Peter Stefanovic:
Treasurer, thanks for your time this morning. Looks like we’re matching. Hey, how about that? So, good news for homeowners.
Jim Chalmers:
Not for the first time, Pete.
Stefanovic:
Exactly. Good news for homeowners yesterday, Treasurer. But it does mask deeper issues for the country. Productivity down. That’ll mean wages, investment, tax takes are all down. Is it a crisis?
Chalmers:
No, but it’s a big challenge that we’re confronting together, this productivity challenge in our economy. Let’s not skip lightly over the very welcome news yesterday that interest rates have been cut for the third time in 6 months and that means very meaningful relief for millions of Australians with a mortgage. It means more money in the pockets of people who are under pressure. So, a very welcome development yesterday.
Now, we’ve been saying for some time now we’ve got a productivity challenge in our economy. We’ve got a big agenda to address that and we are consulting, we’re working with the broader community on the next steps as well. But that productivity challenge, as the Reserve Bank pointed out yesterday, is not a challenge that’s just emerged in the last couple of years. It’s been a feature of our economy for the last couple of decades. It’s a global challenge. Most of the countries with which we compare ourselves are going through a version of this productivity challenge and so there’s a lot of appetite and willingness, from the government point of view, to work together, to turn that around over time.
Stefanovic:
Are we now paying the price, though, for big government and record spending? Is that why productivity is as bad as it is?
Chalmers:
No. Our productivity challenge has a number of sources. It is primarily – we’re not getting what the economists call the ‘capital deepening’ in that we’ve got a lot of investment, a lot of business investment, a lot of capital flowing, but it’s not creating that capital deepening that we need to see in our economy. We’ve got some mismatches in skills. Our economy is not dynamic enough. So, there are a number of reasons why we’ve had this productivity challenge for some time now.
It’s worth remembering that the worst decade for productivity growth in the last 50 or 60 years was the Coalition decade, and so it will take time to turn that around. It’s an entrenched challenge in our economy, which we have recognised even before the Reserve Bank made its comments and provided its forecasts yesterday. And that’s why it’s so important that we’ve made this progress in our economy in some of the nearer-term issues. Inflation down, real wages up, unemployment low, interest rates falling, we’ve got the debt down. All of those things are very good developments and it provides a foundation now to deal with the global uncertainty which surrounds us and the big economic challenges which confront us. And productivity is the main medium- and longer-term challenge that we’ve had in our economy for some time and it’s a big focus of the government to turn that around.
Stefanovic:
Ok, so now that it’s at 0.7 per cent in the medium term, how does that change your focus or your plans for the roundtable next week?
Chalmers:
It doesn’t change our focus at all. We had already identified this as the major focus of the Economic Reform Roundtable. That reform roundtable is primarily focused on the productivity challenge in our economy. That’s an important way that we make our economy more resilient and our budget more sustainable. And so those 3 goals, those 3 agenda items next week are closely related but productivity is the most important of all of them. Because as you intimated in your earlier question, if we can make our economy more productive, we can lift living standards over time and make people better off. It is the primary driver of that over time. And that’s why it’s the primary focus not just of the roundtable next week, but of the government and its economic team in particular.
Stefanovic:
Okay, is it going to tackle tax reform? Because it looked like it was going to do that, but then that was watered down by the Prime Minister. So, are you going to reverse back to that?
Chalmers:
Well, I don’t agree with the way you’ve characterised that. The Prime Minister, I think, made the obvious point last week that our tax policy is to cut income taxes for 14 million Australians. That’s our focus and that’s our policy.
Stefanovic:
So, no more changes this term?
Chalmers:
Well, those were the points that the Prime Minister made last week and you said something about Ted O’Brien earlier on the show, I obviously didn’t catch that. But let’s not forget that our political opponents took to the last election a policy to increase income taxes on 14 million Australians. And even after doing that, they still had bigger deficits and more debt and so they’re not especially credible when it comes to tax. We’ve got a tax agenda which is to cut income taxes. No doubt people will bring all kinds of ideas on tax to the Economic Reform Roundtable. We’ve tried not to artificially narrow or limit the contributions that people make, we will listen respectfully, but our focus and our priority on tax is cutting taxes for 14 million Australians. Our political opponents tried to increase taxes on 14 million Australians.
Stefanovic:
That’s true. Are you and the Prime Minister on the same page at the moment?
Chalmers:
Yes, we are, absolutely. And we meet and discuss our economic agenda, the Economic Reform Roundtable, very regularly. We’re in touch most days, if not every day in one way or another and I think that’s what people expect. We work very closely together, we’re very closely aligned and when you look at the way that we work together with Katy Gallagher and other colleagues, you can see the progress that we’re making in our economy as a consequence.
The interest rate cuts yesterday were a powerful demonstration of the progress we’ve made on inflation. We’ve kept unemployment low. Later today, we’ll learn about more growth in real wages in our economy. So, these are some of the fruits of that partnership. We work very closely together on the economy. We discussed the Economic Reform Roundtable, as you’d expect. I’m not sure why that’s front page news today.
Stefanovic:
Okay, Treasurer, just on a different topic this morning. You were on this program a couple of weeks back and were the first to say it was going to be a matter of when, not if, a state of Palestine was called. Now that it has been by our government, how does our government, or your government, propose to actually demilitarise Hamas, the terror group that controls Gaza?
Chalmers:
Well, first of all, I might have been the first to say it on your program, Pete, but I wasn’t the first in the government to use that language and nor was I the first to say that we were working towards the progress that was announced by Minister Wong and the Prime Minister on Monday. This is all about making sure that we are making a contribution to the international momentum and progress which is being made on this question. And we see recognition as an important step towards that two‑state solution and the reason we want a two‑state solution, when you boil it down, is because we want families in Israel and in Palestine to be able to raise their kids in peace and Hamas doesn’t share those objectives. This is about isolating and excluding Hamas from the future government of a Palestinian state. And so, we will continue to work closely with our friends around the world to see that outcome, to see this progress and to keep the Palestinian Authority up to the mark on the commitments that they’ve made around some of these key questions.
Stefanovic:
How do you demilitarise Hamas, though. Have you got any thoughts on that?
Chalmers:
Well, the Palestinian Authority has made a number of commitments on this front and as I said a moment ago, we’ll work with the international community to make sure they come good on that. Obviously, there’s a range of complexities here. We’re not naive about how difficult the coming months and years will be. But if you come back to the principle here, the most important thing is that we see peace in the region, that Palestinian and Israeli families can raise their kids in peace, and we see that as an important step in that direction. Hamas will have absolutely no role. We want to see the hostages returned. We’ve made all of that clear. And we will continue to work with the international community to make sure that this recognition and a two‑state outcome that we want to see in that fraught part of the world comes to fruition in the best way possible.
Stefanovic:
Ok, well, we’ll leave it there. That’s the Treasurer, Jim Chalmers. Thanks for your time as always, Jim. We’ll talk to you again soon. We’re off to a quick break.