last week we've had three very different views from three different people in the Liberal Party, and that concerns me, because it tells me that the Shadow Treasurer doesn't speak with any authority in his own party room or in his own Shadow Cabinet when it comes to these important issues.
KARVELAS:
It looks like that you may have to deal with the Greens. They want the central bank to have a new objective that addresses climate and ecosystem breakdowns. Are you open to that?
CHALMERS:
That's not my preference, and it's not something that I've been prepared to negotiate on. What I'm trying to do, and I'll keep trying to do it, frankly, Patricia, is I'm looking for a good outcome; I'm not looking here for some kind of political win, I've never seen it in political terms, I want to bed down the recommendations of the Review. They will enhance the independence of the bank, they'll strengthen it as an institution, they'll give it the tools to make well‑considered decisions about interest rates and other matters into the future.
So I'll keep trying to find that bipartisan landing point. My preference is to do that with Angus Taylor, and in order for that to happen, I need to know that he speaks with some authority on these matters. He's never raised, for example, the issue around the parliamentary override in the parliament, in all of the consultation that we've done for more than a year now. So we need to know what the Liberal Party's position is; that's the most important thing, far more important than what the Greens think. Once we know what the Liberal Party's position is, we can work out whether we can get to a sensible landing point.
KARVELAS:
Okay. I want to move to the by‑election that looms on the weekend. Of course your tax cut changes to Stage 3 are part of that story. Some believe that in fact it's a referendum on those tax cuts. If you lose the seat of Dunkley, will it be a verdict on those tax cuts?
CHALMERS:
I don't think so, Patricia. I mean this really boils down to the choice in Dunkley. Labor is trying to make sure that people earn more and keep more of what they earn, and the Liberals want people to work longer for less. That's really the choice that people have got in Dunkley.
I think it will be difficult there, and I think it will be really close, because by‑elections are tough on incumbents usually, and it's made harder by this influx of rabid right‑wing money that we've seen with the Advance campaign.
KARVELAS:
You call it rabid right‑wing money, but just like, you know, groups like Get Up have campaigned around left‑leaning candidates including Labor candidates of course, also spend money campaigning for Labor candidates. Isn't it just sort of standard practice in politics?
CHALMERS:
No, I think the sorts of advertising that we've seen from that group goes well beyond the acceptable norms of sensible Australian politics. We don't want to see our politics go down that path; we don't want to see this kind of money decide elections and by‑elections, and I say to the people of Dunkley, the best way to honour Peta Murphy and her legacy is to vote for her friend, Jodie Belyea. And I say to the people of Dunkley, don't reward Peter Dutton's nasty negativity or his lack of alternatives. They've got an important choice to make, tax will be part of that, but not the only part of that. We've got a very positive reaction on the tax changes around Australia –
KARVELAS:
But it will be part of it, right?
CHALMERS:
We've had a really positive reaction to our tax changes right around Australia. Our tax changes aren't about Dunkley or Dickson or Farrer or Forde they're about a tax cut for every taxpayer, and a bigger tax cut for people to help with the cost of living. Clearly people will factor that into their decision, it won't be the only thing that matters in Dunkley, but we made this change because we wanted to give every taxpayer a tax cut, not just the taxpayers in Dunkley.
KARVELAS:
Just finally on another story, not in the economic space, or the sort of domestic political space, former treasurer and ex‑ambassador representing Australia to the United States, Joe Hockey, has said he wants the identity of the politician who betrayed Australia to foreign spies to be made public because it smears anyone who served for their country. Has he got a point?
CHALMERS:
Look, I didn't hear Joe Hockey's interview, but I think this is a matter for ASIO, I respect their advice, and I don't intend to second‑guess it. I know Mike Burgess, I work with Mike Burgess, and I know that he wouldn't have said this without good reason, and he wouldn't have couched it this way if he didn't think that was absolutely necessary.
KARVELAS:
But doesn't it make us doubt all politicians who've served because we don't know who it is?
CHALMERS:
Well, not necessarily, but I guess I can only repeat what I said a moment ago; he wouldn't have done it this way if he didn't think it was necessary to do it this way. Mike Burgess is an absolute professional, and I respect the advice we get from him and from ASIO. This is ultimately a matter for them, how they publicise their important work.
KARVELAS:
Thank you so much for joining us.
CHALMERS:
Thanks very much.