SARAH FERGUSON:
Treasurer, welcome to 7.30.
JIM CHALMERS:
Thanks very much, Sarah.
FERGUSON:
The Opposition wanted you to transfer all the current external Reserve Bank board members onto the new rate‑setting board without any exceptions. Isn’t agreeing to that a small price to pay for securing such a major reform?
CHALMERS:
First of all, Sarah, it’s important to remind your viewers what this reform is all about. It’s about modernising the Reserve Bank, it’s about strengthening its decision making and it’s about making it more independent. In my efforts to get to a bipartisan outcome between the major parties in the parliament, there were a number of issues raised, about half a dozen issues which were raised, including that one that you refer to in your first question.
We accommodated the view put forward by the Shadow Treasurer and the Liberal and National parties. The change that we made to the recommendation of the review was that people would automatically transfer from the existing board to the Monetary Policy board unless they didn’t want to. That’s just one of 6 examples where concerns or issues were raised with us, where we accommodated the Opposition’s view. That’s why it’s disappointing and irresponsible, but unfortunately unsurprising that we’ve come to this outcome today from our political opponents, because we’ve made all of the accommodations that they asked for.
FERGUSON:
Now, had any of those existing members indicated to you, by any means that they would not want to join the new board?
CHALMERS:
They’d had discussions with the Governor of the Reserve Bank. My obligation was to write to the existing board members and I did, asking them to speak with the Governor of the Reserve Bank about their preferences.
FERGUSON:
And do you know what the responses to those questions were?
CHALMERS:
I have a broad sense of those discussions, but obviously they’re private discussions between the Reserve Bank Governor and her board members. It’s not for me to publicise those discussions, but Angus Taylor came to me and said he was worried about continuity on that board. I accommodated his view, and I said that everyone would go from the existing board onto the Monetary Policy Board unless they didn’t want to. I think that’s an entirely reasonable proposition.
FERGUSON:
I think it’s an entirely reasonable proposition also to get some sense of how many of them were expressing some reluctance to go to that board because, of course, that gives you the power to appoint new members to one of the most crucial boards in the country.
CHALMERS:
I understand that, Sarah, and I know that people would like to be a fly on the wall in the conversations between the Reserve Bank Governor and her board members, but it’s not something I’m prepared to discuss in public. They were private discussions.
The assurance that we gave Angus Taylor, the Shadow Treasurer, is that we had absolutely no interest in making political appointments to either one of the new boards. He knows that. Unfortunately, what’s happened here is he’s been rolled again. You can only do so much accommodating the views of somebody who doesn’t carry any authority amongst his colleagues. He’s been rolled once again. He was very supportive of the recommendations of the review. He said so publicly.
Unfortunately, what we’ve seen today and what we’ve heard today were really the last gasps of the Coalition’s economic credibility. I think it speaks volumes and frankly, it rings alarm bells that the Greens in the Senate are prepared to be more responsible and more constructive about Australia’s central bank than the Liberal and National parties are.
FERGUSON:
I just want to come back to your knowledge of those people who’ve given indications to the Governor that they wouldn’t want to go on that board. You must have some idea what kind of numbers of people would not want to be on that new board because you thought you were going to get a deal. You must have started thinking about potential replacements. So, are we talking about one or 2 people?
CHALMERS:
It’s not something I’m prepared to go into, Sarah. These are private discussions between board members and the chair of the board, in this case, the Governor of the Reserve Bank. Obviously, we are prepared for a number of different eventualities, and we discussed that with the Shadow Treasurer. I did that privately in good faith. I said, in the event that there were vacancies on both boards, here are the sorts of people that we would be considering. I consulted him in good faith, as I have for a year and a half now in all of those conversations and all of those accommodations that I’ve made to issues that he’s raised.
That’s because I genuinely want a bipartisan outcome that survives any future change in government. I think that the central bank, its decision making, its structure, its personnel, that should be beyond the daily cut and thrust of partisan politics. I’ve made that clear for a long time now. Unfortunately, the Shadow Treasurer was unable to carry his colleagues even after I accommodated the 6 concerns that he raised with me.
FERGUSON:
Nonetheless, with those potential changes, and I think one of the board members, their tenure is due to expire next year. If you’re still in government then, you’re talking about potentially the power over as many as 3 new board members that would give you more sway over that crucial decision; setting interest rates in Australia.
CHALMERS:
I don’t see it that way. We would make the best appointments that we can and in the event that these reforms go through one way or another, we’ll be making new appointments to the Governance Board, for example. It’s in our interests and it’s in the country’s interests to make the best appointments that we can, and they won’t be political appointments in any way. We’ve conveyed that privately to the Opposition and we’ve said that publicly as well.
We’ll be very responsible if and when vacancies arise on either of the new boards that we hope to create to make sure that we’re putting the best people in the best positions. I’ve got a good record when it comes to appointments. With Governor Bullock and the other institutions that I’ve appointed people to, I’ve tried to come to the right decision for the right reason, and that’ll continue.
FERGUSON:
Let’s just go back over the political context in which this has occurred. You issued a statement on a Sunday afternoon about 10 days ago saying the Reserve Bank’s interest rate settings were smashing the economy. Did that kill your own prospects for securing this reform by appearing to put you at odds with the Reserve Bank?
CHALMERS:
No, I don’t believe so. I think that’s just Angus Taylor’s excuse for getting rolled by his colleagues. I’ve been making a similar point for some months now. As far back as June, I’ve been making a very similar point, an especially non‑controversial point, which is when interest rates go up, they slow the economy, in our case, considerably. I’ve said repeatedly for some time now that combination of global economic uncertainty, persistent inflation in our economy, and interest rate rises are combining to slow our economy considerably.
My view was borne out in the National Accounts, which were released last Wednesday, which showed that consumption went backwards, discretionary spending fell by quite a bit, household savings were low, had impact on dwellings and mortgage costs. We can see in a factual way, in an objective way, in a non‑partisan and not especially controversial way, that, of course, when interest rates go up, they slow the economy considerably, and that’s what we’re seeing.
FERGUSON:
Of course, it was controversial and it was followed up by Wayne Swan, and I think one could fairly call a surrogate of yours who said the bank was ‘hammering households’. Why did you think it would be helpful to have him enter the debate at that stage?
CHALMERS:
I don’t know why you assume, Sarah, necessarily, that there was some kind of coordination between us. I haven’t spoken to Wayne for a couple of weeks now. I didn’t know he was going to make those comments that he made. The first I heard of them was when somebody sent me a report from one of the online news sites later that morning. I wasn’t aware that he was going to make those comments.
I am my own person. I’ve got my own views about that and I express my views and I’ve got my own focus and my own objectives. My objective is shared with the Governor of the Reserve Bank, I respect her. I don’t second guess decisions taken by the Reserve Bank in the same way that Wayne did. I haven’t gone anywhere near as far as Wayne has. My objective is to work closely with the Governor of the Reserve Bank. We’re engaged in this fight against inflation together. We’re making some welcome and encouraging progress. Inflation has halved from its peak in the year that we were elected. The Governor of the Reserve Bank and I have both made the same point. We work closely together. We’ve got the same objective, we’ve got different responsibilities, and I take responsibility for my part of the fight against inflation.
FERGUSON:
Let’s talk about what happens next, because now you’re going to be in negotiations with the Greens over this, they want the bank to retain an old power to direct banks’ lending activity. Is that off the table?
CHALMERS:
First of all, I want to make it really clear that my strong preference is still for a bipartisan outcome with the major parties in the Parliament. That’s still my preference. Unfortunately, the irresponsible way that the Coalition has gone about that means that we have to consider how we play the cards that we’ve been dealt in the Senate.
FERGUSON:
So, how is that going to work with the Greens?
CHALMERS:
As I said today, I haven’t been engaged in negotiations with the Greens and that’s what –
FERGUSON:
Have you had no conversations with them prior to this point?
CHALMERS:
The Greens have raised it with me on other occasions when we’ve met to discuss other pieces of legislation, and that’s appropriate. I’m not chipping them for that. They’ve raised it with me. But my genuine, respectful preference has been to deal with the big parties –
FERGUSON:
You made that point. Let’s just go back to that question. I presume that old bank power to direct lending activity will be off the table. Can you just confirm that?
CHALMERS:
We’ve got to go through all of our options. We’ve got to consider all of the options before us. Unfortunately, the Coalition has tried to force our hand. I’ve said repeatedly, I’d rather not have to do a deal with the Senate cross bench, but I’m –
FERGUSON:
Just come back to the, come back to the question on the Greens because that’s where we are. You said, you’ve said you’re unhappy with the situation, but just in relation to the Greens, they also want you to retain veto power over interest rate decisions. Will you retain that?
CHALMERS:
I was speaking very specifically about the Greens when you jumped in, Sarah.
FERGUSON:
My apologies then.
CHALMERS:
– saying that I’d rather not have to do a deal with the Greens. If I can avoid it, I would. But I’m committed to these reforms. These reforms are really important. They’re really considered. They’ve been in the public domain for the best part of a couple of years now. They’ve been the subject of welcome discussion and debate, and it’s time to make this legislative change.
The Governor of the Reserve Bank has said that she is 100 per cent supportive of these changes and she wants to see them legislated. When it comes to the Greens, I’d rather not have to come to an accommodation with the Greens. I’ve made that clear publicly and privately to them, to the Coalition, and I’ve made it publicly very, very clear. I’d rather not have to consider those sorts of things. Unfortunately, the Coalition may be forcing our hand.
FERGUSON:
Jim Chalmers, thank you very much indeed for joining us.
CHALMERS:
Thanks very much, Sarah.