Steve Austin:
But as you know, inflation is likely to remain above target for some time, according to the Governor of the Reserve Bank. Treasurer – federal Treasurer, Jim Chalmers, says it was private demand, not government spending, that was the catalyst for the higher inflation. This means that what you pay, sometimes called the Consumer Price Index, is going to rise above 4 per cent in a few months’ time.
Treasurer Jim Chalmers told ABC TV last night that he thinks the federal Budget is being well managed. He joins me now. Jim Chalmers, morning to you.
Jim Chalmers:
How are you, Steve?
Austin:
Very well, thank you. So what are you going to do about rising inflation, Jim Chalmers?
Chalmers:
Well, 2 things, primarily. I mean, we recognise and acknowledge that inflation is higher than anyone would like, and that’s putting pressure on people, but more than acknowledge that –
Austin:
The highest in the developed world, apparently, parliament was told yesterday.
Chalmers:
Well, let me come back to that in a minute, and that’s a really important point that I want to come at, Steve, but first of all, you asked me what we’re doing about it: we’re rolling out cost‑of‑living relief, we’re cutting taxes 2 more times, we’re making medicines cheaper, we’re doing [indistinct].
Austin:
That’s already announced, that’s old news though, Jim. What are you going to do about it now?
Chalmers:
Well some of that – well, first of all, some of that just came in last month, so you know, it’s not especially old news that we’re helping people with the cost of living. Sussan Ley was asked about the cost‑of‑living relief this morning, and she said that it’s not the answer, so she can explain what cost of living they would unwind.
But more importantly we’re rolling out cost‑of‑living help, we’re getting the budget in much better condition than it was 3 years ago, hundreds of billions of dollars better off, because of our spending restraint, because of our savings, because of our surpluses, because we’re banking upward revisions to revenue we’re getting the budget in better nick.
Now, we know that there’s more to do, of course there is, there always is, but especially when inflation is higher than we want it to be.
Now, you asked me about these international comparisons, Steve, and I’m so pleased you did, because –
Austin:
Parliament was told that our inflation here is the highest in the developed world today.
Chalmers:
Yeah, and the reason why in the parliament and elsewhere people don’t make the full comparisons with the major advanced economies is because we’ve got faster jobs growth than all the major advanced economies; we’ve got less debt than all the major advanced economies; we’ve got lower unemployment than most of them; stronger growth than all of them except for the US when you compare to the major advanced economies.
And the reason people don’t make the full comparison, whether it’s Ted O’Brien or others, is because they want to talk the economy down. And so I’d encourage you to check out what Governor Bullock said about this yesterday. She said, and talking about the Australian economy, she said, and I’m quoting, ‘We’re actually in a really good position’.
Inflation is higher than we want it to be, we’ve got a productivity challenge, we’ve got all this global uncertainty, but we’ve also got very low unemployment, the lowest average unemployment of any government in the last 50 years, strong jobs growth, higher labour market participation, business investment is recovering strongly, and so we can’t forget that we come to this challenge with advantages as well. We’ve got things going for us, and we’ve got some difficult challenges as well, and the government is focused on them.
Austin:
I have Michelle Bullock’s statement in front of me, the statement of monetary policy, and she says, ‘Uncertainty in the global economy remains significant, but so far there has been little or no depressing effect on the Australian economy’. I’m quoting her, Jim.
Chalmers:
I’m not sure of the point that you’re making, Steve.
Austin:
Well, the point is that global uncertainty, or the global situation, she’s saying there’s been little or no effect on the Australian economy.
Perhaps I should play you what the economist, Matt Canavan, said in the Senate yesterday, as you know he used to be with the Productivity Commission –
Chalmers:
Matt Canavan. He spends most of his time walking around, playing dress‑ups as a coal miner, Steve. Let’s not pretend he’s some kind of authority on these things.
Austin:
Well, let me play you what he said, and that way you’ll be able to answer it directly, because he addresses the budget question which you said you’re going to improve.
[Excerpt]
Matt Canavan:
Now the government takes no responsibility for this, but their own documents show that they are wrong, that they have contributed to inflationary pressures. Just before Christmas the Mid‑Year Economic Fiscal Outlook came out, and buried on p81 of that document is an extraordinary statement which says, and I quote, ‘Since the 2025 PEFO’, that’s the pre‑election fiscal outlook released in April, ‘Total expenses have been revised up by $23.5 billion in 25/26 and by $55 billion over the 4 years from 2025/26 to 2028/29’. In just the space of 7 months, this government has presided over a blow‑out in their own budget of $55 billion of that, and almost half of that is actually occurring into this financial year. We’ve never seen anything like this, never before.
[End of excerpt]
Austin:
That was yesterday in the Senate. I checked his claim, and it is correct, the document does indeed say $55 billion over 4 years from 25 to 26 to 28/29. That’s your Budget, and that is a blowout of $55,000 million, Jim.
Chalmers:
Well, first of all, I mean you played a long advertisement for Matt Canavan, you take him more seriously than anyone else does, Steve.
Austin:
Well, he’s quoting from your Mid‑Year Economic and Fiscal Outlook document, it’s your document, Jim.
Chalmers:
And I’m trying to talk to you about the Mid‑Year Economic and Fiscal Outlook, which was by 3 measures, a combination of 3 measures, the most responsible on record. It had a stronger bottom line every year of the forward estimates, it had lower debt in every year of the forward estimates, and the policy decisions that we took made a net positive difference to the budget.
Now that’s the first time that a mid‑year budget update has ever done those 3 things simultaneously. There were $20 billion of savings in the mid‑year update, part of $114 billion in savings that we have found.
Austin:
Congratulations, but why is there a $55 billion unexpected over‑spend?
Chalmers:
Because of spending in areas like aged care and Medicare and the things that our society needs in order to fund the services that people need and deserve.
Austin:
Okay. And it’s your argument that that has no effect on inflation in Australia?
Chalmers:
I’m saying you have to look at the whole budget.
Austin:
Okay.
Chalmers:
And the whole budget improved in the mid‑year budget update, not something that you have acknowledged or Matt Canavan has acknowledged. The budget improved. And to give you a sense of those $20 billion in savings, it took our predecessors about 7 updates to find that much in savings. $20 billion in one update.
Austin:
All right.
Chalmers:
So the point that I’m making, Steve, is if you compare our record on the budget with our predecessors’, the budget is much stronger now because of our efforts; delivering those surpluses, getting the deficits down, getting the Liberal debt down, finding savings, showing spending restraint, banking the upward revisions to revenue, all of those things mean that the budget is $233 billion stronger than what we inherited. That is the biggest nominal improvement in a budget in 3 years in the history of the Commonwealth.
Austin:
My guest is federal Treasurer of Australia, Jim Chalmers. Commonwealth spending is apparently at its highest level in 40 years outside of the pandemic. How is this good management?
Chalmers:
Well, first of all, I’m not sure why you would take the pandemic out of it, because when we came to office –
Austin:
Because that was a globally unusual event, that was a global event –
Chalmers:
Yeah.
Austin:
– that everyone had to deal with, so that’s why I’m taking it out of there.
Chalmers:
I can completely understand that, but that’s the baseline that we inherited. That level of spending was actually near a third of the economy under our predecessors.
Now regardless of the cause of that, that’s the baseline that we inherited, and we got that down from almost a third of the economy, spending as a share of the GDP, to around a quarter of the economy. Now there are pressures there largely from, you know, the care economy, the ageing of the population, Medicare and the like, there are pressures there on spending, and we’re very attentive to those, but everyone wants to pretend that we didn’t come into office with spending in the 30s when it comes to the share of the economy, and we got it down below 25, it’s settling now in the 26s, and that means that we have made very substantial progress on the level of spending in our economy.
Now from time to time you’ll hear –
Austin:
Of course, but that – Jim, let me jump in there. You wouldn’t have heard this, on the Breakfast program this morning this was pointed out, that you keep trying to blame the previous government when they were handling the pandemic, a time at which you were urging them to spend more money yourself to tackle the pandemic, because it was a global, you know, massive event. That’s why that’s been taken out of it; we’re not trying to say that you’re not working to bring down debt, the argument is that that was globally for all economies an unusual situation. Of course you’re going to try and bring down debt, but the question is it does seem to be –
Chalmers:
Partly true, Steve, but not entirely true. I mean, first of all, we tried to be as supportive as we can, and obviously we understood the need to do things like JobKeeper, but we made the point that when we were calling for JobKeeper to be extended to the tourism industry, for example, we believed that that could be paid for by unwinding JobKeeper for the businesses that didn’t need it, that were very profitable, where tens of billions of dollars were wasted.
So not quite true to say that we were calling for dramatically higher spending. We were trying to be supportive, we did recognise the conditions, and we acted in a bipartisan way. But there was a lot of waste there too. But regardless of the cause of it, the point that I’m making is when we came to office we inherited a baseline which was spending very high, huge deficits as far as the eye can see, a trillion dollars in debt on a trajectory –
Austin:
Understood.
Chalmers:
– higher than it is now –
Austin:
Understood.
Chalmers:
– we tried to rein that in and we’ve made some progress.
Austin:
No one’s missed that point though, Jim, no one’s missed that point. You’ve made that point several times, it’s been very clear.
Yesterday you blamed the private sector, you said, and I quote you, ‘Growth in private demand has strengthened substantially more than expected’.
Are you saying it’s a negative thing for the private sector economic activity to grow?
Chalmers:
Well, first of all, I’m quoting the Reserve Bank Governor making that point yesterday. I mean that was really the –
Austin:
Okay.
Chalmers:
– key point that the Governor –
Austin:
So is that a negative thing; are you saying it’s a negative –
Chalmers:
No, I –
Austin:
– for private sector economic activity to grow?
Chalmers:
No, I’ve said for a long time now that we want the private sector to be the main driver of growth in our economy, but it’s also true that that recovery, which is a good thing, you know, last year the story of our economy was public demand in retreat, private demand taking over, and what I was doing yesterday was pointing out to people who want to pretend wrongly, dishonestly, that this inflation challenge is all government spending, that the Governor of the Reserve Bank said growth in private demand has strengthened substantially more than expected.
She said again in the media release, private demand is growing more quickly than expected. She said in the statement of monetary policy, private demand was much stronger than expected. Probably half a dozen or more times they made that point, and I don’t think it’s unreasonable for the Treasurer of Australia to point out to these people who want to pretend dishonestly that this is all government spending, that the Governor herself has said that the thing that surprised them on the upside was the growth in the private economy and that explains the upward pressure on the outlook.
Austin:
My guest is Treasurer, Jim Chalmers. Quoting from the monetary policy statement by the Governor, she says, ‘Prices in the housing market are also continuing to pick up’. You’re a Federal Labor MP here in Queensland. What’s the cost of an average mortgage in your electorate of Rankin?
Chalmers:
It’s a bit over 500 grand. I think the most recent data we’ve got I think had 512,000 as a new mortgage, and that compares, I think, with a Queensland average of about 687.
Austin:
That’s about right. So, how much are you expecting that to go up?
Chalmers:
Expecting the mortgage to go up?
Austin:
Yeah, because if, as the Reserve Bank says, prices in the housing market are continuing to pick up, that’s going to put upward pressure on that. Any idea as to what that’s going to be?
Chalmers:
Well, it remains to be seen. You know, the Reserve Bank and other forecasters try to forecast house prices. I think it’s an especially difficult task given the way that house prices behave in Australia. Obviously when we get a rate increase like we got yesterday that will play out too, and so I wouldn’t be prepared to make a prediction about that. We know what the current average mortgage is, we know what the impact of yesterday’s decision would be on that, but I’m not prepared to make guesses about future movements in house prices.
Austin:
But the RBA’s saying they expect more of them; there will be more, at least cash rate increases, which will bump it up.
Chalmers:
Well, they haven’t been that clear about it. They said that they’d keep their options open.
Austin:
Okay.
Chalmers:
And in their forecasts, the same way as in the Treasury forecasts, they make an assumption based on a survey of market economists, I think, certainly we do in the Treasury. So it’s not a policy decision to increase rates more times but they’ve left that option open obviously.
Austin:
All right. I’m mindful of the time, I’ve got to check traffic in a moment, but I want to play you one other thing from the Senate, this time from your own side, from Finance Minister, Katy Gallagher.
[Excerpt]
Katy Gallagher:
I also note that economists, if you got them all in a room, I think 10 people – 10 economists in a room, you’d have 10 different answers.
[End of excerpt]
Austin:
That was yesterday, Jim. Do her comments represent a frustration that the government is receiving from your economists, or something else?
Chalmers:
No, no, of course not. I mean Katy’s being her usual engaging and irreverent self and pointing out that there’s not a unanimous view amongst economists about government spending in these inflation figures.
You know, you’ve got an AMP economist saying government spending’s peaked, the growth in government spending’s going to add less to inflation, Belinda Allen from the Commonwealth Bank, public sector’s contribution to growth has eased significantly, Lucy Ellis from Westpac, public sector demand growth is slowing, and indeed was negative over the first half of 2025. And I think what Katy’s referring to is the fact that our opponents and their cheerleaders in the media want to pretend that there’s a unanimous view about economists. There rarely is, and there isn’t in this instance either.
Austin:
How many economists work for you in Treasury; any idea?
Chalmers:
Well, I’ve probably got about 10 or a dozen in the office, and then I’m not sure – I haven’t checked everyone’s degree in the Treasury, but most of the probably 15, 1,600 or so would be economists in the Treasury, I would have thought. So a lot.
Austin:
Thanks for your time.
Chalmers:
Thanks Steve, all the best.
Austin:
Federal Treasurer, Jim Chalmers.