SONALI BASAK:
This is Bloomberg Markets, and I’m Sonali Basak. The IMF recently warned that Australia may need to cut spending even though it just had a second budget surplus in a row. We’re going to discuss this with the man in the middle of this issue, Treasurer of Australia, Jim Chalmers. What do you make of the IMF’s report? Let’s start right there, because of course, really, the IMF’s growth forecasts and recommendations, it’s a shot heard around the world.
How do you feel about your budget in relation to what they had said?
JIM CHALMERS:
First of all, Sonali, thanks for having me back on Bloomberg TV, it’s a real pleasure. There’s obviously a lot of insights in the IMF’s reports that we find valuable, but the reality is in Australia we’ve made really quite extraordinary progress in the fight against inflation.
When we came to office a little over 2 years ago inflation had a 6 in front of it, now it has a 3 in front of it. Next week we’ll learn more about the situation as it relates to inflation in Australia.
But we’ve made a lot of progress, that progress has been welcome, it has been encouraging, and a big part of our success has been the responsible way that we’ve gone about managing our budget.
The 2 surpluses that we’ve just delivered are the first back‑to‑back surpluses for almost 2 decades in Australia, and they are a consequence, a welcome, deliberate consequence of the spending restraint that we have shown, the savings that we have found in the budget so that we can rebuild our fiscal buffers, as the IMF has been recommending all of us to do in the face of these uncertain global conditions.
BASAK:
Jim, I’m glad you also brought up the inflation story here, because, of course, all eyes will be on that third quarter CPI report next week, and you were saying, yes, inflation has come down, but it hasn’t come down as much as other countries, and do you accept that perhaps rates need to stay higher for longer in Australia in order to bring down that last mile of inflation?
CHALMERS:
First of all, there’s an important convention in Australia that politicians don’t make predictions or don’t give free advice to our independent Reserve Bank. That’s an important convention that I adhere to.
But when it comes to the inflation story in Australia, again we’ve made really quite outstanding progress in the fight against inflation, and any differences between our inflation rate and what we’re seeing in some other countries are a consequence really of 2 things. First of all, inflation in Australia peaked lower and later than most countries that we compare ourselves with, that’s a really important point.
And secondly, some countries that have lower headline inflation than Australia have got much higher unemployment, or they’ve got weaker growth, or some other combination of undesirable aspects of the economy.
What we’ve done in Australia is we’ve focused primarily on the fight against inflation, but we’ve done that without ignoring the risks to growth. We’ve struck a really effective balance between those primary economic objectives, and that’s because we’ve taken the view that it is much better to avoid a hard landing in our economy than to clean up after one.
We are on track for a soft landing in our economy, we’re confident but not complacent about that. The policy decisions that we’ve taken, whether it’s the 2 budget surpluses, the way we’ve delivered our cost‑of‑living relief, the way that we’re investing in productivity and dynamism in our economy, all of these things are really important ways that we’re getting that inflation rate down without ignoring the risks to growth, which are coming at us from an uncertain global environment and from some domestic sources as well.
BASAK:
Treasurer, to that end, do you think that the RBA needs to be moving faster or do you think that they’re being too cautious?
CHALMERS:
Again, I don’t give free advice to our independent central bank; there’s good reasons not to do that. I take responsibility for our part of the fight against inflation. Fiscal policy is playing a helpful role, the Governor of the Reserve Bank has said herself that our 2 surpluses are helping in the fight against inflation, and the way that we’re managing our budget and our economy in the most responsible way that we can, those are my responsibilities. I’ll leave decisions about the trajectory of interest rates in Australia to the Board of the Reserve Bank, which takes its decisions independently and appropriately.
BASAK:
We only have about a minute left here. But I do want to get your view here on your relationship with China. The removal of restrictions on lobster exports is imminent. And do you think that there’s a new stage around the corner, around the relationship between Australia and China?
CHALMERS:
We recognise that the relationship with China is full of complexity and full of opportunity. We have our differences with China, we don’t pretend that they aren’t there. But our efforts to stabilise that key economic relationship have borne fruit and including when it comes to the removal of some of those trade restrictions.
We welcome the progress we’ve made in the lifting of those trade restrictions in some of our key exports, but we know that it’s a complex relationship, we know that it needs ongoing management. We believe that you get more out of engaging with our major trading partners than the alternative, and so far, that has proven to be the case.
BASAK:
Jim, we have to leave it there. That is Jim Chalmers, the Treasurer of Australia, of course, joining us on the sidelines of those IMF World Bank meetings.