SARAH FERGUSON:
Treasurer, welcome to 7.30.
JIM CHALMERS:
Thanks very much, Sarah.
FERGUSON:
Now the economy is barely growing, as we can see. It barely has a pulse. We’re flirting with recession. What do you hope that’s telling the Reserve Bank?
CHALMERS:
I don’t see it in those terms, Sarah, but I certainly do acknowledge, and I’ve been upfront through the course of today and even before today, that the economy was very weak in the first 3 months of the year. And that, I think, puts an onus on us in the budget and subsequently to recognise that we can engage in this fight against inflation without smashing the economy. And so I see today’s very weak growth figures for the March quarter as justification for the approach that we took in the Budget. The very responsible, measured and balanced approach, which was to continue to fight inflation without slashing and burning the budget, which would have been diabolical in these circumstances.
FERGUSON:
Now, it would, however, be remarkable if you, as Treasurer, were not trying to read the intentions of the Reserve Bank, because another interest rate rise this year could send the economy into negative growth, couldn’t it?
CHALMERS:
Well, I think one of the good things about our system is that the Governor of the Reserve Bank gets a number of opportunities to explain her own thinking, and she was able to do that today before the relevant parliamentary committee, and that’s a good thing. I think that’s one of the very good developments in our system. And so I can provide commentary on the parts of it that I’m focused on, getting inflation down, but being cognisant of this growth challenge as well, providing cost‑of‑living help in a way that helps the economy and puts downward pressure on inflation rather than upward pressure on inflation. And the Governor can focus on her job, which is monetary policy.
FERGUSON:
Well, help us understand this, because households are saving less than previously thought. Is that a strong signal that people will spend more when the Stage 3 tax cuts flow through, which in the end would also possibly delay an interest rate cut?
CHALMERS:
Well, I think it’s an indication that people are under pressure. There’s a whole range of factors in today’s National Accounts which remind us something we already knew, which is people are under the pump. You can see that in the very low savings rate. You can see it in the fact that consumption was dominated by essentials. You can see that really across a whole range of indicators.
FERGUSON:
Can you give me your interpretation of what that household, it’s called a ratio. It’s not very helpful to the audience, but essentially people saving less than we thought. What is the, what are the possible outcomes of that?
CHALMERS:
Well, I think it reflects the fact that people have a bit less of a buffer in their household finances. That’s been clear again for some months now. That’s a key reason why we’re providing this cost‑of‑living help. You reference the cost‑of‑living tax cuts, which come in in a few weeks time. They will be a very important way to support people and to support the economy, when the economy’s soft and people are doing it tough and they come alongside a wage increase for people on the minimum wage, they come along with energy bill relief for every single household. And the reason why that’s important, and the reason I keep coming back to the strategy that we rolled out in the Budget is because the Governor talks about this narrow path that we’re on, I think about it as striking the right balance. Primarily fighting inflation, but also helping people through difficult times, repairing the budget and being cognisant that you can overdo that and smash the economy and frankly, we got a lot of free advice over the course of the last couple of months. And if we’d followed that advice to slash and burn in the Budget with this kind of scorched earth austerity, to take even more heat out of the economy, we now know that would be absolutely diabolical, given the context and the conditions that we confront.
FERGUSON:
Let me just come back to that question, though, because I want you to help me understand it better. Is that a strong signal that people are going to spend money when the Stage 3 tax cuts flow through?
CHALMERS:
It’s a strong signal that they need more help. And whether it’s the household savings rate, whether it’s the fact that consumption was dominated by essentials. Also the fact that over the last year, I think discretionary spending only went up by 0.1 per cent, which was incredibly low in terms of the history of that measure. And so there are a range of factors which make it really clear that the Stage 3 tax cuts, the tax cuts for every Australian taxpayer, will come in at a good time for the economy and for people doing it tough, in addition to some of this other cost‑of‑living help, which we are providing in the most responsible way in the second half of the year.
FERGUSON:
But you’re not concerned that what we’ve seen today by those household savings figures are going to lead to behaviour that makes the job of securing that next interest rate cut harder?
CHALMERS:
No, I’m not concerned about that. I mean, the Governor and the Treasury Secretary and others have made it clear that the impact of those tax cuts are already factored into their forecasts. And in addition to that, in a very helpful way, Governor Bullock pointed out today that she doesn’t consider the energy bill rebates either to be inflationary. And so we consider our role to be making the job of the independent Reserve Bank easier, not harder. I think that’s very clear. A lot of the testimony from the Governor went to that today. She also pointed to the fact that a couple of surpluses, after all of those big deficits is also helping in the fight against inflation. And again, it comes back to this balanced and methodical and responsible approach that we are taking, making sure we’re taking the economic conditions into consideration in our Budget, fighting inflation without smashing the economy. Those are our primary goals.
FERGUSON:
She didn’t give actually a final view on whether the Budget was inflationary or not, however, did she?
CHALMERS:
Well, she said it was more complex than that, and Governor Bullock pointed out that 2 surpluses were helpful. She pointed out she didn’t think the energy bill rebates were inflationary, she said –
FERGUSON:
But as an overall package, she didn’t actually say that it was either one nor the other.
CHALMERS:
That’s correct. She said it was more complex than that, and I agree with that. That’s the point that I’ve been making when I’m pointing out that some of this spending in the Budget is essential spending in areas like healthcare and making sure that we can provide this cost‑of‑living relief in the most responsible way.
FERGUSON:
I just want to talk to you about corporate tax cuts. You rejected a suggestion by your industry minister that it’s time to consider lowering Australia’s corporate tax rate. What’s wrong with the debate about corporate tax?
CHALMERS:
I don’t worry about a debate about corporate tax and the point that I’m making –
FERGUSON:
Then why not encourage Ed Husic to have that debate?
CHALMERS:
Well, I haven’t discouraged him. You know, I’ve pointed out in the parliament and again at a press conference today that we are reforming the company tax system, in this case with a series of new production tax credits –
FERGUSON:
I’m just going to interrupt you there just to say that the head of the Productivity Commission that you appointed said that that’s not tax reform, that’s tax policy.
CHALMERS:
Obviously, I’m aware of those comments. There’s always a range of views about the definitions or the descriptions that people use. I consider it tax reform that we have designed new production tax credits to incentivise the production of the type of clean energy and critical minerals which will power the future of our economy in the context of the global net zero transformation. I consider that to be tax reform. I’m not especially troubled if people have got commentary about that as well.
FERGUSON:
Well, let me just come back to the question then, to be clear. Do you encourage a debate about corporate tax then, as Ed Husic suggested we should be having?
CHALMERS:
I encourage a conversation about tax reform, including company tax reform –
FERGUSON:
I beg your pardon.
CHALMERS:
– and the point that I’m making there is that I’ve engaged enthusiastically in that myself. More than that, I’m not just debating company tax changes, I’m implementing them. Whether it’s the instant asset write off for small business, whether it’s the production tax credits that I just talked about, and in a whole range of other ways, multinational taxes and the like, I’m engaged in reforming the tax system, including the company tax system. And I think these are important ways that we incentivise the kind of investment and the kinds of production that we need to see to deliver a new generation of prosperity in our economy.
FERGUSON:
I think I’m right in saying that what Ed Husic was talking about specifically was the rate of company tax. He was also talking about those incentives that you’re talking about, but he wanted to target the rate of corporate tax in Australia. Is that the debate that you welcome?
CHALMERS:
I’m comfortable with people putting forward ideas, whether it’s my colleagues or others. And when those ideas are put to me, I listen respectfully. If it’s the chair of the PC, whether it’s a Cabinet colleague, whether it’s any objective observer, frankly. You and I have spoken to each other on a few occasions, Sarah, I don’t fear a conversation about the future of our economy, and people have got different ideas about how to go about that, delivering that new generation of prosperity. I work really closely with Ed and his department to make sure that our Future Made in Australia agenda was a central feature of the Budget I handed down a few weeks ago. And that’s because in the context of pretty serious fiscal constraints, which the Treasury Secretary was talking about in this context, we’ve got to work out where we can make the most difference and the biggest impact conscious of those budget constraints, and I’m really confident that the tax reform, substantial tax reform in the Budget, is the right way forward.
FERGUSON:
Thank you very much indeed for joining us.
CHALMERS:
Thanks very much, Sarah.