Sarah Ferguson:
Treasurer, welcome.
Jim Chalmers:
Thanks very much, Sarah.
Ferguson:
On house prices first. At the Budget, Treasury said the impact from your tax changes would see house-price growth continue to rise, but by a bit less, 2 per cent over a couple of years. The Commonwealth Bank’s latest forecast says prices will fall 10 per cent across the capital cities. Did Treasury underestimate the impact of your tax changes?
Chalmers:
Well, first of all, you’re right to point out that the Treasury assumptions are over the next couple of years, not the past couple of months, and even that Commonwealth Bank forecast that you reference in your question has house prices recovering next year.
And so it’s a really important reminder that we need to compare like with like. There is softness in the housing market, prices have come off a bit, auction clearance rates have come off a bit, but that was beginning before the Budget, and that’s because, as a number of experts have pointed out, one of the big influences there is interest rates.
Ferguson:
I mean it’s a bit more than a bit; Sydney could see the biggest annual decline in 40 years. But just in terms of what you did discuss around the time of the Budget, you say they’re forecasts over 2 years, but you must have talked about what was going to happen in the short term. Is this much more acute than you anticipated?
Chalmers:
No, because housing is not a short‑term proposition. People don’t –
Ferguson:
It’s a short‑term proposition for people who own a house right now and are looking at its value falling.
Chalmers:
No, I don’t believe so, because people don’t buy a house, move into it, sell it a month later or 2 months later and move out of it. Buying a house is a long‑term proposition. The assumptions in the Budget are over the next couple of years, not the first couple of months since the Budget.
And again, you know, even some of these numbers that you see reported from time to time, they are forecasts as well, and the Commonwealth Bank says that they expect house-price growth as soon as next year, and so that’s a really important reminder that you judge the impact on the housing market of a whole range of different influences measured in years and not months.
Ferguson:
Nonetheless voters can see what’s happening to the value of their house right now. Won’t this have political consequences if homeowners decide to blame you for a loss of value in their asset?
Chalmers:
Well, I think from memory, we’ve seen house-price growth, I think in 15 of the last 20 months. And so we’ve still had very strong house-price growth indeed over the past couple of decades, but it’s not unusual for prices to come off from time to time. I counted at least 7 occasions in the last 2 decades where house prices have come off.
In fact, we saw, I think in Sydney, something like a 13 per cent drop in Sydney house prices in the 2 years leading up to 2019, and so it’s another important reminder that the housing market over a long period of time has seen extraordinary price growth, but it’s not unusual from time to time to see prices come off because of interest rates and other influences.
Ferguson:
Let’s talk about today’s figures. They show that the economy grew slightly more than expected over the past 3 months, but with very sluggish productivity growth still, you face the real prospect of the RBA having to raise interest rates again. I know you won’t comment on that, but the broader question is, is there more financial pain to come for households?
Chalmers:
Well, you’re right that I won’t comment on decisions that the Reserve Bank will take independently weighing up a whole range of data in our economy in the usual way.
These are the national accounts of a robust economy and a resilient country, and what they show overwhelmingly is that we have very substantial advantages in the face of some serious economic challenges. Productivity is one of them, inflation is another, extreme global volatility, turbocharged by a war on the other side of the world which has been dragging on for more than 6 months now. All of those things –
Ferguson:
If I may just come in there, because you make it sound as if these are all external factors when, you know, if we’re going to talk about productivity, that’s something over which you will be judged on whether or not you can find the levers to improve the productivity situation in Australia. These aren’t all external factors.
Chalmers:
I don’t pretend that that is an external factor, but it is a factor common to most advanced economies around the world. They’ve all got, most of them have got a version of this productivity challenge, but I’m not sure how you drew that conclusion from my answer, Sarah.
I’ve said for some time, this productivity challenge, it didn’t spring up in the last couple of years, it’s been a long‑standing challenge in our economy for a couple of decades. That’s why the Budget had the biggest, broadest effort on productivity of any budget, probably in the last 2 or 3 decades, because we take that challenge seriously.
We do have an issue in our economy that the speed limit is not high enough. When the private sector came roaring back through the course of 2025, and again today, the private sector’s doing the heavy lifting in the economy in welcome ways, we do have an issue with the speed limit of the economy. We need to make it more productive so we can grow faster with lower inflation, and that’s what informed the big productivity package in the Budget.
Ferguson:
And we’ll talk about AI because you say that’s going to be the game‑changer to boost productivity. I just want to stay with households for a minute. Real wages are still going backwards. Isn’t that persistent pressure on households why so many Labor voters abandoned you and gave One Nation their vote at the recent by‑election in Western Australia?
Chalmers:
Well, I think there are a range of factors there, and –
Ferguson:
That’s one of the predominant reasons; do you accept that?
Chalmers:
Well, that’s your assumption. I mean I haven’t –
Ferguson:
You don’t think that was part of the problem?
Chalmers:
Well, I haven’t seen –
Ferguson:
A dominant issue [inaudible]?
Chalmers:
Well, I haven’t seen the evidence of that, but I do agree broadly, you know, I haven’t spent a lot of time in the entrails of a state by‑election in Western Australia, but I have thought –
Ferguson:
You don’t think that’s a significant moment with lessons for Labor to learn?
Chalmers:
Well, the rest of my answer, Sarah, is that I have thought very deeply about the legitimate concerns and anxieties and frustrations that people have about how the economy works or doesn’t work for people. I mean that is the thing I’m most focused on. It’s the whole reason for our efforts to get wages moving again, it’s the whole reason for our efforts to get inflation down, to make the economy more productive, to lift living standards for people –
Ferguson:
So how do you explain –
Chalmers:
– over time. This is the whole –
Ferguson:
How do you explain that real wages are still going backwards?
Chalmers:
Well, first of all, real wages are under pressure because inflation’s too high. It’s come down 4 months in a row, the inflation data, but it’s still too high, it’s something that I’ve acknowledged already, and that obviously has implications for real wages. Real wages are actually growing – sorry, wages are actually growing quite strongly, inflation’s too high. As inflation comes down we’ll see real wages growth again.
But don’t forget in today’s national accounts in the measure of wages and real wages in today’s national accounts, we did see growth, and we did see growth in one of the measures of living standards, we need to see more of that obviously, and that’s why we’ve got a big effort on productivity, a big effort on tax reform and budget repair and cost‑of‑living help and fuel security, all the essential elements of the Budget I handed down only a couple of months ago.
Ferguson:
But you accept that if you don’t fix that issue for households that you’re going to see a repeat of what we saw in Western Australia, that is people departing Labor to put their vote on One Nation?
Chalmers:
I think people have got genuine concerns about the pressures that they’re under. The pace of change is accelerating, pressures on people around the world and here in Australia are intensifying. They’re not wrong to be frustrated about that.
Now the fault line in our politics now is very different. It’s not necessarily between the centre left and the far right, it’s not necessarily the old distinctions. The distinction in our politics right now is a Labor government working to address the very real concerns that people have versus the Liberals and Nationals and One Nation who just want to prey on that and pick on that, and capitalise on that.
Ferguson:
So why isn’t it resonating; why didn’t it resonate in Secret Harbour? I accept there are other elements –
Chalmers:
Yeah.
Ferguson:
– in that election.
Chalmers:
Thank you.
Ferguson:
But still, it’s –
Chalmers:
Thank you.
Ferguson:
– we’re still looking at significant persistent polls that remain very high for One Nation. Why isn’t it resonating?
Chalmers:
Well, the thing I’d say about Secret Harbour, in case you ask me again and again about it, a state by‑election I’ve thought a little bit about, but not a lot about, is we took these challenges very seriously before Saturday, and we take them seriously after Saturday.
We didn’t need a by‑election in a state system in WA to –
Ferguson:
The signs were already there in South Australia.
Chalmers:
Yeah, and I’ve acknowledged, I think, and on other occasions, I think sitting in this chair talking with you about these important issues, I’ve acknowledged before, people are under pressure. That is why we’re delivering real change in the housing market, in the tax system, providing cost‑of‑living relief. It’s why we’re so focused on these intergenerational issues.
I think one of the big things weighing on people is this idea of our responsibilities to the generations that come after us. So in the here and now, cutting taxes, cost‑of‑living relief, securing fuel, but in an intergenerational sense, delivering real change.
Ferguson:
Let me just ask you briefly about AI and productivity, because you said it’s a game‑changer. But at the same time the uptake of AI in Australian businesses is relatively slow. If that doesn’t change, well, whose responsibility is it to change that?
Chalmers:
Well, it’s all of our responsibility to make this accelerating change and technological revolution work for us and not against us.
This will be a really central concern of the Intergenerational Report that I release in a few weeks’ time, because I really believe that AI will be the biggest transformation in our economy and in our society in my lifetime, and the onus is on all of us, including governments, showing leadership to get it right so that our people are beneficiaries and not victims of that accelerating change.
It will be a big part of getting productivity moving again. Not the only part, we’re cutting compliance costs and teaching and training people more effectively, all of that’s about making our economy more productive, national competition policy.
But AI will be a big part of the story. And again people have got serious concerns about how this rolls out, and so we have a responsibility to minimise the risks to people, to workers, to communities at the same time as we maximise the economic upside, and that’s what we intend to do. I’m confident that we can.
Ferguson:
Treasurer, thank you very much indeed.
Chalmers:
Thanks, Sarah.