Sally Sara:
The brakes have been slammed on the US‑China trade war with the 2 countries agreeing to slash the steep tariffs on each other for 90 days. The deal was struck following negotiations between the 2 sides in Geneva as Australia and many other economies braced for the financial fallout of the clash.
The federal Treasurer, Jim Chalmers, is my guest in the studio this morning. Treasurer, welcome back to Radio National Breakfast.
Jim Chalmers:
Thanks very much, Sally. Thank you. Nice to see you.
Sara:
What’s your read on what’s happening in China. This looks like a significant de‑escalation. What do you think?
Chalmers:
It is significant. It’s welcome. It’s encouraging. But we need to temper our expectations here. There’s still a lot of unresolved issues. There’s a lot of uncertainty, unpredictability, volatility in the global economy. So we welcome these developments over the course of the last day or so. Australia’s got a lot to lose from a trade war between the US and China in particular, and so we want to see these trade tensions de‑escalated permanently, not temporarily.
Sara:
What does it mean for Treasury’s forecasts about the impact on the Australian economy? Will they need to be redrafted?
Chalmers:
One of the lessons of the last few weeks, or the last couple of months, has been that there’s a lot of unpredictability from day to day – whether it’s announcements out of the US or the way that markets have responded to those announcements. And so it’s best not to overreact or underreact each day with new news on this front.
Our Treasury modeling makes it really clear that there are a number of ways that these trade tensions impact us. But the biggest way is the impact on global demand that comes from a dramatically weaker Chinese economy. And that’s one of the reasons why a trade war between the US and China is obviously not in Australia’s interests.
What we do is we continue to analyse and monitor and engage with counterparts to make sure that we are doing everything we can to shield ourselves from the fallout of these sorts of developments.
I think it’s worth reminding your listeners and Australians more broadly that Australia is really well placed and really well prepared to deal with the fallout from this, but we do have a lot of skin in the game. That’s why we welcome the announcement over the last day or so, but we’re not getting carried away by it.
Sara:
Even though there’s already been this pause announced for the moment, a lot of companies, whether it’s retailers, manufacturers, exporters, shipping companies, they’ve already made decisions and taken actions already. Are we already expecting a bit of a bump because inventories have gone up, shipping slowed down?
Chalmers:
It certainly does impact already, the way that investors and businesses and industries more broadly look at their opportunities in the world. And one of the things I’m proudest of is the way that Prime Minister Albanese responded to the tariff announcement early in the campaign. That’s because our priority here is to make our economy more resilient, but also to make our export offerings, our trading relationships, our markets for our exports, more reliable, more diverse.
A lot of the work that we’ve been doing engaging with the Americans, but also engaging much more broadly, from the Prime Minister down. In my case, even in the last few weeks, I’ve spoken to my counterparts from Japan, Korea, Indonesia, the UK, New Zealand, to make sure that our trade offerings are into good, diverse, reliable markets. And I think businesses are going through a similar process of reconsidering the best way to conduct their business
Sara:
My next question is have you contacted your US counterpart, US Treasury Secretary Scott Bessent since the election?
Chalmers:
Not since the election. As you know, I sat down with him for detailed talks not that long before the election. Obviously, there’ll be opportunities to engage with him, but the government is engaging with our American counterparts, as you would expect us to, but not just the Americans, right around the region and right around the world.
Sara:
Anthony Albanese is going to Indonesia this week, and then on to the Vatican ahead of services with the new Pope, Pope Leo. Donald Trump also has a busy travel itinerary ahead. Are there any potential opportunities for their paths to cross and to have some informal talks on the sidelines of various events?
Chalmers:
I’m not sure about that. I’m not sure that the travel plans on either side have been perfectly completed yet. But as I said, we look for opportunities to engage wherever we can and whenever we can. That’ll be the approach that we continue to take.
Sara:
You’re listening to Radio National Breakfast, and my guest in the studio is the Treasurer, Jim Chalmers. You have a new Assistant Treasurer in Daniel Mulino. What are the top priorities you want him to work on?
Chalmers:
He’s an absolutely outstanding appointment. I’m very grateful to the PM, not just for the chance to serve as the Treasurer for a second term. But also to work with these really quite extraordinary colleagues, a lot of intellectual horsepower, a lot of experience and energy, enthusiasm and dynamism. Daniel, Andrew Leigh, Clare O’Neil, Anne Aly, they’ll all be sworn into the Treasury portfolio today, and that’s a terrific thing. I’m really looking forward to working with all of them. I’ve already sat down with Daniel Mulino. We had a good meeting yesterday afternoon, and with Andrew Leigh.
Overall in the portfolio the big priorities are managing this global uncertainty, making our economy more productive, building more homes, rolling out the tax cuts, providing this cost‑of‑living help, continuing to make progress on inflation. Those are our overarching priorities. And I’ve obviously spoken to Daniel and also Andrew about their role in that. They will be an absolutely extraordinary team, and I’m looking forward to working with them, and I congratulate them on their swearing in later this morning.
Sara:
It was interesting, the priorities you just listed, tax reform wasn’t there? Why is that?
Chalmers:
I did mention that we’re rolling out another 2 rounds of tax cuts, we legislated them.
Sara:
But tax cuts is different from reform.
Chalmers:
Well, they were at risk. They were at risk in the election, and I’m pleased that they’ve survived, because that is tax reform. Cutting tax rates is tax reform, and we’ve shown –
Sara:
It’s bracket creep.
Chalmers:
It’s returning bracket creep, and our opponents wanted to take more bracket creep, so that was at risk at the election. I’m pleased that those tax cuts will now proceed. Not the only part of our tax reform agenda, we’ve made progress on multinational tax, the PRRT, we’ve got the Instant Write‑Off for small business. We’ve got the production tax credits in areas that will help us become a renewable energy superpower. And so there are a whole range of tax reforms that we are progressing, but I’m especially pleased to see that those income tax cuts will proceed because we won the election.
Sara:
Former Industry Minister Ed Husic has criticised his own dumping from the ministry, and also that of former Attorney General, Mark Dreyfus, describing the Deputy Prime Minister as a factional assassin. What do you think of that description?
Chalmers:
I don’t describe Richard that way. I work closely with Richard, and I respect him, and I respect Ed and Mark as well.
I can only assume that today will be a difficult day for them to see their colleagues sworn in at Government House, and so I can understand that Ed and Mark are unhappy. Unfortunately, this is what happens when you’ve got too many good people for a limited number of spots. I respect both of them, I like both of them and I can understand why they’re unhappy.
Sara:
Did Ed Husic go too far in that description of Richard Marles?
Chalmers:
I’m not going to engage in a running commentary or parse Ed’s comments. Ed’s got a right to express a view, and obviously he’s unhappy. I would be unhappy too if I was Ed. And so he’s made his views clear. That’s his right. Again, my focus is on the colleagues that have been appointed, the opportunity to work closely with them and to work for the Australian people.
I don’t spend a lot of time thinking about or talking about the internal machinations of the Labor Party. I think people know that, I’ve got a job to focus on, and that’s what I’m doing.
Sara:
The ministry appointments, are they based on merit or factional priorities?
Chalmers:
They’re based on a vote of the of the party room. They’re based on the numbers in the party room, which try to ensure that there is broad representation across the country. Again, I’m not an expert on the way that that all happens.
Sara:
You’ve been around in a senior position for a long time.
Chalmers:
But I think anyone who knows me knows that I don’t spend a lot of time thinking about, talking about, or engaging in the internals. I’ve got a job to do. I’m grateful to the PM for giving it to me. I don’t spend a lot of time on these other issues.
Sara:
Let’s look at another issue. The Liberal Party has been increasingly outspoken against Labor’s plan to increase the tax rate on earnings of super balances above $3 million, given it will tax unrealised gains. Are you determined still to legislate that policy this term?
Chalmers:
We’ve made that clear that we haven’t changed our policy. We announced that policy more than 2 years ago now. We consulted on it. It is a policy that affects 0.5 per cent of people with balances above $3 million. It is still a concessional tax treatment for people. It’s slightly less concessional. And it helps us fund things like stronger Medicare or tax cuts or cost‑of‑living help or building more homes. And so it’s an important part of our budget.
The calculation of unrealised gains exists elsewhere in the super system. It’s not unique to what we are proposing. It affects very few people. It’s still concessional treatment. It’s been part of our budget for a little while now. It’s been before the parliament for a little while now and we haven’t changed our approach to it.
Sara:
Jim Chalmers, time has run out for us. Thanks for coming into the studio this morning.
Chalmers:
I really appreciate it, Sally. All the best.