PATRICIA KARVELAS:
It’s fair to say it’s been a mixed week for the federal government. The annual rate of headline inflation fell to 3.5 per cent in July down from 3.8 per cent in June, which you’d think would be welcomed by the Reserve Bank. But economists say the slow‑down in the pace of inflation last month was largely expected, and it won’t encourage the RBA to cut interest rates any time soon.
On top of that there’s also been a big backlash to the decision not to include data on gender and sexuality in the next census, and there have been those huge rallies in support of the CFMEU over Labor’s move to place the construction arm of the union into administration. So quite a lot going on.
The federal Treasurer, Jim Chalmers, is my guest this morning. Treasurer, welcome.
JIM CHALMERS:
Thanks very much, Patricia.
KARVELAS:
A fall in inflation over the year to July with falls in electricity prices but rises in other areas including food and rent. Is inflation falling fast enough for you, Treasurer?
CHALMERS:
No, we need it to fall further and faster, we’ve made that clear, but yesterday’s numbers were pretty welcome and quite encouraging. We saw the monthly indicator go down, we saw underlying inflation go down, we saw non‑tradeable inflation go down, and all of those things are good developments. But it’s not mission accomplished on inflation because people are still doing it tough, and that’s why our primary focus is on rolling out the cost‑of‑living relief to help people deal with these cost‑of‑living pressures that we know are still too persistent.
KARVELAS:
Most economists say it’s not enough of a fall. I mean you’ve even said it’s not enough of a fall, but for the RBA to cut official interest rates any time soon. How do you read it?
CHALMERS:
Well, obviously the independent Reserve Bank will go through these figures, as they do with all of the data as it comes out, and they can explain their thinking on that. From our point of view, as a government, we’re heartened by the fact that inflation continues to fall in our economy. We’re heartened by the very clear evidence that our policies are helping, our cost‑of‑living policies are helping, and those 2 surpluses that we’ve delivered are helping as well. The Reserve Bank Governor has made that clear.
We’ve got different responsibilities, the Reserve Bank and the government, but we’ve got the same objective, which is to get on top of this inflation challenge, and we need to do that in a way that doesn’t smash an economy which is already weak.
KARVELAS:
Some economists are warning that the CPI’s becoming essentially harder to decipher because of temporary cost‑of‑living relief measures that are artificially pushing down inflation figures, that perhaps they’re clouding evidence of lower price pressures across the economy. Do you concede that those measures, that I know you will defend, but they are making it harder to decipher?
CHALMERS:
I don’t think so. I mean the trend in underlying inflation’s pretty clear in this data as well, not just headline inflation, and the Bureau of Statistics made it really clear yesterday, for example, that when it comes to the Commonwealth’s energy bill rebates, only the Queensland and Western Australian component of that is represented in yesterday’s data, and so I think the ABS is doing a really good job helping economists disaggregate some of these issues. But what we saw yesterday was not just a moderation in the headline rate, it was also a moderation in the underlying rate, a moderation in the non‑tradeable inflation, which is what others describe as the ‘home‑grown’ element of it, and so I think it’s pretty easy to decipher in the figures that we have been receiving, that inflation and not just underlying inflation, the trend is down, that’s a good thing, but people are still under pressure, and that’s why these cost‑of‑living measures are so important. And we shouldn’t lose sight of that.
Sometimes we get lost in the weeds of one economist arguing with another economist. This is fundamentally about helping people who are doing it tough. It’s what the tax cuts are about, the energy bill relief, cheaper medicines, cheaper early childhood education, help with rents –
KARVELAS:
I understand that’s the intent.
CHALMERS:
– getting wages moving again.
KARVELAS:
But I mean I heard a little earlier sort of an economist that’s quite, you know, friendly of your broader message, but Angela Jackson saying, it is about having too much money in the economy though, and that is an issue, and that keeps inflation higher for longer, right?
CHALMERS:
The Reserve Bank Governor has said on other occasions that she doesn’t believe that the way we’ve designed our cost‑of‑living relief adds to spending pressures in the economy. She made that clear on other occasions and the ABS has made it clear that when it comes to energy bill rebates, cheaper early childhood education and rent assistance, that the government is successfully taking some of the edge off those price pressures, and again – let’s remember the main game here, the government is helping people with the cost of living, and we’re doing that in the most responsible way we can at the same time as we delivered a couple of surpluses, and so we are engaged in the fight against inflation, and we’re making welcome and encouraging progress, but we know there’s further to go.
KARVELAS:
If you’re just tuning in, you’re listening to ABC Radio National Breakfast, and our guest is the Treasurer, Jim Chalmers.
Jim Chalmers, earlier this month, the Reserve Bank Governor, Michelle Bullock, warned that people shouldn’t take too much of a signal from the ABS’s monthly inflation indicator anyway. She said the ABS quarterly inflation data was better quality and more comprehensive. Do you agree with her?
CHALMERS:
We’ve made a similar point on other occasions. The monthly indicator bounces around, it’s a bit less predictable, it’s a bit more volatile than the quarterly measure. I reckon I’ve said that many, many times over the course of the last couple of years, but it’s the most recent data that we have, and on all 3 of those fronts I keep referring to, headline, underlying, non‑tradeable, it went in the right direction yesterday.
But if the question is, is the quarterly more reliable than the monthly, yes, that’s a point that I’ve made before, and we’ll get the September quarter CPI before long, and I think –
KARVELAS:
And you get national accounts next week too, that’s obviously going to give us a bit of an idea about the economy. You’ve been concerned that the economy is really struggling, and we do have quite a bit of data that indicates that. What do you expect?
CHALMERS:
Yeah, I have been upfront about that, the economy is quite soft at the moment. The last national accounts showed that, the retail figures show that, what we know about discretionary spending and household savings, the unemployment rate ticking up over the course of the last 12 months. All of these are indications of an economy which is soft, an economy which is weak. A lot of your listeners in small business and in other parts of the economy would understand that, they wouldn’t need the official data to tell them that.
And that’s why I keep coming back to this main point, the Reserve Bank and the government, we’ve got different responsibilities but the same objective, and our objective is to get on top of inflation, and we’re making progress there, and to roll out this cost‑of‑living relief in a way that recognises that people are under pressure and the economy is already quite weak.
KARVELAS:
The CEOs of Australia’s 4 major banks will appear before the House standing committee on economics today and tomorrow, I understand, and they will be answering questions in relation to how they see it. Now they have had different ideas, some of them, about what might happen on interest rates. What do you hope that they will illuminate in these hearings?
CHALMERS:
Well, first of all, it’s not unusual for economists to disagree about the future trajectory of the economy. It wasn’t that long ago that some economists were saying there’d be 2 or 3 rate hikes this year, there hasn’t been a rate hike since November last year. So that’s the first point.
But this Committee hearing today, and I pay tribute to my colleague Daniel Mulino for the way that he runs this, this is really important. There’s never been a more important time for banks to treat their customers fairly, and we believe that more transparency is better, and that’s why the banks have this opportunity at this important hearing today to set out how they are helping people who might be doing it tough after these recent interest rate rises from last year and before, because people are doing it tough. We want to see the banks treat their customers fairly. There’s never been a more important time do that, and that’s why transparency matters.
KARVELAS:
Treasurer, just turning our focus to international student caps. Do you accept what universities are warning about, that it will lead them to cutting budgets and sacking staff?
CHALMERS:
Well, first of all, don’t forget, when it comes to the public universities we’re talking about the same number of overseas commencements next year as they had last year. We think that’s pretty reasonable. We’re talking about the same number of commencements from overseas next year as last year. So that’s pretty reasonable in our book.
I’m a huge supporter of the university sector and the education sector more broadly. It’s a key industry for Australia, it’s a very big export earner, it’s consistently in the top 5 when it comes to our exports, and we don’t expect that to change.
What we’re talking about here is managing the growth and managing the pressures in a responsible and a methodical –
KARVELAS:
Okay.
CHALMERS:
– and a fairer way which recognises, the central role that unis play –
KARVELAS:
But let me get in here –
CHALMERS:
– but which also recognises the pressures on the system –
KARVELAS:
Yeah.
CHALMERS:
– and that’s what we’re doing.
KARVELAS:
But Treasurer, the economist, Warwick McKibbin, pretty respected economist, said that this is – ‘the absurdity is extraordinary’. He said that this could be dramatically bad for the economy, and he’s not the only one. The Victorian Treasurer, Tim Pallas, has said that a cap on international students is a cap on jobs and a cap on economic growth.
You have told me many times that you believe the economy is struggling. Is it a smart decision really to be putting a cap on economic growth now?
CHALMERS:
Well, I don’t agree with the points that either of them have made. University education, education exports will continue to be a huge contributor to our economy, even as we manage the growth and the pressures in a more responsible and methodical and fairer way.
As I said a moment ago, education exports are consistently in the top 5 for Australia. I don’t expect that to change as a consequence of these changes that we are making to the way that we manage our growth. And when it comes to –
KARVELAS:
You don’t think there will be any impact at all, really, on economic growth as a result of this shift?
CHALMERS:
Well, we’re talking about the same amount of commencements next year as last year. I think that gives you a bit of a sense of what we’re trying to do here.
KARVELAS:
I spoke yesterday to the Group of Eight head who said –
CHALMERS:
We’re talking about –
KARVELAS:
– who said that people who have been offered spots in Australian universities will now have to be rejected.
CHALMERS:
Yeah, the rest of my answer, Patricia, was that I understand that some of the universities, not all of them, by the way, what we’re proposing is much fairer for the regional unis and the smaller unis who are being hit hard by the current settings. We know that there’s feedback about this, but I don’t accept for one second that what we are proposing here – to be more responsible, more methodical and fairer with the growth and pressures on the system, to manage that in the right way – I don’t accept that that will cruel the industry.
The industry is consistently top 5 in terms of exports. That will continue to be the case. It will continue to generate billions and billions of dollars for our national economy, and I say that as a supporter of the sector, as someone who believes in the sector and its potential, economically, but also socially.
KARVELAS:
Treasurer, you are the minister ultimately responsible for the Census. I just want an answer on this. Do you agree we need more data about Australians?
CHALMERS:
Of course I do, and that’s what the Census is about, but the Census isn’t the only opportunity to gather that sort of data. For example, in the last Budget I increased funding for the ABS in the context of the Measuring What Matters wellbeing framework, and I pay tribute to David Gruen, the Chief Statistician, and others for the way that we’re trying to collect as much data as we can –
KARVELAS:
Okay.
CHALMERS:
– in as many ways that we can.
KARVELAS:
But why has the government directed the Bureau of Statistics not to include questions about gender and sexuality in the Census?
CHALMERS:
Well, a couple of things about that, Patricia. I mean, first of all, I do genuinely understand the disappointment that people have had this week, and I don’t dismiss the feedback that we’ve been getting as part of all of this, but the points that I’d make about that is that the census is still a couple of years away, and our focus has been on other issues, including some of the issues we’ve talked about today like the cost of living.
It’s not unusual for the ABS to test and tease out questions in advance, and that’s what’s prompted all of this now, but the Census itself isn’t until 2026. And so our goal here has been to try to avoid some of the nastiness that sometimes accompanies that in the lead‑up to the Census. That’s the point that Richard Marles and others –
KARVELAS:
Haven’t you created a bigger problem –
CHALMERS:
– were making yesterday.
KARVELAS:
– I mean if you listen to all the LGBTIQ+ groups, they have dismissed that as a reason. They say data is important. Will you reverse the decision?
CHALMERS:
Well, first of all, I do take very seriously the feedback that we’ve got, I don’t dismiss it. My fear, and one of the things that’s guided us here and me here, if I’m frank, is that we’ve seen the way that these issues can be weaponised against members of our community, and we don’t want to see that happen.
KARVELAS:
But those members of the community are the ones –
CHALMERS:
Yeah.
KARVELAS:
– that are angry, Treasurer. They’re saying –
CHALMERS:
I understand.
KARVELAS:
– you know, they’re saying that you made a commitment, and you should stick to it. Are you prepared to intervene to override this reversal?
CHALMERS:
Well, I’m not here to flag that. I’m here to explain how we got here and why, and our motivations here. And what we’ve been trying to do, as I said in a different way I think a moment ago, we want to avoid the kind of nastiness and weaponisation of some of these issues. We saw some of that around the Olympics, we’ve seen it on other occasions. And again –
KARVELAS:
This is just collecting data –
CHALMERS:
– I say to –
KARVELAS:
– Treasurer, though. It’s just collecting data; this isn’t a new law or – I mean –
CHALMERS:
We collect data in a whole range of ways, including the Census, and the Census is important, and we try and do that in the best way we can, in the most sensitive way that we can.
KARVELAS:
You say you take the feedback seriously. So will you meet with people, Allegra Spender raised it with me, and at least consider reversing this decision?
CHALMERS:
Well, again, I’m not flagging that, I’m not proposing that. I came on the show, I knew that you would ask me about this today, and I thought it was important to explain, how we got here and why, and that’s why I’m doing it, and I’m happy to engage with members of the community on it, the government is happy to engage with members of the community on it as well. I’ve said this a couple of times already, and I know that you’ve pushed back on that, but this is a government that takes people’s feedback seriously. I’m not here to dismiss the very real concerns that people have raised.
What I’ve tried to do is explain how we got to this position.
KARVELAS:
Okay.
CHALMERS:
The Census is still a couple of years away, and our focus has been on other things, including the cost of living, but we know that people are unhappy about this, and we don’t take that lightly.
KARVELAS:
Federal Treasurer, thank you.
CHALMERS:
Thanks Patricia.