SARAH FERGUSON:
Treasurer, welcome to 730.
JIM CHALMERS:
Thanks very much, Sarah.
FERGUSON:
Annual inflation is slightly up, but not as much as predicted by forecasts. What does this mean for households?
CHALMERS:
It means that this cost‑of‑living challenge that we have in our economy is more persistent than any of us would like. Inflation is stickier and more stubborn than we would like to see, but it is really quite substantially lower than what it was at its peak a couple of years ago when we came to Office. And there are also some other important developments in these figures. For example, underlying inflation actually went down in the quarter, and it’s gone down 6 consecutive times in this data. The monthly indicator was down. The headline rate was consistent with what the Reserve Bank has forecast. And the homegrown element of inflation, the non‑tradeables part of inflation, actually halved in the quarter. And so overall, inflation is still persistent. It’s still important that we engage in this fight against inflation, and we are. But there are some elements of today’s data which are welcome.
FERGUSON:
I want to bring this back to households because the biggest price rises we’re seeing here, apart from, apart from rents, were food, clothing and footwear. Do you accept that in the minds of the voters, the buck stops with you for these increases?
CHALMERS:
I think I’ve made it clear, and not just today, Sarah, that I take responsibility for my part of the fight against inflation. Turning those 2 big Liberal deficits into big Labor surpluses. The Reserve Bank Governor has said that’s helping in the fight against inflation. And we saw actually in the data today from the ABS, not a political opinion, but a fact from the Bureau of Stats, who made it really clear that our energy rebates, our policies on early childhood education and our rent assistance are actually taking some of the edge off of this inflation that we’re seeing in our economy. Inflation would be much higher if our political opponents had their way and we weren’t rolling out this meaningful and substantial cost‑of‑living relief in the most responsible way that we can.
FERGUSON:
Now, health and education are still high, and these are obviously not related to some of the big external forces we’re seeing in the world. What’s your explanation for the persistence of those high numbers?
CHALMERS:
Some of those services numbers are higher than we’d like, including those 2 that you refer to. Also rent is still making a big contribution, but it would be making an even worse contribution were it not for the rent assistance that we funded in the Budget. Insurance is another part of the story. Petrol over the last year has been a worrying contributor to this inflation challenge. We’ve seen petrol prices go up substantially, partly because of the volatility in the Middle East. And so, as I said before, these numbers came out, and as I’m obviously prepared to say again after they’ve come out, there’s a combination of international pressures and domestic pressures. But what’s really clear from the ABS data and the way that they’ve presented it to us today is that the way that we are going about dealing with some of these cost‑of‑living pressures is helping rather than hampering that fight against this inflation.
FERGUSON:
But what is your actual explanation for the fact that things like health and education are still so high? Why?
CHALMERS:
One of the issues in health, for example, is private health insurance. But again, the most recent increase is lower than inflation and lower than wages. It’s still making a contribution to this inflation challenge, but it’s lower than some of the other indicators. That’s part of the story. The cost of seeing a dentist and the like has been going up and making a contribution. But again that’s not the only contributing factor. There were some temporary factors when it came to fruit and veg. There are issues around insurance, rent. I’ve already covered petrol. There are a number of factors playing out in today’s numbers. Some of them are international, some of them are domestic. But what’s really clear is that inflation would be higher were it not for the cost‑of‑living relief that we’re rolling out, the ABS made that clear.
FERGUSON:
Now, I think it’s important to point out for the audience that obviously, while the, while the rebates, the energy rebates are helping households, the Governor of the Reserve Bank was very clear that those rebates would not meaningfully affect underlying inflation and would certainly not make them more likely to cut interest rates. I just wanted to mention that, but I want to ask you this question. Would Australians, and especially mortgage holders, be better off now if the government had been more disciplined in its approach to spending?
CHALMERS:
A couple of things about that. I don’t want to leave unresponded to your other point, which is that when it comes to the way that the Governor is looking at our cost‑of‑living relief, that’s consistent with how we look at it as well. That’s not really a revelation. And the headline number will be impacted by our cost‑of‑living relief. And underlying inflation has come down for 6 consecutive quarters. But when it comes to spending restraint, again, the Reserve Bank Governor has made it really clear that the 2 surpluses that we’ve delivered, the first surpluses in a really long time, they are helping in the fight against inflation. We have shown spending restraint, we are finding savings, we are banking upward revisions to revenue. That’s why we’ve got these 2 big Labor surpluses. And when we came to office it was projecting to be big Liberal deficits, we’ve turned that around and that’s helping.
FERGUSON:
Yes, but in relation to spending decisions, we look at the last Budget, those net spending decisions came to $11.7 billion. You’re putting $11.7 billion into an economy that’s already running hot. You can’t, as the Treasurer, claim that that’s nothing going to have an impact.
CHALMERS:
First of all, that’s $11.7 billion in the context of a $2.6 trillion economy. That’s the first point. Secondly, the nature of that spending matters, the cost‑of‑living relief, plus some other necessary investments in areas like health, strengthening Medicare for example, a very important part of our investments in the last couple of budgets. And then lastly, I dispute your characterisation of an economy which is running hot. We saw in the first 3 months of the year that growth was barely there in the Australian economy, we’ve seen retail was soft again today. We’ve seen household savings have come off. There are a whole range of factors which would, I think, show an economy which is much softer than that characterisation that you just provided. Underlying inflation is coming off, we need it to come off further and faster, and that’s why responsible economic management has been and will continue to be so important.
FERGUSON:
When we talk about the economy running hot, of course, we’re talking about the RBA trying to stifle demand in the economy. But let me just come back to your answer there, because you’re talking about the $11.7 billion as if it’s the entirety of the government spending, when, of course, that number is in the hundreds of billions of dollars. The $11.7 billion is new government spending. So, I come back to that question. The RBA is trying to take money out of the economy while you’re putting it back in.
CHALMERS:
Well the Reserve Bank Governor has made it clear that those surpluses, which otherwise would have been, that extra money would have been sloshing around in the economy –
FERGUSON:
– I’m going to interrupt –
CHALMERS:
– so that’s helpful –
FERGUSON:
It’s difficult because we’ve got a delay. But I am going to, just this time, I don’t want to talk about the surpluses. I want to talk about your government’s decision, your $11.7 billion spending decisions.
CHALMERS:
No, I understand that. But you asked me about our approach to the Budget and how it relates to inflation, and the Reserve Bank Governor’s made that point. When it comes to the $11.7 billion in spending, as I said a moment ago, what matters is the composition of that spending, very responsible investments. And you’re talking about additional spending in the context of an economy which is bigger than $2.5 trillion. Both of those things are facts. And then lastly, and additionally to those other points that I already made, is if you look at the composition of our inflation challenge, it’s a very hard ask to say, as you look across the persistence of inflation in our economy, that the issue here is too much government spending. As the ABS has made clear today, some of our investments are taking the edge off inflation, not adding to it. That’s deliberate.
FERGUSON:
Let me just ask you a couple of questions about Rex. Did Catherine King speak to you about the possibility of funding a bailout for Rex?
CHALMERS:
We’re obviously engaged with Catherine King, the Minister. She’s doing a characteristically diligent job of considering all of the options given the really disappointing news, frankly, this week from Rex, very disappointing for its workers and for its customers and for regional communities. And so, Catherine King is engaged with myself, the Prime Minister. We’re engaged at office level and departmental level to work through some of these conclusions and some of these announcements from the administrator. Catherine leads that work, but she works very closely with Anthony and with myself to make sure that if there’s anything that we can responsibly do, we’ll consider doing it.
FERGUSON:
Have you discussed a bailout?
CHALMERS:
We’ve discussed having an open mind to a whole range of options. We haven’t discussed in very specific terms what that might look like.
FERGUSON:
So, no one has raised, no one has raised the prospect of a bailout and used the words bailout in your conversations?
CHALMERS:
It gets raised with me of course, it gets raised with me by people like yourself in your profession, and I’m sure with Catherine and with Anthony as well –
FERGUSON:
– I’m talking about in your discussions with the Prime Minister or with the Minister.
CHALMERS:
We are discussing and considering all of the responsible options, including that one. But that’s not the only thing that we are considering. We’ll work through the other options. We’re having the sorts of discussions that you would expect from a good, diligent government like ours.
FERGUSON:
In the past, Virgin asked the Morrison government for a loan and offered a stake in the airline if it couldn’t repay it. And we know that Alan Joyce asked Tony Abbott’s government for a $3 billion loan guarantee. Are you prepared to contemplate either of those options?
CHALMERS:
We haven’t ruled out any of those sorts of options. Whether it’s that one or from the question before, we haven’t been going through and ruling out these sorts of ideas that are put to us. We take seriously our responsibilities here. We want to make sure that regional communities in particular continue to be serviced. These airline services are so important to local communities and to regional economies and therefore the national economy. And so, if we can play a constructive and meaningful but responsible role, we will do that. We haven’t been ruling out the sorts of options that you’ve been putting to me tonight.
FERGUSON:
Treasurer, thank you very much indeed for joining us and safe travels to Fiji.
CHALMERS:
Appreciate it, Sarah. All the best.