Sarah Ferguson:
Treasurer, welcome to 7:30.
Jim Chalmers:
Thanks very much, Sarah.
Ferguson:
As we just saw, Anika Wells spent $100,000 flying herself and 2 others to New York to host an event on Australia’s social media ban. You’ve defended the cost on the grounds that that was a very important event. In the current climate, however, does that cost pass the pub test?
Chalmers:
That’s for others to judge. But from my point of view, it’s official travel. It’s well within the guideline and as you rightly anticipate, this is a really important opportunity for Australia in the world. And of course, our views should be heard in the world on this important change, which is all about making sure that our kids are safe when they’re online. That’s what this is about, and the minister doesn’t determine the cost of these sorts of visits within the guidelines, official travel and for an important purpose.
Ferguson:
Now, you’ve been accentuating the positives through today of the National Accounts figures, but they also show that productivity remains a central challenge for the economy. Do we have to accept a lower speed economy for the foreseeable future in Australia?
Chalmers:
No, I don’t believe so, and the government’s economic plan is all about lifting the speed limits on the economy, trying to make it more productive, more resilient over time. But we’ve got to recognise that you can’t turn these things around overnight. The productivity challenge has been there for the best part of 2 decades, and it will take more than a couple of years to turn around.
But I have to contest the characterisation there, Sarah, because what we saw in the numbers today was the fourth consecutive quarter of productivity growth. We saw productivity growth at 0.8 per cent, in the market sector 1.1 per cent. Obviously, we need it to be better than that and in a more sustained way, but those 4 quarters of continuous productivity growth in the circumstances has been much better than the situation that we saw for much of the past decade or 2.
Ferguson:
But would you claim that Australia is winning with its productivity challenge? Would you say that to economists and analysts throughout the country?
Chalmers:
I’d say that today’s numbers represent good progress. You know, one of the reasons why I have accentuated the positives today, why I do see these National Accounts as positive and as promising, is because productivity ticked up again for the fourth consecutive quarter.
But overwhelmingly, the big, big story out of these National Accounts is the stunning improvement in new business investment, alongside very welcome growth in investment in housing as well. That’s why the key takeout from these National Accounts is the way that the private sector has been leading the growth in our economy, the fastest annual growth in a couple of years now, led by the private sector, and particularly by new business investment, investment in homes, and coming along with that welcome the uptick in productivity. Now we’re not getting carried away about that uptick in productivity. It can bounce around from quarter to quarter, but you’d rather have 4 consecutive quarters of growth than the alternative, and so I see it as encouraging in that light.
Ferguson:
Now, private sector spending, as you just said, it has gone up, but so too has government spending. It rose at 0.8 per cent in the quarter. How much pressure is that putting on you as you plan for your budget next year?
Chalmers:
Well, first of all, the story of 2025 has been that the private sector has been creating the growth in our economy. Now when it comes to public spending, obviously, in every budget that we do, and every budget update, we try and manage it as responsibly as we can. That means continuing to find savings where we can to fund priority areas like strengthening Medicare, or lifting bulk billing, or building Urgent Care Clinics, or cutting income taxes 3 times.
So, the fiscal pressures are always there. The pressures on the budget are always there. But the overwhelming take out from today’s National Accounts is that government spending, public spending, is making much less of a contribution to economic growth. The private sector is doing all of the heavy lifting, and that’s a good thing,
Ferguson:
But there are warnings everywhere about the need to consolidate, to bring down government spending. You won’t accept the term austerity when it’s put to you. What word would you use to describe the cuts you’re going to have to make at the next budget?
Chalmers:
Responsible. That’s the approach that we’ve taken to all of the other budgets as well. It’s not often recognised, Sarah, that we found $100 billion in savings. That’s been a key part already of delivering those 2 surpluses in our first 2 years, a much smaller deficit in our third year. But there’s always more work to do. The pressures on the budget are intensifying rather than easing. The task for us is to continue to manage the budget in a responsible way, and that’s what people can expect to see in the mid‑year budget update and also in the Budget in May.
Ferguson:
What happens to your economic credibility if the next interest rate move is up?
Chalmers:
Well, you know that I don’t provide a running commentary on decisions taken independently by the Reserve Bank‑
Ferguson:
The question is, how it will reflect on you?
Chalmers:
Well, obviously I’m not going to get into those sorts of hypotheticals, because I don’t pre‑empt or predict those decisions taken independently by the Reserve Bank or its board. I think you and I have had this exchange on a number of occasions over the years, Sarah.
The point that I would make is this. Our job is to manage the budget in the most responsible way we can, that’s what we’re doing. We know that there are still challenges. Inflation is persistent, the global environment is incredibly volatile and unpredictable, and so just like we did in the first 4 budgets, the fifth Budget will be about responsible economic management. The Reserve Bank will take its decisions independently, I’m focused on my part of this. Which is to make sure we’re getting value for money, making sure that we’re making a contribution to this welcome uptick in growth which is coming from the private sector.
Ferguson:
The Coalition has essentially put all its political chips on a bet that electricity prices won’t come down, and through that, they will find a path back to government. How much of the Albanese government’s success now is riding on energy prices coming down?
Chalmers:
Well, first of all, I think obviously the Coalition would like energy prices to be higher for political reasons, but also we know that from their policy. If they abandon net zero that will be a recipe for upward pressure on prices, not downward pressure on prices. I saw you fact check that on your program and on your social media not that long ago. That’s because as we think about the ways that these ageing assets are becoming less and less reliable – the coal fired part of our system – the cheapest way to replace that energy is with reliable, renewable, cleaner and cheaper energy, which is central to our policy.
So yes, for political reasons, the Coalition want Australians to be under more and more pressure. Whether it’s electricity prices or in other ways, they’re always talking down the economy and when they do, they diminish the progress that Australians have made together. But our policy gives Australians a better chance of putting that downward pressure on prices over the medium and long term. The Coalition’s policy is a recipe for higher power prices, not lower prices.
Ferguson:
Yesterday, the government came out with its AI plan. It’s making a very big bet on AI investment in Australia, especially on data centres. But I want to draw your attention to the head of one of Australia’s biggest domestic data centre companies, AirTrunk. You’ll be familiar with him. He says that slow planning approvals are a major headache in Australia, it’s much harder here to build those data centres than it is elsewhere in in Asia. Are you going to have to do something drastic to change the planning approval crisis?
Chalmers:
Well, a couple of things about that. First of all, if you look at the National Accounts today, the investment in data and technology is absolutely galloping. It’s a big reason why the business investment numbers were so strong, and a big reason why we saw the fastest annual economic growth for a couple of years now. So, a lot of that investment is already flowing.
We’ve acknowledged on other occasions, indeed, in and around the Economic Reform Roundtable that Australia needs to get much better and quicker when it comes to approvals. Already, the EPBC environmental law reforms will be part of that story. Already, we’ve announced a whole bunch of other measures in the Foreign Investment Review Board space, and in other areas, to make sure that we’re getting those approvals done as quickly as possible so that we’re competing for this global investment.
But I think any objective observer of the numbers that we saw released earlier today would conclude Australia is already an incredibly attractive destination for AI infrastructure, for data centres, and for technology more broadly. We want that investment. We need that investment. We’re encouraged by today’s numbers, and we will make the planning regime – the approvals regime – as fast as we responsibly can.
Ferguson:
Jim Chalmers, I hope the head of AirTrunk is watching that answer. In the meantime, wish you safe travels to New Zealand. Thank you very much indeed.
Chalmers:
Thanks so much, Sarah.