SARAH DINGLE:
Treasurer, welcome to PM. Inflation has slowed for the second straight quarter but when you dig into the numbers, it's still pretty high for non‑discretionary items like food and rents. It's not really a time to celebrate is it?
JIM CHALMERS:
We recognise that people are still under the pump. Inflation really is still the defining challenge in our economy, and so it's the primary focus of the government and of our economic plan but we are seeing inflation moderate off that very high quarterly peak we saw before the election last year, and the very high annual peak we saw around Christmas time, and that's good to see it heading down, heading in the right direction. It's a welcome development but we understand that these pressures are still a big part of people's household budgets and that's why our major focus is rolling out this cost‑of‑living help to take some of the edge off these pressures.
DINGLE:
The Reserve Bank is sticking to its inflation target band of two to three per cent, some say that's reasonably inflexible but that is the inflation target band that they have. Are you worried they will keep hiking rates until we see more people out of work?
CHALMERS:
My job isn't to give them free advice, I've got my own things to focus on and that's what I'm doing. When it comes to interest rate hikes, obviously, everybody recognises including, I think, the Reserve Bank that when rates go up, it makes it harder for people to make ends meet. They understand that and we understand that and people listening understand that. What we're trying to do here, collectively ‑ not just the Reserve Bank, the government, I think the country's got an interest in this ‑ is how do we get on top of this inflation challenge in a way that preserves as much as we can of the really strong labour market that we've seen for a little while now. We've got unemployment at three and a half per cent which is pretty remarkable given what's coming at us from around the world. We want to keep people in good, secure, well‑paid jobs if we can, we need to do that at the same time as we get on top of this inflation challenge which is doing damage to people's household budgets and that's the difficult balance that governments and central banks around the world are trying to strike right now.
DINGLE:
Speaking of damage to household budgets, it looks like you have recorded a $20 billion Budget surplus for the financial year recently ended. Now inflation is showing signs of slowing but households are still hurting. At what point are you going to provide more relief to households beyond what you've already committed?
CHALMERS:
A couple of important things about that Sarah ‑ and to be fair I get asked this a fair bit at the moment. The surplus for last year is now behind us. When it comes to cost‑of‑living help, we currently have billions of dollars in cost‑of‑living help rolling out ‑ right now when it comes to electricity bill relief, around the beginning of September we've got more relief when it comes to cheaper medicines, we've got the biggest increase to Commonwealth Rent Assistance in 30 years ‑ a whole bunch of different ways that we're providing cost‑of‑living relief right now and people will benefit from that now and in the coming months as well. If at some future point in future Budgets we need to do something differently or we need to provide more cost‑of‑living relief, obviously, we'll contemplate that at the time but right now, we're not working up extra cost‑of‑living measures, and that's because we're focused on rolling out the billions of dollars of cost‑of‑living relief that we've already announced, which will take some of the edge off these pressures that people are feeling without making this inflation challenge even worse.
DINGLE:
Going to the RBA and its incoming Governor, can you outline some of the key differences you see between Michelle Bullock and Philip Lowe?
CHALMERS:
Well, I'm not super keen to do that because I don't want to reflect on Phil Lowe who finishes up in that position with the government's respect and gratitude and he goes with dignity and really what I've tried to do here is to say that Michelle Bullock's appointment is about taking the Reserve Bank forward into the future and the things I really value about Michelle Bullock is in addition to her really substantial expertise and experience as an outstanding economist and an experienced central banker, is I think Michelle Bullock has the right kind of leadership qualities to implement the change agenda that we want to see at the Reserve Bank and to take it forward into the future. And so rather than compare the two, I think Michelle Bullock is an appointment that we're very proud of but we can be proud of this appointment without reflecting unnecessarily on Phil and his contribution.
DINGLE:
When did you actually tell Philip Lowe that he wasn't having his term extended and did he express any disappointment to you?
CHALMERS:
Well, the decision to appoint Michelle Bullock and not to renew Phil Lowe was a decision taken by the Cabinet the day that we announced it but obviously, a couple of weeks before that, I indicated to Governor Lowe that my recommendation to the Cabinet would be that we appoint somebody else. I just saw that as a respectful way to engage with someone who's had a lot of dedication and commitment to our country and its economy for a long time but it wasn't finalised and decided till the day that we announced it.
DINGLE:
Treasurer, we're looking overseas, China's economy is in a concerning state. It's definitely not bouncing back post COVID lock downs. They are our largest trading partner. How concerned are you about the threat of recession in China hitting Australian exports?
CHALMERS:
Certainly the Chinese economy has shown some softness. In the last few weeks, we've seen data out of China which has got the world's attention because it's been a bit softer, perhaps than what people were anticipating and an economy like ours with the close economic relationship we have with China, obviously, this is something that people would expect me to monitor very closely and I am. The global economy is a pretty precarious place right now. We've got the Germans in recession, closer to home the New Zealanders are in recession but there's pockets of resilience as well in the US and elsewhere and so it's a mixed bag but one of the downside risks to use the economic jargon is that the Chinese economy is a bit softer than people would like ‑ that has obvious implications for us and so we monitor it closely.
DINGLE:
In particular, their real estate sector is looking really shaky and that accounts for a lot of demand and Australian exports, particularly iron ore and coal which ‑ I mean ‑ the resources exports of this country have propped up the federal Budget in recent difficult times. This is quite concerning, isn't it? If their property sector collapses, we are in real strife.
CHALMERS:
Well, the Chinese authorities have come out in the last day or so and acknowledged some of the softness and some of the challenges in their economy and they've mentioned real estate in particular, local government debt and a couple of other areas and I think that acknowledgement is welcome. People have expressed a level of confidence that the Chinese authorities have acknowledged these challenges and they've indicated that there will be some kind of policy response to that and that will matter greatly to us. Obviously, a very important part of our Budget is the tax that we collect on our resources and we're grateful for that but the bigger contribution to the improvement to the Budget we've seen in recent months is actually the strength of our labour market ‑ 40 per cent of the improvement in our Budget is from the strength of our labour market, 20 per cent is from commodities, both of those things are super important and we're grateful for both of them. Commodities are an important part of the story but not the whole story when it comes to the way that we've been able to get our Budget in much better nick.
DINGLE:
Treasurer, thanks for joining me.
CHALMERS:
Appreciate it, Sarah. All the best.