Paul Sakkal:
The Treasurer’s position is known to be one of, if not the, most difficult spots in any Australian Cabinet in modern history and now is no different. On the domestic front, interest rates are at a 15 year high and maybe an 18 year high if the RBA jacks up rates again on Cup Day. Overseas, Donald Trump’s war is keeping prices elevated. All of this as Labor comes under considerable political pressure from a grumpy electorate which demands more and more spending and a persistent populist insurgent.
Jim Chalmers is in the middle of all of it as signs of tension emerge in the Cabinet over Labor’s economic stewardship. Chalmers’s, at times, testy relationship with Anthony Albanese has also been in the spotlight. Jim Chalmers joins me, Paul Sakkal and our senior economics correspondent, Shane Wright. Treasurer, thanks so much for joining us today.
Jim Chalmers:
Thanks for having me on guys.
Sakkal:
It’s a difficult week for political establishment, but really just for the country. So, it’ll be remiss of us to not just touch on the attack on Helen Haines. Just quickly, at the time of recording, we know that she’s extremely unfortunately lost 2 legs, but in a stable condition down at the Alfred. Treasurer, do you have any reflections on that issue first? You’ve been overseas, I’m not sure you’ve commented on it yet. How did it make you feel when you heard the news?
Chalmers:
Oh, devastated. It would be distressing and devastating no matter who this happened to. But I think it’s not lost on anyone that probably the most reasonable, rational, respected person in the parliament has been a victim of this irrational violence. And Helen is probably as close as you get to the perfect temperament in a very imperfect workplace. And so we’re all thinking of Helen, I saw the news on the way on plane wifi on the way to Hong Kong for the engagements I’ve just come back from and it’s just like everyone just devastated. Just absolutely love Helen. We’re thinking of her, obviously, but also her family, her staff, her local community.
You know, politics has become a much more dangerous place. The rhetoric has become more violent, the threats have become more serious and more frequent. And, you know, we can’t pretend that the sort of violence we see around the world associated with politics can’t replicate itself here. It’s, it’s, you know, in the same week that we saw riots on the streets of Paris, we saw this unspeakable act of political violence in the main drag at Wangaratta.
Sakkal:
Do you see this as potentially a moment of reckoning around security of politicians and will that inevitably lead to more spending pressure on domestic security?
Chalmers:
Well, I think one of the elements of this which is really concerning, there’s lots about this is obviously concerning and distressing, but the more available you are, the more vulnerable you are. And this country’s got a really proud history and heritage of politicians being, not just from communities, but in communities. I mean, one of the most important elements of our work, certainly one of the most enjoyable parts of the work that I do, is interacting with real people in real communities like this one in Logan City where I live. It is the case that the more available you are, the more vulnerable you are. So there’ll be a lot of reflecting on what’s happened here.
It is shocking but not surprising what happened because we have seen this quite extraordinary spike in violent rhetoric and violent threats, and it will play out in our politics. As the authorities, the agencies, the police, the government and others work out the best way to respond and go forward from here, we want to make sure that we don’t lose the essential element of our democracy, which is people being available in local communities.
Sakkal:
Acknowledging the importance of that issue, we might just shift onto normal domestic politics. Treasurer, inflation’s in a place nobody expected earlier this year. Rates could soon rise to an 18‑year high. You were just with IMF and G20 leaders in Asia, all worried about Trump’s ongoing war and the exacerbating effect that’s having on inflation and the challenge that’s creating for the budget. You said last week to us that the government is under severe political pressure. Do you have a pathway out of this moment?
Chalmers:
Well, first of all, to pick up a couple of those important points that you made. I mean, in all of the engagements I’ve been doing in Asia the last few weeks, it’s really clear that there is a lot of inflationary pressure in the global economy, and we’re seeing that in our own economy as well, obviously made worse by the war in the Middle East, which has dragged out for much longer than anyone was anticipating and kind of exacerbating some of our own domestic challenges around inflation and productivity and the like. So, first of all, to acknowledge that.
In terms of the way out of this, the best response to the complex combination of conditions that we are confronting right now is to continue to manage the budget in a responsible way. And you’ll see in the mid‑year budget update that that will be the ninth consecutive budget update from this government that will have savings in it. So, that’s part of it. We’ve got cost‑of‑living help rolling out via tax cuts, bulk‑billing support, cheaper medicines, and the like. That’s an important part of it as well. And if you look at the forecast from the Reserve Bank and the Treasury, they expect that this time next year we’ll have inflation back in the band. But there’s more than the usual amount of uncertainty about all of that, as you know, and as Shane certainly knows, covering this closely as well.
So, our job is to roll out the economic plan that we outlined in the Budget. Fuel security, cost‑of‑living help, productivity package, tax reform package, and budget repair. Acknowledging that these are really difficult circumstances around the world and they’re playing out for people in our country too.
Shane Wright:
But just touching on that, the oil spike, I think today Brent Crude hit 110 a barrel. That is such an inflationary impact. But government spending as a share of the economy, the budget, even just the just completed one, spending was back at the same level it was when your beloved Brisbane Broncos before they started playing in the National Rugby League. So, you’ve talked about savings, but you can’t continue with spending at around almost 27 per cent of the economy, can you?
Chalmers:
Well, first of all, we haven’t just talked about savings. Eight consecutive budget updates with savings in there, a record amount of savings in the last Budget. You would know that the last Budget of our predecessors didn’t have any savings in it. We’ve delivered 8 savings packages in a row, and there’ll be a ninth towards the end of the year. That’s one of the reasons why the budget’s in better condition now than it was expected to be a few years ago. So, that’s the first thing in terms of spending as a share of the economy.
Again, that’s come down substantially from that COVID peak. There are good reasons for that. There’s also a lot of pressure on the budget. Whether it’s pressure that comes from the care economy and ageing, other kinds of pressures. I think it’s understood that there is upward pressure on the budget. That’s why we’re making room for it with these savings package, including that record effort in May this year.
But when it comes to the interaction of government spending and inflation, I think as you would know Shane, if you look at the comparison between private demand growth and public demand growth, you look at the last full year of that: private demand growth has tripled compared to the year before in the last full year while public demand growth has halved. And what that tells us is that there are other factors at play here.
You’re right to acknowledge the role of much higher global oil prices, 110 bucks a barrel this week, over 100 bucks really since the re‑escalation in September. And so that is a big driver of inflation. We will see that in the inflation figures which come out on Wednesday, which you’ll be hitting the refresh on your keyboard from 11:28 or 29 like the rest of us to see what that number says. And obviously fuel prices will be a big part of that.
When it comes to government spending, we know that we’ve got a responsible role to play there. We take those responsibilities very seriously. But the fact that private demand growth has escalated while public demand growth has come off substantially compared to the year before, I think that tells us there are other factors at play.
Wright:
But do you think government spending as a share of the economy like it is higher than it was pre‑COVID? Yes, it’s come down, but that was a one‑in‑a‑hundred‑year pandemic. Do you think government spending as a share of the economy is just going to be higher than it was pre‑COVID?
Chalmers:
Well, first of all, I think it is a relevant comparison to the peak a few years ago because it still requires effort to get that spending as a share of the economy down. People will have different views about what the optimal level is. From our point of view, it needs to recognise some of these pressures in the care economy and elsewhere; defence spending and the like. We have been able to make, I think, a substantial difference to our budgets.
You know, speaking with with our peers and partners around Asia the last few weeks, you know, the fact that we’ve delivered a couple of surpluses and got our deficits much smaller, the fact that we’ve got that debt trajectory down, the fact that we’ve been finding savings and banking upward revisions to revenue – that’s not especially common in economies like ours around the world. The fact that our debt as a share of GDP is a sliver of what we see in comparable economies.
And so I understand your question. I’m not prepared to put a specific number on the optimal spending as a share of GDP, but I do recognise that there’s a role for us in making sure our budgets are as responsible as possible. And we’ve embraced that 8 consecutive times with savings packages and a ninth on the way.
Sakkal:
Just on your comparisons to the emergency spending during the pandemic, Treasurer. There’s been a growing line of criticism from economists, quite fervent ones like Richard Holden, but also commentators in the press gallery making the point that it’s 4 years ago, that was an emergency, a lot has changed. There was a huge revenue uptick from the Ukraine war, and lower unemployment and better tax receipts since then. Do you accept that that argument is wearing thin and that part of the criticism towards the government is stemming from this consistent comparison with a point which many observers have viewed as not comparable to the current moment?
Chalmers:
Well, it’s more than 4 percentage points lower than during that time. And so we’re not making an argument that spending as a share of GDP should be the same as it was in the depths of COVID, but it’s not an irrelevant comparison either.
When it comes to the views of commentators, including those who work in the same hallway as you guys, or further afield, it’s not unusual for governments of either political persuasion to get a lot of free advice. You try and be respectful about that. There are a range of views. Some commentators think that we should be investing more in certain areas, and some think that we should be cutting spending dramatically.
The government’s approach, the approach that I’m responsible for, is to find savings where we can. Working closely with Katy Gallagher, more than $60 billion of savings in the last Budget, precisely $0 of savings in Josh Frydenberg’s last budget. And I think that is evidence that we take this challenge very seriously when it comes to making the budget more sustainable. Look at the effort that Mark Butler and Jenny McAllister and Katy Gallagher and I and the Prime Minister have put into NDIS reform, for example. All of this represents a very serious effort to make sure that spending in the budget is sustainable.
Of course, there’ll be commentators who say that we should cut harder and faster. Of course, our political opponents will say that at the same time as they’ve come up with more than $110 billion of unfunded commitments. And so for people who think we should cut much harder, they should nominate, I think, those areas that should be cut more substantially. But we have been finding savings, many more savings than our predecessors, and that’s because we take the hard yards of budget sustainability seriously.
Wright:
The other side of the budget is always, is revenue and tax. And even though you’ve got a tax cut this financial year, and there’s another one coming July 1, tax as a share of the economy is back at its highest level since Costello was Treasurer, and you are about to, your forecast is for a deficit of 31.5 bill. If I’m an ordinary member of the community of Logan. I’m going, hold on. You’re saying, yep, there are spending pressures, we’re delivering tax cuts, and I’m running a budget deficit that is 31.5 bill, can’t you understand, like, if I’m that ordinary person saying the budget priorities are out of kilter.
Chalmers:
Well, I think you’ve touched on a couple of essential elements in your question. First of all, we’re cutting taxes. Secondly, tax as a share of the economy is still a little bit lower than it was in the Howard-Costello years.
I understand the point that you’re making about it getting closer. The tax‑to‑GDP ratio came up a bit in the Final Budget Outcome, really, for 2 reasons. One, the labour market held up a bit better than expected, I think, from memory. And so that means more people are earning more, and more people are working and earning more. And the second thing, which might not be the central part of the discussion I had with my constituents in and around here in Logan City, but you would know, Shane, certainly, that one of the reasons why it came up a little bit is because nominal GDP came in lower. And that’s part of the calculation.
When you’re calculating tax‑to‑GDP, nominal GDP coming in lower has implications for the calculation. Let’s not go down that particular rabbit hole, Shane. But that’s part of the reason why I ticked up a bit. We’ve been up –
Wright:
Are you comfortable with a deficit of 31 bill?
Chalmers:
I would like to get it down lower. Of course I would. And as evidence of that, have a look at the 2 surpluses that we delivered. I’m the first Treasurer in a decade and a half to deliver a single surplus, and we delivered 2. We got the 2 subsequent deficits down quite substantially as well. So we’re always looking for ways to get those deficits down. They were huge. When we came to office, we turned 2 of them around, we got 2 of them much smaller. And so that hard work, hard yards of fiscal sustainability is ongoing, all of that work is ongoing and we’re engaged in a bit of that right now when it comes to the mid‑year update, which is due before long.
Sakkal:
You’ve started to emphasise that savings package, Treasurer, particularly since the last rate rise and the Final Budget Outcome in recent weeks. Some commentators have noted that a lot of the savings so far have been around reductions in consultants as well as reining in blowouts in existing programs. One of the first actual savings of a genuine cut was the private health insurance rebate, which the Greens and the Coalition have teamed up to block, and I acknowledge that’s not your doing. That was quite a cynical move by them. But in the budget update, the MYEFO, sorry, are we likely to see some new actual cuts to programs, not just reining in blowouts? Can you commit to that?
Chalmers:
Yeah, I mean first of all, I haven’t just been emphasising that savings package in the last few weeks, we emphasised it in the Budget. One of the 5 key ingredients in that Budget was budget repair and a bigger than usual effort on savings. In terms of the mid‑year update, the MYEFO, we are still doing that work with ministers right now. I think you probably understand why I wouldn’t want to kind of pre‑empt that because that work’s ongoing. That particular piece of homework’s not due for a few weeks yet. And so we’ll continue to work with ministers on that.
And on your point about the parliament, I think that just reflects the reality of our politics. No one political entity has the numbers on their own in the Senate. So, we play the cards we’re dealt, and we do the best that we can. But there’ll be additional savings in the mid‑year update. We’re working on them right now, and when they are finished and packaged up, then I’m happy to run through them at the appropriate time.
Sakkal:
You’ve been dangling the prospect of larger tax cuts, Treasurer, we know you have delivered several different tax cuts in different ways, as you want to point out. Do you think that the next Budget in May, I know, a ways off, is a time when you could deliver those larger tax cuts or is that more a question for the pre‑election Budget, potentially in 2028?
Chalmers:
I think it remains to be seen. I mean, obviously it depends very heavily on the fiscal situation, and we’re working on the mid‑year update right now. We’ll start working on the Budget kind of the day after we release that, most likely in December, and so we’re not anywhere near kind of determining that yet.
But I mean people engaged enough to tune into this podcast, I think, would appreciate that from Budget to Budget, we weigh up the pressures that people are under can key indicators in the economy, the fiscal pressures on the budget and we do the best we can and so I don’t think it’s clear yet when the next round of tax cuts would be responsible. But I’m actually really grateful, Paul, for you mentioning that we have cut taxes a bunch of times, and the reason this comes up, and the reason why I’ve made it clear that, of course, we would like to cut income taxes more when the budget can afford that and carry that and sustain that – it goes to Shane’s earlier question about tax‑to‑GDP.
You look at the intergenerational report, you look at the Final Budget Outcome, you look at all of our budgets, and it’s clear that governments of either political persuasion will return bracket creep in one form or another when they can afford to do that. And so when I talk about this, I try and be upfront with people and say, of course we will look to cut taxes again, but it’s not clear yet what the best way to go about that would be, or the most appropriate time to do that would be given the really substantial fiscal pressures that we’re under right now as well.
Wright:
Apart from the fiscal situation, there’s the economic situation. We’re talking before the RBA’s November meeting, markets say 50-50 for a rate increase. But this week, both the chief economists of the Commonwealth Bank and Better Shares said the RBA is at risk of pushing the economy into recession. Or over the edge was the term that Luke Yeaman from the CBA referenced. Do you share those concerns?
Chalmers:
Oh, look, I don’t want to wander into any territory that could be misconstrued as giving free advice to the independent Reserve Bank. You know, Shane, you’re probably the authority on the Reserve Bank in the press gallery, and you know that there are good reasons why treasurers don’t do that.
So, putting that to one side, I think more broadly the job for all of us, certainly the job, the responsibility that I have, is to strike a series of balances here, recognising that the war in the Middle East is pushing up inflation, but it’s also weighing on growth. We did see, in a labour market, which is still, by historical standards and in average terms, pretty resilient and pretty robust, we did see a tick up in unemployment in the most recent figures. We have seen a softening in the labour market.
And so whether it’s the independent Reserve Bank weighing up all of those things or the government weighing up all of those things in the lead‑up to MYEFO, obviously we’ve all got balances to strike. But I’m not going to give free advice to the Reserve Bank. There’s good reasons not to do that. They’ll weigh all of this up when they meet early in November.
Sakkal:
You were once, Treasurer, I think it was, in the first term, heavily criticised for saying that the RBA was quote, ‘smashing the economy’. That tapped into I think a growing sense in the caucus, some economists on the left, groups like the Australia Institute, who say that the RBA is misreading the inflation problem effectively, that the source of the inflation problem is not the consumer base of Australian people going out and buying too much, but that it’s problems outside the RBA’s control. And so they’re using an arbitrary, blunt method. Now that view is heavily contested by most orthodox economists, and most of your colleagues are not really willing to say that publicly. What’s your view on that debate about the adequacy of monetary policy?
Chalmers:
Well, again, I want to be careful here because I don’t want to be seen to be kind of pre‑empting or positioning the discussions and deliberations that they’ll have around the table in a couple of weeks time. When I made those comments a while ago now, for me it was a sort of a self‑evident piece of economic analysis. But I can understand why it got covered the way that it did. And so that’s another reminder that treasurers, need to be really careful talking about monetary policy.
The Reserve Bank’s got its job to do. It will do that free of interference from me. I’ve got my own job to do: managing the budget responsibly, rolling out this cost‑of‑living relief via the tax system and in other ways. Those are my responsibilities, and I’m focused on them. The Reserve Bank and the government have got the same objectives here, price stability and full employment. But we’ve got different responsibilities. And so I stay out of their way when it comes to these discussions that they’ll be having early in November.
Sakkal:
Do you acknowledge, Treasurer, that at points this government has made the Reserve Bank’s job harder? Now I acknowledge all those savings. The opposition gives you no credit for them. But if you listen to most economists, they would say that some of the subsidies you’ve done, some of the non‑means‑tested welfare supports you’ve done, have made the RBA’s job objectively harder. Do you acknowledge that or is that not something you concede?
Chalmers:
I wouldn’t sign up to that line of argument. Obviously I read it from time to time. But we’ve been really careful. We’ve got the budget in substantially better condition than it was when we came to office. We’ve made sure that when we roll out cost‑of‑living help, we’ve done it in the most responsible way that we can. We found savings and banked upward revisions, the revenue and all of these things that the 3 of us have been talking about today. We know that budgets aren’t the primary driver of prices in our economy right now. Of course they’re not. But we can and are playing a helpful role in the fight against inflation.
Wright:
Just not to make this sort of an RBA‑love‑in or attack point, but Andrew Hauser, their deputy Governor, an Englishman, this week he got asked about productivity.
Sakkal:
Why is it relevant that he’s an Englishman?
Wright:
Well, I will get to that very point because he said there’s all these complaints saying that people say the government must solve productivity. He says that is a very Australian approach to take, that the government is the arbiter and the solver of productivity. And he made a pretty compelling point, saying there’s been a global slowdown in productivity over the last 10, 15 years, and it’s been tied to a drop‑off in business investment. And does he have a point? He said business itself has to embrace productivity. This is not just a government will come in and solve the situation.
Chalmers:
Well, of course that’s the case. I mean, if you go all the way back, I think to my first speech in the parliament, I made it clear that how we perform as the economy is partly a function of economic policy, but also the decisions taken by business about how they adapt and adopt technology and how they invest in their human capital and their capital more broadly.
And so of course, everybody’s got a role to play in turning around a couple of decades of very ordinary productivity growth performance. It is a global phenomena and it has been a historical reality in Australia for too long. And that’s why recognising the key role of the private sector, governments again have got a meaningful and a helpful role to play. I don’t think you could point to a budget in the last couple of decades which hasn’t had a broader or more serious crack at the productivity challenge in our economy than the one that Katie and I released in May. And that’s deliberate.
And in order to turn around productivity, it will take some time. It means operating on a number of fronts simultaneously. You know, approval times, foreign investments, human capital, national competition policy, tariff reform, artificial intelligence, all of these are the essential elements of a more productive economy. And we’re working away on all of these fronts simultaneously.
Even this week, a bigger effort this week on in the financial sector, trying to make sure that regulation better reflects our aspirations for growth and productivity in our economy. So, we’ve all got a role to play. The government is playing a role. We work very closely with business in this regard, and business has got a very substantial role to play as well, as Deputy Governor Hauser pointed out.
Sakkal:
Might just end on a few questions on the Budget and the politics at the moment. Treasurer, several of the budget measures, particularly the negative gearing change, have been widely supported by credible economists and other experts and think tanks for years. In combination, though, all the tax changes at the time they were made, was it the right time to proceed with a largely redistributive big taxing Budget at a time when inflation was just starting to tick up? Important to note that we got a rate rise very early this year, before the war started. Was it the right time to plough forward with such an ambitious big taxing Budget at a time when the economy was both slowing, the inflation pressure was becoming more severe, and now we know the speed limit on the economy was tightening in a way we didn’t expect. Was it the right timing?
Chalmers:
There’s a heap of important elements to your question, Paul, but first of all, on your characterisation of taxing, don’t forget that over the 4 years of the Budget, we’re returning the proceeds from the tax changes to workers and businesses. There’s a $4 billion tax cut package for businesses and start‑ups, there’s the income tax cuts that we’re talking about. And so revenue neutral over the 4 years of the Budget. That’s the first point, just in terms of your characterisation. Now, on your broader points –
Sakkal:
Revenue rises in the long term –
Chalmers:
But over the 4 years of the Budget, we’re returning the proceeds of the tax reforms deliberately in the form of tax cuts for workers and tax cuts for businesses. I just didn’t want to skate past your characterisation, Paul, in case people thought that I was signing up to it.
But on your bigger point, your broader point around timing, I think if you wait for calm in the world, you’ll be waiting forever. The relative calm of the post‑Cold War period has been replaced by chaos. And these rolling economic shocks mean that we are in a very substantial period of global economic uncertainty, volatility, risk and flux. And so waiting for that to end I think will would mean waiting forever, and it means that some of these challenges would become harder to deal with, including the fact that too many people, especially young people, have been locked out of the housing market for too long. So, I don’t think it was an option to wait for calm, because that calm might never come.
In terms of the domestic economic conditions, I mean, I see the Budget very much as responding to the heightened pressures – inflation, productivity and global economic uncertainty. The 5 elements of the Budget – energy security, cost of living, tax reform, productivity reform and budget repair – they are arguably the 5 best things that you could be doing in the context of this volatility in the global and domestic economies. People will make the case that now is not the right time.
I think in a lot of instances, to be fair, those are people who would argue that it’s never the right time. There are a lot of people who disguise their arguments in all kinds of ways. Some people in our community would like everything in the tax system and the housing market to stay exactly as it is, and they’ll mount all kinds of arguments against changing it. For us the least surprising thing has been that these ambitious tax reforms have been contested and contentious. Of course they are. They always are. When you’re reforming the economy and especially the tax system, you’ll get all kinds of feedback, but I don’t think that that’s a reason to delay these really important reforms.
Sakkal:
The Prime Minister was very strong in the lead‑up to the Budget. I can’t recall if you made similar points, but that a big kind of activist move was needed to show, particularly, voters drifting off into the hands of populists, that the government was working for them. The primary vote has just drifted southwards since the Budget, as it was before the Budget, really with no change in the downward shift. Is there a pivot required in the way the government talks about the economy? Do you give any weight to these calls to have a more pro‑growth agenda? Do you need to do something different or I don’t really understand the argument that if this was meant to stem the bleeding to One Nation, the primary vote’s dropped, that this has been a success politically.
Chalmers:
Well, we see the budget in economic terms and the reform agenda in economic terms. I know there’s political commentary around that. And when people are under pressure, of course you see that reflected in politics and in opinion polls. Again, it’s not especially surprising, nor is it irrelevant to us, of course we notice that.
In terms of the risk that people feel disconnected and disregarded in our economy, that is a good reason to change the status quo. The status quo is not working for people in the housing market, in the tax system and in other ways. When you’re a decision-maker in Australian politics, you’ve got really 2 options when you see all of this discontent. One is to just pick at it and try and prey on it – that’s what the Liberals, Nationals, and One Nation does – or to try and address it. And that’s what we’re doing.
And you know, there are the legitimate underlying sources of discontent. I think the housing market is really probably the defining issue when it comes to intergenerational unfairness in our economy and in our country. And so we took hard decisions to deal with that. Not because we expected that to play out immediately and politically and to pay off in opinion polls and in other ways, but because it’s the right thing to do. And I think over time that will become clearer to people.
Now, on the growth agenda, we haven’t come to this realisation in a couple of weeks, last couple of weeks or last couple of months. Have a look at the productivity package in the Budget, bigger, broader effort on productivity than what you would have seen in any Budget in the last couple of decades. And so we do have a very substantial growth agenda across all of that productivity package and elements of the tax reform plan as well. This is not a government which is solely focused on distribution. We’re focused on growth as well and making sure that more people can have more opportunities in a more productive, more competitive, more dynamic, growing economy. That’s our mission.
Wright:
This is a left field, just to finish up, Treasurer, but the Western Sydney Airport will open and there’s more than $5 billion of federal taxpayers’ money in that. It’s the first time that the country’s actually had competing airports, major airports in the same capital city. I’m just wondering. You’ve talked about productivity, you’ve talked about competition, whether the fact that Western City Airport’s opening will put downward pressure on airfares into Sydney in particular, or provide an outlet for some more competition to our Qantas/Virgin duopoly on the domestic market.
Chalmers:
Well, I mean, it certainly means more competition in terms of it gives the good people of Sydney another option and obviously freight options and all the rest of it as well. So, it can only be a good thing for competition and for the economy more broadly. It’s a really exciting development. It’s a long time coming again, for a time, incredibly contentious and controversial, but I see it as a really exciting development. Some of my colleagues and counterparts in other parts of Asia raised it with me in the course of the last couple of weeks. It’s a really big deal. It’s a really big deal. It’s a really great thing for the economy of Western Sydney, which is massive and growing in very welcome ways and it will make a difference to the national economy as well.
Now when it comes to the particular elements around ticket prices and freight charges and all the rest of it, we’ll see how that plays out. But in aggregate, in principle, a very good development for competition, but more than that, a good development for that really important part of our national economy.
Sakkal:
I didn’t know Shane was gonna jump to airline competition quite so aggressively.
Chalmers:
He likes to surprise us both.
Sakkal:
He does. I’ll just quick jump back. I know you’re tight for time, Treasurer, but if I could, you know, I’m obsessed with the internals of the government. I’m a bit of a freak like that, so I might just quickly jump onto the politics again. Outside of the policy critique, which you’ve gone through in quite a lot of detail here, another part of the debate around the economic narrative at the moment has been around your internal style.
Treasurer, you said in comments to our newspaper last week, you made the point to your colleagues, to the caucus, the very large caucus, that you like and respect your colleagues. I thought that was a striking comment. There is a view that the Prime Minister is kind of a factual master, always trying to seek to, you know, solidify his internal position, whereas you’re more of a lone wolf in the government. Explain to listeners and to us, Treasurer, what you meant by that comment. Why did you feel you needed to tell your colleagues that you like and respect them? And what is your internal clout and position in the government, in your mind?
Chalmers:
If you just take a step back for a moment when you contacted me, as you did, being a good professional journalist, when you contacted me last week about that absolute stinker of a piece that you wrote about me on Saturday, I tried to be really upfront with you and say that, I acknowledge that the government’s under pressure. I do genuinely take some responsibility for that. I’m driving some really difficult reforms through the parliament. And I know that that’s playing out and makes life tougher for some of my colleagues, in particular.
And I do care about that, and I do care about them. And I know you’ve picked up on this thing about liking and respecting my colleagues. I mean, I do. And if you’re asking me about my kind of internal political or factional management style, I think it is a fair criticism of me to say that I spend a lot of time locked in windowless rooms, working very hard on some of these difficult economic challenges. I should make more time for my colleagues. I see a lot of them. They come around and talk to me about the economy all the time. I do as much as I can.
But if the message is that I need to do more of that, then I take that message seriously. I took your piece seriously, and I took the feedback at the core of your piece seriously as well. And I have tried to operate – and I’ve known you for a little while, Paul. Shane’s known me for a long time – I have always tried to operate on the basis that none of us is beyond criticism. Of course we can all do better. Of course we can, me included. And so I tried to acknowledge that in the spirit of humility, responding to that piece that you ran on the weekend about all of these questions.
Sakkal:
Yeah, I did appreciate the frankness of the comments, Treasurer, and that’s why I found them striking because you can often get a quote from a minister that says absolutely nothing. Your comments said something of substance, but they intrigued me.
Just on the Prime Minister, Treasurer. I mean you are the minister in charge of the budget with Katy Gallagher, but you carry the can for the government’s whole economic agenda, and there are lots of big spending pressures. You’ve spent many billions on subsidies for low‑paid workers, which is of course an important imperative. There are billions going into the suburban rail loop, which some of your ministerial colleagues do not believe is an important imperative, but is something the Prime Minister can care about deeply. Do you wish that your Prime Minister was in the Hawke or Keating mould and someone who took the economic challenge to be at the absolute highest level of his priority?
Chalmers:
Oh, I think he does. I genuinely think he does. And you know, without talking out of school about cabinet meetings or ERCs and the like, I mean, he’s incredibly engaged in the key economic challenges and circumstances that confront us, and I see that as a very good thing. I see commentary from time to time, but we actually work really closely together, is very engaged in ways that I welcome on some of these key questions, and that’s a good thing for the government.
And when it comes to treasurers, I mean, treasurers are lightning rods when the government is under pressure. It’s not unusual throughout the course of the modern history of our country and our politics that treasurers are often lightning rods. I’m okay with that. Genuinely okay with that. I understand when I signed up for this gig, when I got sworn into this gig and I genuinely take responsibility for some of the hard stuff that we’re pushing through the parliament which is being reflected in politics and opinion polls. And as I said before, I know for colleagues, it puts pressure on them when you’re doing hard things in the parliament. I understand that, but I know that people think and understand how important it is that we reform the housing market, reform the tax system, not because it’s easy, but because it’s the right thing to do.
Sakkal:
You’ve said that you take your share of the blame for the difficult political moment. Is the rest of that blame – can some of that be sheeted home to a Prime Minister who’s lost quite a lot of his skin in terms of approval ratings over the past year?
Chalmers:
Well, I mean, obviously I’m not going to come at it that way. I mean, the government’s lost some paint over the course of not just the last 6 months or so, but over a longer period than that. It’s up to other ministers and the Prime Minister, how they describe their part in that. I mean, you know, I’m being upfront and saying that when the government’s under pressure and partly because we’re doing difficult things, these are difficult things in my portfolio. And so I think it’s only right and only fair that I put my hand up and take responsibility for my share of that. The way that other people describe their role in that and their responsibility for that is up for them.
Sakkal:
This has just been a bugbear of mine and it’s not relevant to what we’re talking about, but it will be my final question, Treasurer, are you tempted to take more credit for what’s happening with house prices? I’ve heard from some of your ministerial colleagues who just say we should stop tiptoeing around this issue. As Shane’s reported repeatedly, polling does suggest that the majority of Australians are comfortable with prices decreasing. Are you tempted to just say we’ve made tax changes that are contributing in part to that drop off, that correction and we own that and it’s good?
Chalmers:
Well, I think we’ve said part of that. I mean, we’ve acknowledged that there’s a few things going on in the housing market. The tax changes are one of a number of influences, including interest rate changes and broader macro conditions. And so I think it would be dishonest to say that the tax changes are solely responsible or that they’re not responsible at all. They’re part of a number of reasons why house prices have softened a bit.
It’s not actually that unusual to see house prices come off. Even in the last couple of decades of extraordinary house-price growth. We’ve had at least 7 times where prices have come off, including under previous governments. And so it’s a factor, but not the only factor. We do want to make it easier for first‑home buyers to get a toehold in what is a market that’s been too difficult for too long. But it would be wrong to attribute all of the recent movements in house prices to the changes that we brought in in the Budget.
Sakkal:
Treasurer, we have kept you for too long and we genuinely do appreciate you coming on at a tough moment. Thank you.
Wright:
Thanks, Treasurer.
Chalmers:
Appreciate your time, too. Thanks very much, guys.