PETER STEFANOVIC, HOST:
Joining us is the Treasurer, Jim Chalmers, but before we get to the Treasurer, the Shadow Treasurer Angus Taylor spoke a short time ago calling on Jim Chalmers to come up with a plan.
ANGUS TAYLOR, SHADOW TREASURER:
What are they going to do? Are they going to wait until October before they deal with these pressures that Australians are really suffering from right now? Are we going to get more pictures painted by the Treasurer? How many pictures has he got to paint before he's actually going to do something?
STEFANOVIC:
Okay. That's Angus Taylor. So let's bring in Jim Chalmers now. Treasurer, good morning to you. How bleak is the picture that you are going to paint today?
JIM CHALMERS, TREASURER:
Well I'll paint a realistic picture today of the economic challenges that we've inherited from our predecessors, and what I'd like to do, what I hope to do, with this statement to the Parliament is to bring Australians into our confidence about the conditions as the Treasury expects them as we go about putting together this Budget in October. I think it's self‑evident that our economy is growing but so are our challenges and I want to outline some of those challenges, but also remind people of the sorts of things that the Government is doing ‑ the elements of our economic plan with the design to deal with these pressures which will get a little bit worse before they get better.
STEFANOVIC:
So numbers have obviously worsened since March. First of all, what do you now expect inflation to peak at?
CHALMERS:
The Treasury's expectation is that inflation will peak higher than 7 per cent towards the end of this year but then it will begin to moderate throughout the course of next year. And that is obviously a very high peak for inflation in historical terms in Australia.
STEFANOVIC:
How much, Treasurer?
CHALMERS:
It will be north of 7 per cent. I'll go through the details more specifically when I release the statement.
STEFANOVIC:
Okay.
CHALMERS:
But north of 7 per cent, people are already finding it especially tough with these skyrocketing costs of living and it will get tougher before it gets better.
STEFANOVIC:
Is 3.5 per cent unemployment the floor now?
CHALMERS:
Well over recent years there's been a big conversation about this, a big debate about what full employment looks like and what the floor is in the unemployment rate. It's been lower than expected and that is very welcome news. It's one of the things that we've got going for us as we confront this heavy weather in our economy.
We've been getting good prices for our commodities until recently. We've got that unemployment rate, which is low in welcome waves, but we've got a series of challenges as well. We go into it with some advantages but what I want to talk about today is really about the combination of the impact of rising interest rates and falling global growth on our own economy which will flow through to things like the unemployment rate.
STEFANOVIC:
Okay. Well on that global story at the moment you know the IMF said yesterday the world's basically on the precipice of a global recession. Can you guarantee, can you give any kind of guarantee that Australia won't head into a recession either this or next year?
CHALMERS:
It's certainly not our expectation. It's not the expectation of the Treasury or any of the private sector forecasts that we would get that outcome. Our economy is still growing, so are the challenges attached to that. But our expectation is that we will continue to grow. But the global economy is treading a pretty perilous path right now. There are a lot of concerns coming out of the US, coming out of China, coming out of Ukraine of course, and that will obviously have implications for us here at home. We are performing better than the rest of the world but obviously that doesn't make it easier for people to pay their bills here.
STEFANOVIC:
Yeah.
CHALMERS:
And so, the focus of the Government, the focus of our economic plan is on the things that we can influence, sorting out those supply chains in the economy, providing responsible cost‑of‑living relief where we can and trimming the sort of rorts and waste in the Budget which have given us that trillion dollars of debt with not enough to show for it.
STEFANOVIC:
Housing affordability, that one is getting worse and worse. I do want to ask you, those at the lower end of the scale though, those who bought using the Government's home guarantee scheme with just a minuscule deposit, do you expect that you will have to bail those new homeowners out?
CHALMERS:
That's not our current expectation, Pete. You know, when people apply for and become eligible for those programs one of the things that is taken into consideration is whether or not they can service those loans if interest rates were a bit higher than they were at the time of the loan. So that's a key feature of what the regulators and the Reserve Bank and others have focused on. There is a buffer in loan approvals to allow for this kind of situation.
STEFANOVIC:
Okay. Just a final thought here. A lot of numbers swimming around people's heads might not make sense to those who don't study it every day, Treasurer, but how tight are things going to get for folks at home?
CHALMERS:
We're in for some heavy weather and there's no use pretending otherwise, but my belief is that we will weather the storm. There is cause for optimism in the medium‑term in our economy, but first we've got to get through a pretty difficult period together. My message to your viewers, Pete, is that we will do whatever we responsibly can to make it easier for people as we go through this heavy weather, but on the other side of it, we have optimistic expectations for the future of our economy and the future of our country.
STEFANOVIC:
Okay. That's the Treasurer Jim Chalmers live from Canberra.
Treasurer, thank you.