PATRICIA KARVELAS:
Jim Chalmers is the federal Treasurer and he joins us on Breakfast live in the studio, in fact we’re eyeballing each other. Welcome, Treasurer.
JIM CHALMERS:
Thanks, Patricia.
KARVELAS:
Households have been flogged by inflation and rate rises. Will these cuts and bill relief be enough to get people back ahead?
CHALMERS:
Well, they’ll certainly help, and one of the reasons why we’ve funded all of this cost‑of‑living help which comes in from today is because we understand people are under pressure and we’re responding to that pressure, easing some of that pressure with a tax cut for every taxpayer and energy bill relief for every household, a pay rise for millions of workers and cheaper medicines and extra paid parental leave.
This is substantial and meaningful cost‑of‑living help, but it’s also responsible in the context of our efforts to get the budget in better nick and fight inflation.
KARVELAS:
All of that, but of course we also have this inflation which is persistent and sticky and here with us. Are you worried that the tax cuts may be used to stimulate the economy, which is not what we need right now?
CHALMERS:
No, I think the tax cuts are coming in at precisely the right time, and it’s important to remember as well that not every dollar of a year’s worth of tax cuts hit on the first day. They begin today. People will start to see it in their pay packets this month, ideally in the next couple of weeks.
But not every dollar of it hits the economy at once. I think that point is sometimes lost when people think about the inflationary or non‑inflationary impact of cost‑of‑living policies, that’s the first point.
In terms of inflation more broadly, of course inflation is higher than anyone would like to see it, but it’s much lower than when we came to office, and we know from the ABS and from the competition watchdog that our policies in areas like energy bill relief, cheaper early childhood education, rent assistance, all of these things are helping, not harming, the fight against inflation.
KARVELAS:
And you said Australia could see inflation back into that target band of between 2 and 3 per cent by the end of the year. Do you still stand by that? Could we really get between 2 and 3 per cent this year?
CHALMERS:
Well, that’s the Treasury’s expectation, and obviously there’s always an element of uncertainty when it comes to forecasting, but there hasn’t been anything which has substantially changed the Treasury view or my view. We are confident about the future trajectory of inflation, but we’re not complacent about it. We’re focused on where we can make a difference.
The budgets, for example, aren’t the primary determinant of prices in our economy, that’s another point that is sometimes lost, but we can be helpful. Two surpluses, the Governor of the Reserve Bank has said are helping in the fight against inflation, the way we’ve designed our cost‑of‑living help in the most responsible way is also helping, and so we are doing our bit to get inflation back to band as soon as we can. The Treasury expects that that would be earlier than what we might have thought last year, and perhaps even by the end of the year.
KARVELAS:
We’ve seen inflation rise in Canada and in parts of Europe. Is it inevitable that we’ll see more here and the RBA will have to intervene?
CHALMERS:
I don’t think it’s inevitable, no. But what we’ve seen around the world, and you’re right to pick up on it, is our experience here in Australia where the last mile as people call it, is more difficult than the earlier progress, we’ve seen that around the world. The difference is our inflation peaked lower and later than most countries that we compare ourselves with, but the shape of the trajectory has been really similar, and the Reserve Bank Governor and the Deputy Governor of the Reserve Bank have made that point as well.
We saw in the US inflation went up a couple of times this year before it went back down again, Canada as you rightly point out, Europe as you rightly point out, inflation is rising again.
And so, as I said before, we can’t be complacent about the future trajectory of inflation, but we’re confident that we’re doing what we can.
KARVELAS:
Do you agree with the Governor’s language that the narrow path is now narrower?
CHALMERS:
I’ve always accepted that the job here, which is to get on top of inflation and provide cost‑of‑living relief for people doing it tough and repair the budget without smashing the economy, these are difficult balances to strike and –
KARVELAS:
Are we currently on a tightrope?
CHALMERS:
I wouldn’t describe it like that.
KARVELAS:
How would you describe it?
CHALMERS:
Well, I’ve described it in my own way in the past. I’ve said we’re looking for a soft landing on a narrow runway, and –
KARVELAS:
It’s so narrow now though.
CHALMERS:
Well, I mean we’ve seen around the world, policy makers around the world, whether they’re central bank governors or people in jobs like mine, we’ve had to weigh up all the pressures on the economy. I think a really important point that the Governor has made and the Deputy Governor made last week is that they weigh up a whole range of factors – the labour market, growth in the economy, all of this other data, and we’ll get more data this week about retail trade and the like, they weigh all of that up, not just one number or another number, but we’re all trying to do the same thing which is to get on top of this inflation challenge without smashing the economy. I’m confident from our point of view as a government that we’ve got that balance broadly right.
KARVELAS:
Let me put this to you – what are our chances of a recession?
CHALMERS:
Well, it’s not our expectation, and I don’t put percentages on these sorts of questions, you know that, you’ve asked me –
KARVELAS:
Yes, I do know that.
CHALMERS:
– questions like this for a very long time, Patricia. It’s not our expectation that our economy will go backwards but we’ve already seen it’s really quite weak. Growth in the first 3 months of the year was basically flat.
We know that discretionary spending has been absolutely hammered by higher interest rates. We know that household savings ratios are down, the retail sector has been weak, the labour market is softening around the edges, and that’s because of the impact of the rate rises which are already in the system combined with a lot of global economic uncertainty.
KARVELAS:
Treasurer, the Nine papers have published research from The Australian National University Centre for Social Research and Methods showing average tax rates for 80 per cent of taxpayers will go back to their current levels or even higher by 2027. Are you concerned about that trajectory?
CHALMERS:
I’m glad you asked me about that, Patricia. I mean what we’re doing today, and one of the reasons why I made the changes with the Prime Minister earlier this year to the tax cuts, was because we want to get those average tax rates down.
Now it’s important to remember, the highest they’ve been in the last 35 years or was actually under John Howard, about 26 per cent. Right now they’re 25.6 per cent. After these changes, we’re talking about 24.1 per cent in the coming year, and that is a better outcome than the old stage 3 tax cuts that we replaced.
KARVELAS:
But you’re not refuting the ANU’s research, are you?
CHALMERS:
Well, since I read the paper an hour ago, I haven’t gone through and made sure they’ve carried the one and got all the maths right. The point that I’m making is we’re getting average tax rates down, we’re lifting 2 thresholds and we’re cutting 2 rates – that is tax reform and meaningful tax reform for every Australian taxpayer, not just some, which is what would have happened had we not made the change.
There will always be people who want more tax reform, I understand that, that’s a healthy feature of our national economic conversation but what’s happening today is those average tax rates are coming down because of our efforts.
KARVELAS:
Treasurer, I want to change the topic and I have deliberately because I know our listeners are very concerned about the economy and their cost of living, really tried to focus on that. But Senator Fatima Payman crossed the floor and she said she’d do it again. She’s been indefinitely suspended from caucus, but she hasn’t been expelled from the party. Why?
CHALMERS:
Look, I think that the decision taken by the leadership group yesterday was the right one, and that’s because I believe as a Labor person that we get more done and make more progress collectively than we do individually, and you’re right in the tone of your question and I appreciate it, is that my focus is not typically on internal issues like these, as important as they are – I’m focused on cost of living and inflation and the economy and all the things you’ve asked me about in the first part of this interview. So I haven’t had a big focus on it, but I think the decision that was taken was the right one, and that’s because we believe in getting outcomes collectively, not individually, and I think that should be the focus. I say that in a respectful way. I don’t –
KARVELAS:
But is this a significant rule change for Labor, because by choosing not to expel her, this sets a new benchmark. I’ve written a column on this on the ABC News today, I’ve made a lot of calls. This is a new standard.
CHALMERS:
Well, I’ve got to be frank with you, Patricia, and say that I don’t spend a lot of time thinking about the Labor Party’s caucus rules. They’re important and I don’t seek for one second to diminish what’s happened in the last few days. I support the decision that the leaders have taken. I respect my colleagues and I believe that we make more progress when we go together, not individually. That’s my view.
KARVELAS:
Dozens of Islamic and Muslim organisations have come out this morning supporting Senator Payman. Do you worry that this move may ostracise Arab and Muslim voters?
CHALMERS:
I don’t think about it in electoral terms but I do think about and I do care about the views of the Muslim community. I represent a big Muslim community in my part of the world and I do that proudly, and I engage with them enthusiastically and frequently and I understand the pressures that they feel – that we all feel – about these horrific events in the Middle East and so I listen respectfully to them and I engage enthusiastically with them and I see all of our jobs is to try and work out how we can bring the communities together around some incredibly difficult issues and so I see that as an important part of my job locally and nationally.
KARVELAS:
I want to ask you just a couple of questions again back on your portfolio as Treasurer. Later this week the Senate inquiry into ASIC will hand down what’s expected to be a damning report into the performance and culture of that corporate regulator. Is ASIC still a tough cop on the beat?
CHALMERS:
I believe so, and I meet with Joe Longo and his colleagues from time to time, I met with them on Friday actually about some of the issues around making sure that ASIC is its best version of itself. I wasn’t surprised to hear earlier on your program that this committee report that comes out later in the week hasn’t been sighted apparently by the other committee members apart from Senator Bragg – that’s consistent with how he approaches these things, it’s always about him and not about ASIC or the economy or the regulator.
KARVELAS:
But if he’s got good ideas, will you take them on?
CHALMERS:
Well, let’s see what it says. Typically it’s a heavily partisan and heavily personal effort rather than a genuine effort to get to the bottom of issues in the regulators. I think people have seen I’ve got a willingness to renovate and modernise our regulators to make sure they’re the best versions of themselves. We’ll see what the committee report says later in the week.
KARVELAS:
ASIC raises $1.8 billion a year through fines and fees but its operating budget is only 500 million. You’ve given them an extra 200 million over 4 years for one‑off costs. We spoke to our investigative reporter Adele Ferguson who knows a little bit about this, you’d agree?
CHALMERS:
She does, yeah.
KARVELAS:
Do they need a bigger budget? She thinks they do.
CHALMERS:
Well, I think you’re right to point out we gave them extra money in the last Budget, and obviously, like all of the organisations that I have coverage of as Treasurer, they’d like more, and to be fair to Joe Longo, I mean that’s one of the things that he engages me on from time to time. We fund it in a pretty substantial way, industry fees are a part of the story and we always do what we can to fund them appropriately. There’s not a bottomless pit of money for the regulators, but we do what we can to help them, resource them to do their jobs.
KARVELAS:
Treasurer, just before I let you go, you’re going to the Governor‑General’s swearing in ceremony. Her pay has been a big issue recently and there have been some criticisms of her. Will today be a politics‑free event?
CHALMERS:
I would have thought so. I mean today’s a really important day in the civic life of our country, swearing in the 28th Governor‑General of Australia and I know Sam Mostyn really well, and Sam Mostyn is a person of vast experience and achievement, a wonderful leader of our community and including our business community and Sam Mostyn will be an outstanding Governor‑General.
KARVELAS:
Treasurer, thanks for coming in.
CHALMERS:
Thanks, Patricia.