Sally Sara:
The federal government says consular crisis teams are being deployed to the Middle East to help Australians trying to return home amid the widening regional conflict.
The Treasurer has warned the economic consequences of the war are uncertain, but they are ‘likely to be very substantial.’ Jim Chalmers joins me now in our Parliament House studio. Treasurer, welcome back.
Jim Chalmers:
Thanks for having me back, Sally.
Sara:
We’ve seen developments overnight, the US sinking an Iranian warship in the Indian Ocean near Sri Lanka and also reports of possible intercepted projectiles over Türkiye as well. How worried are you that this conflict is now spreading?
Chalmers:
Well, obviously, this is now a bigger and broader conflict. I heard Penny Wong say earlier this morning that we’re talking about 11 countries now where there are hostilities. And so clearly these are concerning developments that we closely monitor in my part of the government. We monitor very closely the impact on the global economy and on global markets, but primarily the government is focused on the human consequences of what’s happening here and the regional impacts.
Sara:
Given the human rights record of the Iranian regime, is it important in Australia’s view that there is regime change in Iran?
Chalmers:
I think we’ve made it clear ever since Saturday night our time that we can consider the Ayatollah’s regime to be a brutal and oppressive regime, and that our sympathies lie with the Iranian people who have been brutalised and oppressed for too long.
Now, we weren’t involved in initiating or carrying out these strikes, as you know, but we’ve made our views clear about the regime and our focus now is on the 115,000 or so Australians who are in the region, some of whom came home last night, which is a very good thing, and 3 more flights to leave today, which is also a very good thing. But the government’s efforts are really focused on trying to help the Australians who are caught up in this conflict.
Sara:
In the view of the federal government, are the US and Israeli strikes on Iran justified, given the concerns you’ve just raised about the humanitarian and human rights record of the Iranian regime?
Chalmers:
Well, we’ve made our views clear. You’ve heard other ministers in the government and the Prime Minister talk through our position on this. We weren’t involved in initiating it, but we are obviously very critical of the regime and what the regime has been doing to the Iranian people for so long. And so, in that regard, we’ve been supportive of what is happening here, but we haven’t been involved in it.
Now, for us here in Australia, as I said, our focus is on the Australians caught up in the region. My focus is on the economic implications. You rightly cited at the start of this interview that those implications for the economy are uncertain but likely to be substantial, and they will weigh very heavily on our thinking as we put the Budget together.
Sara:
We have the Canadian Prime Minister visiting Australia at the moment and will be addressing the federal parliament here. In your view, what is the role of middle powers in situations like this? Is it to ensure that military action that’s taken is legal, or does that not matter to middle powers?
Chalmers:
Well, I think the role of middle powers goes much beyond and much broader than that. We’re really looking forward to welcoming Prime Minister Carney to the Parliament. He is a remarkable leader and a wonderful friend of Australia. I think he’s making a very thoughtful contribution when it comes to the ways that a lot of the old certainties in the world and in the global economy are breaking down and busting up. Prime Minister Carney is coming at these issues in a characteristically thoughtful and considered way.
For Australia, we believe that the best way to advance our national interest is to engage enthusiastically with Canadian friends and other middle powers, but also with the major powers. We believe in cooperation and in engagement. And as a middle power ourselves, obviously, we see a very, very substantial role for countries like Canada and like ourselves.
Sara:
When we’re talking about the economic ramifications here, you say the intense global economic volatility has been dialled up by the escalation of the conflict in the Middle East, acknowledging there is lots of uncertainty. What’s Treasury telling you about when and where Australians are going to start feeling the effects of this directly?
Chalmers:
Well, a couple of things about that. First of all, what I’m trying to acknowledge is that we had considerable economic challenges even before the escalation of conflict over the weekend—inflation, productivity, global economic uncertainty—and in at least 2 out of 3 of those areas, the conflict in the Middle East will make those challenges more difficult rather than easier. We’re just being upfront about that.
And for us, the things that we monitor most closely are developments on oil markets, developments on gas markets. There are also implications for markets like for fertiliser, though we are pretty confident that on the land, there are sufficient stockpiles to get people through the coming cropping season. We focus on insurance markets, we focus on travel costs. All of the things that Australians would expect us to focus on, we monitor those developments very closely.
As I said before, the way that this is playing out will be a big feature and a big factor in our thinking leading up to the Budget. We do expect there to be price pressures, we do expect this to weigh heavily on global growth in one way or another. But the reason why that’s uncertain is because we don’t know for how long this will go on for. We know it’s no longer days, we’re talking about weeks at least, and the duration of the conflict will have a big say on how serious these consequences are for the economy.
Sara:
You’re listening to Radio National Breakfast, my guest is the federal Treasurer Jim Chalmers. The latest GDP figures released yesterday show an accelerated economic recovery in the December quarter last year. Does this suggest that the economy, in your view, is well‑positioned to absorb extra interest rate hikes?
Chalmers:
Absolutely and when I say absolutely, sorry, I mean it’s well‑placed to absorb the pressures coming from around the world, obviously I don’t come at the question about the future movements in interest rates. But it’s well placed, absolutely well placed. What we saw in those numbers yesterday were really a set of outstanding outcomes. Growth was stronger and broader, the composition of that growth was welcome, strongest growth in almost 3 years, stronger growth than every major advanced economy. And so absolutely, we are well placed to deal with what’s coming at us from around the world.
It is a robust foundation from which to deal with all of this global economic uncertainty, and so I think that’s the most pleasing aspect of these very strong growth numbers that we got yesterday. It means that we confront these global economic uncertainties from a position of genuine strength.
Sara:
Treasurer, we’ve just got a minute up our sleeve. You’ve been hinting that the May Budget will be ambitious with both spending cuts and tax reform. Is the conflict in the Middle East going to curb some of that ambition?
Chalmers:
It’ll be an ambitious Budget regardless, but it will be very attuned to developments in the world, as you would expect. We’ve got these 3 big challenges – inflation, productivity, and global economic uncertainty. The fifth Budget will be an ambitious budget. It will be designed to address those 3 challenges, and it will be put together at a time where that global uncertainty has been dialled up very substantially.
As always, we’ll weigh up the economic conditions, we’ll look at the big challenges that we want to address, and we’ll address them with a level of ambition which is characteristic of a government like ours.
Sara:
Treasurer, thanks for coming back into the studio. Thank you.
Chalmers:
Appreciate it, Sally, thanks.