PATRICIA KARVELAS:
The Treasurer, Jim Chalmers, joins us this morning in the studio. Treasurer, welcome.
JIM CHALMERS:
Thanks very much, Patricia.
KARVELAS:
Your party pledged to reduce power bills by $275 by 2025 during the election campaign ‑ repeatedly, many times ‑ but now the forecast is that they'll go up by 56 per cent in the next two years. So, is your promise essentially dead?
CHALMERS:
First of all I think it's important to remember that the modelling we released was done in 2021 before a war in Europe, which is playing havoc with global energy prices. The modelling was done in 2021. It referred to an outcome in 2025, and in 2022 we’ve had a war in Ukraine. That’s a fact. We are expecting energy prices to go up as a consequence of that and the fact that we’ve had a decade of energy policy chaos from our predecessors hasn’t helped either.
KARVELAS:
But you knew about the war when you were making the promise during the election campaign.
CHALMERS:
I think the full impact of the war in Ukraine is starting to be felt when it comes to electricity prices. We didn’t have these forecasts obviously, which are relatively new forecasts for electricity prices. We didn’t have them in May, of course. But I think people do understand around the community that the war in Ukraine is causing havoc. It’s pushing up electricity prices, and our electricity market here is not as resilient and robust as we need it to be because we’ve had a decade of policy failure.
KARVELAS:
Okay. You pride yourself on being straight with the Australian people and just, you know, trying to cut through the spin. So does it just demonstrate that making promises like $275 will be cut from your bill based on modelling that gets out of date so quickly is actually a waste of time? That it’s a promise you can’t possibly ever keep.
CHALMERS:
We released the best modelling that we had at the time –
KARVELAS:
Yes, but you knew it would change. You know that.
CHALMERS:
We didn’t know there’d be a war in Ukraine when we released the modelling.
KARVELAS:
But you kept relying on it throughout the campaign when you knew there was a war.
CHALMERS:
That’s because it goes to the fundamental fact here – which is renewable energy is not just cleaner energy, it’s also cheaper energy – that is the near unanimous view of investors and economists and others. That remains the case. There’s basically three facts here: first of all, renewable energy is cheaper energy. Secondly, the war in Ukraine is causing havoc and pushing up electricity prices. And, thirdly, the fact that our predecessors had more than 20 energy policies and pulled more capacity out of the system than they put in has made us more vulnerable to these global price shocks.
KARVELAS:
Is there any way you could offer Australians energy rebates? New South Wales Treasurer Matt Kean spoke to me yesterday on the show. Here he is.
[Excerpt]
MATT KEAN:
The budget bottom line from the Commonwealth has been propped up by soaring gas prices and soaring coal prices. And what I would expect is that the Commonwealth Government would have provided relief for families that are doing it tough or will do it tough when we see huge up to 50 per cent increases in wholesale electricity prices.
[Excerpt ends]
KARVELAS:
That’s the New South Wales Treasurer, Matt Kean. You’re reaping billions from fossil fuel companies. Why can’t you give some back?
CHALMERS:
It’s the easiest thing in the world for a state treasurer to spend Commonwealth money in the lead‑up to a State election. And I think we should see Matt’s comments – I work with Matt in other areas, but we should see his comments in that light. If he wants to provide more relief to people in New South Wales, there’s nothing preventing him doing that. Our approach in the Budget is to provide cost‑of‑living relief in a way that doesn’t make this inflation problem worse. Inflation is the defining challenge. At the moment, we’ve been talking about the electricity part of it. Natural disasters won’t help. Issues in supply chains won’t help either. And our responsibility to the Australian people is to do what we can to not make this inflation problem worse.
But we do understand that as electricity prices become a bigger and bigger part of that challenge, we’ve taken some steps, Chris Bowen has taken a number of steps with his state and territory counterparts. We’re empowering the regulators to do some of the heavy lifting here. But we’ve said repeatedly during the course of the week that if further steps need to be considered, they will be considered. But we need to recognise here that it involves a number of different portfolios. More importantly, a number of the regulatory levers are actually held by the states when it comes to electricity prices and electricity markets. And so, there is more work to be done, and we will do it.
KARVELAS:
Do you believe factories could close if there’s not a new price cap put on gas producers? There’s a warning that this could happen in the next few weeks even?
CHALMERS:
First of all, I don’t want to pre‑empt or limit the mechanism, and I know that in welcome ways a lot of people do have views about this, and we want to hear everybody’s view about this. We don’t want to artificially limit the consideration of some of these measures. I am really worried about the impact of high gas prices and high energy prices on Australians broadly, but particularly on Australian industry. And I think we are seeing local manufacturers and local industry under an extreme amount of pressure. I’ve spent time with some of these manufacturers in recent weeks and months, and I understand the pressure that they’re under. And their views are not irrelevant to us as we consider whether any further steps can be taken.
KARVELAS:
Okay. And do you believe based on those conversations that businesses like those manufacturers could close their factories within weeks or months because of these prices?
CHALMERS:
I would prefer to let them speak for themselves. They’ve all got their own individual –
KARVELAS:
But is this something that – you know, this could lead to higher unemployment, huge economic consequences. You must have been briefed.
CHALMERS:
I am concerned that the pressure on some of our local industries and some of our manufacturers in particular will be too much.
KARVELAS:
Former competition watchdog chair Rod Simms says you should threaten gas companies with export controls, stopping them from selling more gas offshore than had been contracted to serve the domestic market. Is that something that’s under consideration?
CHALMERS:
Well, once again – well, first of all we welcome people’s contribution, as I said a moment ago. And Rod Sims has substantial experience in some of these areas. And so obviously we take his views seriously, as we take other people’s views seriously as well. We need to weigh up a range of things. We take seriously our obligations to our international parties. We take seriously the investment that the companies have made. But equally, I don’t think we can have a situation where our local industries are under this much pressure in a sustained way.
What I’m trying to do is to be careful not to walk across the work of ministers like Madeleine King and Chris Bowen and Ed Husic and others. We approach these challenges in a collaborative way. We’ve got work to do here. We’ve flagged that before the Budget. In the gas market we’ve got a code of conduct that we’re looking at. We’re going to involve and empower the ACCC not just in a monitoring sense but in a policy‑making sense as well. They have a lot to offer here. So I want to involve them as well.
KARVELAS:
The new heads of agreement between the Government and the east coast gas exporters comes into effect next year. There are calls to ask the ACCC to use that and set a so‑called fair reference price, as it’s called, separated from spikes and international markets. It would effectively be a form of price capping. Is that the most – is that the proposal you find the most palatable at the moment?
CHALMERS:
We’ve asked the ACCC to look at a range of options. And they’re doing that work as we speak on a relatively short time frame. And, again, I don’t want to kind of pre‑empt their conclusions, but obviously all of these sorts of things are the sorts of things that the ACCC is considering.
KARVELAS:
If you’re just tuning in, I’m interviewing the Treasurer Jim Chalmers, and you’re listening to ABC RN Breakfast. The idea of a windfall tax has come up repeatedly. If companies continue to make tens of millions in profits out of global conflict and uncertainty, shouldn’t they share some of that with the rest of us?
CHALMERS:
Again a lot of people are making that case. I suspect that at least one of the guests that you might have on after me might make that case. We listen respectfully to that as well. People do need to understand that the PRRT take in the near term has gone up a little bit. I know that a lot of people would rather that went up a lot more. I understand that, respect that but it has gone up a little bit. And the company tax take has gone up considerably. It’s one of the reasons why we’ve had this welcome substantial improvement in revenues in the next year.
But beyond that, there’s a piece of work that the Treasury began under the Liberal Government, under Scott Morrison and then Josh Frydenberg. They’ve got a little bit more work to do on some of these sorts of issues but we haven’t made a windfall tax a priority of the Budget this week. We haven’t been working up a windfall tax. But there is another piece of work that the Treasury is doing which they will provide to us at some stage.
KARVELAS:
What’s the piece of work?
CHALMERS:
What Morrison and Frydenberg got them started on was thinking about some of these issues around tax and there was a report of sorts and then there was more work to do. It got paused because of COVID. At some point if they haven’t already the Treasury will restart that work.
KARVELAS:
Okay. Can we turn to industrial relations. Tony Burke spoke to us earlier. He’s introducing this bill today. Business claims it could put jobs at risk. Can you guarantee this won’t lead to more strike action across the board?
CHALMERS:
These changes that we’re proposing today are about more agreement, not more conflict. They are about getting wages moving again in a sustainable way. And they are about getting the institutional arrangements right around the Fair Work Commission and in other ways, the processes right to get more and better agreements. The enterprise bargaining system has not provided over a long period – really the last decade or so – the kinds of wages growth that Australian workers need and deserve. And so something needs to give. Obviously I work closely with the business community. I’ve got a lot of time for and I spend a lot of time with the business community –
KARVELAS:
Well, let me go to that, because the head of the Business Council of Australia, Jennifer Westacott, is frustrated she hasn’t seen the IR legislation. Yesterday at the Press Club you said you had a lot of respect for Jennifer Westacott –
CHALMERS:
I do.
KARVELAS:
But they’re not happy with this multi‑employer bargaining. They say it will lead to more industrial action. And, indeed, Treasurer, that’s embedded in the bill, isn’t it? That’s the point – you know, that people can, these feminised industries can take more action to push up their wages. Just be frank with people – it will lead to potentially more industrial relations action.
CHALMERS:
Not necessarily. I genuinely believe that these laws are about more agreement, not more conflict. And the reason I believe that is because they’ve got embedded in them a bigger role for the Fair Work Commission to help employers and employees come to agreements. And you’re right that our big focus here is on the low paid and particularly our workforces dominated by women, because that’s where the problems with wage stagnation have been the most acute.
And so, I think what we’re doing, what we’re presenting to the parliament today, is responsible. We will always consult respectfully and meaningfully with the business community and with the union movement to try and strike the right balance.
KARVELAS:
Well, they say you haven’t.
CHALMERS:
The legislation gets introduced today. I’m working on the assumption that there will be a Senate inquiry, there’ll be all kinds of work that goes on between introduction and passage. Tony Burke’s done a hell of a lot of good work here. We have engaged where we can. I understand this is not – there’s not a unanimous view about this, but it’s important to get wages growing in a strong and sustainable way. And that means more and better agreements, not more conflict.
KARVELAS:
Treasurer, thanks for coming on the show.