SABRA LANE:
The Federal Government has promised cost‑of‑living relief in next month's Budget. Ahead of that, the Treasurer Jim Chalmers along with the Reserve Bank chief Philip Lowe are in Washington right now for a number of important meetings with the World Bank and the International Monetary Fund. Mr Chalmers joined me earlier.
Jim Chalmers, you've had a number of meetings in Washington, what's the mood like?
JIM CHALMERS:
I think there's broad understanding amongst my G20 counterparts and also colleagues at the International Monetary Fund and the World Bank that the global economy is in a precarious place right now and it's characterised by uncertainty and volatility and that's why it really is an important time to take the temperature of the global economy as we put the finishing touches on the Budget so that we can closely align and calibrate our economic strategy with the pressures that are coming at us from around the world.
LANE:
Yesterday's jobs figures surprised many people here yesterday, prompting some economists to forecast that maybe the Reserve Bank might resume lifting interest rates again from next month. I know that you can't comment on what the Reserve Bank does but if that happens, it'll be hard news for borrowers, particularly the 800,000 people coming off ultra cheap, fixed rate mortgages this year. How worried are you about how they are going to cope?
CHALMERS:
I think certainly Australians are under the pump. They're under pressure from inflation which has been more persistent than anybody wanted to see and these interest rate rises do mean that people have got to find more money in their household budgets to service mortgages, that does put people under pressure, I think that's broadly recognised and understood, certainly by the government. You're right that the Reserve Bank takes its decisions independently. Obviously, they take into consideration what's happening in the jobs market, but they also take into consideration what's happening around the world and what's happening in areas like consumption and retail and in that regard, it's been a bit more of a mixed story. So they'll weigh all that up and they'll come to a decision independently. I'll focus on my job which is handing down a Budget in less than four weeks' time.
LANE:
You're going to deliver some energy relief in that Budget along with the states. Will that be the extent of the cost‑of‑living pressure that you're able to give given the economic circumstances we are now in?
CHALMERS:
We're still putting the finishing touches on the Budget. There'll be some key discussions in the next week or two to finalise the key decisions in the Budget but you're right that a bit of assistance for electricity bills will be a centrepiece of the Budget and it's a good example really of an area where we can provide a bit of cost‑of‑living relief without blowing the Budget, without adding to these inflationary pressures and that is a bit of a guiding light when it comes to putting the Budget together: cost‑of‑living relief without adding to inflation but also laying the foundations of future growth and also trying to make our economy more resilient to these sorts of international shocks that we're dealing with right now.
LANE:
You've warned of choppy times ahead. The Reserve Bank has also said the path to a soft landing in Australia is narrow. Many will be worried that people are being softened up for a recession. How hard will it get this year?
CHALMERS:
We expect our economy to slow considerably this year, there's no use pretending otherwise when you've got this combination of a slowing global economy mixed with the impact of these interest rate rises which began before the election and continued afterwards. Certainly Treasury, the Reserve Bank and others expect our economy to slow quite a bit over the course of the next 12 to 18 months or so and we are upfront about that. It's one of the reasons why the strategy in this Budget in May will be similar to the strategy in the Budget in October but it also needs to try and strike a balance between supporting people through a difficult time without adding to inflation but also making sure that we can grow out of this downturn by investing in our industries and in our energy market and in all of these places where we know we will get the growth that we need in our economy coming out of what will be a difficult period.
LANE:
Yes. How hard will it be?
CHALMERS:
Our expectation or the Treasury's forecasts - and we'll see them updated in the May Budget, certainly the Reserve Bank's forecasts - neither of them are forecasting a recession in Australia. But I think the point that you make about a hard landing, particularly in other countries around the world, we won't be completely immune from that if it happens and we need to be realistic about that. I think it's possible to be optimistic about our own economy and its future but to be realistic about what a global slowdown would mean or what a hard landing in some of these other economies would mean for us. And that's why I think we can be confident about the future but we can't be complacent because as I said at the outset, the global economy is a precarious place right now.
LANE:
The US and Europe have had bank collapses in recent weeks, Australia hasn't. You think there's a good reason why the contagion hasn't caught on here. You've shared it with your colleagues in Washington. Is that right?
CHALMERS:
I have, yes. I think one of the key contributions that we can make as Australians in these key discussions is really about the fact that our banks are well regulated, they are well capitalised and that makes them well placed to deal with some of the tremors that are in the global banking system right now and so I was able to make a contribution on this front. We need to make sure that other countries have got their regulatory systems up to scratch, we need to make sure in particular that all of us have the capacity to react quickly if the problems emerge in the banking system because one of the big differences between now and the Global Financial Crisis - apart from the fact that banks are better regulated now than they were 15 years ago - but the pace of these problems emerging can be much quicker because of digitisation and social media and the like. And so our regulators and governments need to be quicker and smarter to make sure that we stay on top of these issues as they emerge.
LANE:
Mr Chalmers, thanks for joining AM.
CHALMERS:
Appreciate it, Sabra. All the best.