Sarah Ferguson:
The Treasurer Jim Chalmers is in Washington and joins me now. Treasurer, welcome and thank you for coming on the program at 5:30 Washington time.
Jim Chalmers:
You’re welcome, Sarah. Thanks for having me back on your show.
Ferguson:
First of all, just on the refinery fire, have you had a briefing this morning and what can you tell us about the impacts?
Chalmers:
Well, ministers have been briefed throughout the day, obviously, the damage is being assessed as we speak. We’ll know more about the costs and consequences of this fire in the coming days and weeks. But this is a serious setback.
We’re relieved that all of the workers are safe. We’re very grateful to the firies and others who got this blaze under control. But it feels like the worst luck at the worst time, doesn’t it? And it just shows how important it is that we’ve all been engaging with key partners around the world and key industries in Australia to make sure that we can get this supply.
I was relieved to hear that the company said that the 100 million litres that the government secured today will play a part in making up the shortfall from this fire, that’s a good thing. It also reminds us how costly it is that we went from 6 refineries to just 2 refineries under the former Coalition government.
Ferguson:
Well, this is not the moment for me to fact check you on that, we’ll park that for another day. I want to talk to you about some comments from the Deputy Reserve Bank Governor Andrew Hauser, who’s also been in the United States. He said that Australians are going to be poorer because of the crisis in the Gulf. Is that correct? Are we going to be poorer?
Chalmers:
I saw Andrew last night actually and I spent a big chunk of today American time with Andrew, and also caught up with the Assistant Governor Sarah Hunter as well and with the Reserve Bank Governor by phone on Wednesday. And so we’re working very closely together and speaking relatively frequently about the fallout of this war in the Middle East.
I think the view that Andrew expressed is similar to the view that the IMF expressed, the same view that the Treasury has in Australia, the same view that I have said publicly – which is this war means slower growth and it means higher inflation, and that means Australians are paying already a really hefty price for this war on the other side of the world.
They didn’t choose the consequences of that war but they are paying a hefty price for it already at the bowser. And those economic implications will cascade through our economy, and that’s for the very simple reason, Sarah, the global economy is a very dangerous place. The costs and consequences of this war in the Middle East are already very serious, they are potentially quite severe, and that’s why it’s such an important time that I’m engaging with my counterparts from the biggest and most important economies from around the world and some of our key suppliers of fuel in the short time that I’m here in Washington D.C.
Ferguson:
Looking at conditions in Australia, what Andrew Hauser said in that conversation I just quoted, he says he does not have high confidence that interest rates are high enough, suggests strongly that they are looking, the Reserve Bank is looking at a rate hike, but at the same time the International Monetary Fund says they want to urge a cautious wait and see approach. Do you accept that the Reserve Bank of Australia is in a very difficult spot?
Chalmers:
I think every policymaker in pretty much every country is in a difficult spot right now, whether they’re making monetary policy or making fiscal policy like we are. You know that I don’t interfere with the independence of the Reserve Bank. I know that they’ve got a whole range of factors to weigh up when they next meet in the beginning of May, they’ll come to that decision independently.
I think all of us are obviously very focused on the consequences of this war when it comes to inflation, but also when it comes to growth. And speaking to some of my colleagues here already in Washington DC, I think there is an expectation that even if the war ends relatively soon in an enduring way, even if we can get the Strait of Hormuz opened properly, the costs and consequences of this war will be felt for some time yet.
I think there’s an expectation amongst my colleagues that the economic conditions will get harder before they get easier. And so Central Bank Governors, economic Ministers like myself, obviously, all of us are weighing that up.
For me, it means putting together a budget in some very unpredictable global circumstances, making sure that we can calibrate our forecasts but also our decisions to this extremely volatile, extremely difficult global environment that we are all confronting right now.
Ferguson:
I’ll come to the federal Budget in a moment, but I just want to stay with those comments. What Andrew Hauser said is that in conditions like these, the Reserve Bank needs ‘rock solid support from government at a time when you are making hard decisions’. Will you give them that support, if that means interest rate rises?
Chalmers:
Well, obviously, we’ve got different responsibilities, but we’ve got the same objective here, which is to try and get Australians through a difficult period, recognising the upward pressure on inflation and the downward pressure on growth, which is playing out right around the world and right around our own country in Australia, so we take those responsibilities seriously.
This Budget that we’re putting together, less than 4 weeks from now, will be a responsible budget, and it will be focused on resilience and reform. It will continue to make the budget more sustainable over time, it will continue to make our economy more resilient in the face of all of these international shocks which seem to be coming at us more and more frequently. And it will also meet our intergenerational obligations to people, and that means economic reform so that we can lift the speed limit on the economy so it can grow faster with lower inflation and higher living standards over time.
So, to the extent that we are partners with the Reserve Bank in trying to make sure our economy can grow quicker to get inflation down over time and to lift living standards, of course, even though we’ve got different responsibilities, we’ve got very similar objectives.
Ferguson:
You talked about some of your colleagues that you’re talking to in Washington, you’re obviously very conscious of the mood there. You said before you left that being there actually would help you finally calibrate the Budget. The IMF’s message is very clear ‑ act cautiously and build buffers, they said, including today.
On a day here in Australia when we’re hearing about billions of extra dollars for defence, does being there make the responsibility for you to cut further into the federal Budget feel more urgent to you?
Chalmers:
First of all, extra investment in defence is not a nice‑to‑have or an optional extra in the very dangerous world that we inhabit, so that’s what I’d say about defence funding. But of course, we’re making sure that we get value for money there and we’re making room in the budget for these important investments.
When it comes to the purpose of being here in D.C. so close to the Budget, in addition to continuing to call for an enduring end to the war and the re‑opening of the strait. We’re also engaging with partners about fuel security. The meetings that I will have represent more than half of our diesel imports, I think three‑quarters of petrol and three‑quarters of jet fuel, something like that. Also making sure our supply chains are more robust, comparing notes when it comes to our budget forecasts and also promoting Australia as an investment destination.
Now all of that is feeding into our Budget preparations. There will be more savings in the Budget. It will be a very, very responsible budget, particularly in the context of what we’re seeing unfold in the global economy. It will be a budget that’s all about responsibility, resilience and reform, and the work that we do here, the engagement that we do with our key partners and colleagues and counterparts is all about making sure that we strike the right balances. I’m confident that we can do that. I’m not complacent about any of this because we are in a very real way hostage to decisions taken in other countries and developments in the Middle East.
Ferguson:
Now on that issue of fuel supply, the PM, the Australian Prime Minister and the Malaysian Prime Minister signed a statement today agreeing to keep supplying vital energy products to each other. That agreement also promised no surprises. It’s important that this commitment also comes with the approval of Petronas, the big Malaysian energy company. Does that mean that any prospect of a gas tax change, widely popular in the community, popular in politics, is now dead on arrival?
Chalmers:
Well, we haven’t changed our policy on that. We’ve already taken steps to reform the PRRT, for example, so that Australians are getting a fairer share sooner for these exports.
Ferguson:
But you were keen on –
Chalmers:
So that’s –
Ferguson:
There were reports – sorry to interrupt, Treasurer ‑ but there were reports that you were keen on a change to the gas tax regime. Is it over now with this arrangement between the Prime Minister and the Prime Minister of Malaysia?
Chalmers:
I think the statement that the Prime Minister made after meeting with his Malaysian counterpart is very consistent with what I’ve been saying privately and publicly, including to our key counterparts. It’s the same message that Don Farrell and Penny Wong, Madeleine King and others have been conveying, which is that we are a very, very reliable supplier into these markets, and it’s very important at times like these. Whether it’s Malaysia, Singapore, South Korea, Japan, some of these other engagements that I’ll be having today, that we recognise this relationship of mutual benefit, and for our part that means being a reliable supplier, it means doing absolutely nothing which would jeopardise that supply into these really important markets.
So that’s a consistent message that we’ve all been conveying to our partners and our counterparts in the world. It’s all hands on deck right now when it comes to this international engagement, as you can tell, and that’s the message that we have been delivering.
Ferguson:
And just briefly, do you try not to talk about Donald Trump in those meetings?
Chalmers:
Oh, I wouldn’t put it like that. Obviously, decisions taken here in Washington D.C. are central to the considerations we’re all undertaking, whether it’s putting together budgets or in other ways.
From an economic point of view, the end of this war can’t come soon enough, we’ve made that very clear. We understand that Australians are paying a hefty price for the war that they are hostage to, developments that they have no say in. So, we’ve made that very clear.
But the engagement that we have here, including in the discussions chaired by the Americans, the G20 discussions and other discussions, make it really clear that we’re all about navigating these difficult circumstances that we are all confronting. That’s why it’s so important that we’re doing ‑ being part of these meetings and engaging with the world in the way that we are.
Ferguson:
Treasurer, thank you, and again for turning out at 5:30, 5:45 in the morning. I appreciate it.
Chalmers:
I appreciate it too, Sarah, thank you.