Steve Cannane:
Well, the fallout from the Reserve Bank’s decision to keep interest rates on hold at 3.85 per cent continues this morning. The decision from the RBA Board, which was not unanimous, comes as the bank says uncertainty in the world economy remains elevated. And as for uncertainty, in developments overnight, Donald Trump says he’ll soon announce tariffs on imported pharmaceuticals, which could reach 200 per cent.
Joining me now is the Treasurer, Jim Chalmers. Treasurer, good morning.
Jim Chalmers:
Thanks very much, Steve. Good morning.
Cannane:
The RBA has decided against cutting rates. Were you as surprised as the markets were?
Chalmers:
I think there are good reasons why Treasurers don’t make predictions about movements in interest rates, I don’t predict them, I don’t pre‑empt them, I don’t second‑guess decisions once they are taken.
I think it’s certainly the case that the market was surprised. I think certainly economists were surprised by the outcome. And I think it’s fair to say as well that there were millions of people who were hoping for more rate relief yesterday and didn’t get it. I think all of those things are self‑evident.
Cannane:
In the meantime, what can you do to alleviate pressure on households?
Chalmers:
As the Reserve Bank Governor said yesterday, we’re actually making really good progress on inflation. We’ve got inflation down from something which had a 6 in front of it when we came to office, now in the low 2s. We’ve made a lot of progress together as Australians on inflation, and we’ve also been prepared as a government to help with the cost of living, including a whole range of new measures which came in just last week on the 1st of July.
What we’ve done as a government is we’ve been a helpful part in the fight against inflation. We’ve helped Australians with the cost of living in the most responsible way that we can. That’s why we’re seeing inflation come down so substantially and now in a sustained way. And it’s also why that’s given the Reserve Bank the confidence to cut interest rates twice in the cost of the last 5 months.
Cannane:
There are other indicators that make things tricky for the RBA. The RBA says labour market conditions remain tight and productivity hasn’t picked up. We know the productivity roundtable is coming up in August. But what is the government doing to kickstart productivity in Australia in the immediate future?
Chalmers:
Productivity is one of the big structural challenges in our economy. It hasn’t just shown up in the last couple of years; it’s been a feature of our economy, unfortunately, for the last couple of decades. We did spend a big chunk of the first term working to make our economy more productive – a lot of competition policy played an important role in that, investing in skills, investing in people’s capacity to adapt and adopt technology. We’ve had a big productivity agenda. It’s not one of those areas where you see quick wins or immediate kind of spikes in the data when it comes to productivity. But we have been working hard on it. We have got a big agenda, and the productivity roundtable is all about working out the next steps in that regard.
But on your question about employment as well and the labour market, it should be a source of considerable pride to Australians that we’ve done something here that other countries haven’t been able to do – and that’s get inflation way down into the lower half of the Reserve Bank’s target range without seeing a spike in unemployment that other countries have seen.
We haven’t paid for our progress on inflation with much higher unemployment. That’s a good thing, as the Reserve Bank Governor acknowledged yesterday as well.
Cannane:
On Radio National Breakfast, it’s 22 to 8, and we’re talking to the Treasurer Jim Chalmers.
I want to bring you to tariffs. What do you make of this announcement overnight of a 50 per cent tariff on copper imports, with US President Donald Trump also flagging a potential 200 per cent global tariff on one of Australia’s biggest exports to that country – pharmaceuticals?
Chalmers:
These are obviously very concerning developments. It’s been a feature of recent months that we’ve had these sorts of announcements out of DC. It’s still early days. Obviously, we’ll make a more detailed assessment of what’s come out of the US in the usual way. And the 2 big announcements were obviously regarding copper and pharmaceuticals.
Our exports of copper to the US are actually quite small. The US accounts for less than 1 per cent of our copper exports. Much more concerning are the developments around pharmaceuticals. Our pharmaceutical industry is much more exposed to the US market. And that’s why we’re seeking – urgently seeking – some more detail on what’s been announced.
But I want to make it really clear once again, as we have on a number of occasions before, our Pharmaceutical Benefits Scheme is not something that we’re willing to trade away or do deals on. That won’t change even if –
Cannane:
Is there pressure coming from the US on the Pharmaceutical Benefits Scheme?
Chalmers:
I think in recent months we have seen comments out of the US about pharmaceutical trade with Australia. We see the PBS as a fundamental part of health care in Australia. We’re not willing to compromise the PBS. We’re not willing to negotiate or trade away what is a really important feature of the health system alongside Medicare and all of the other things that we’re proud of as Australians.
We’ll work through the announcement out of the US overnight. They’re obviously very concerning developments. We are talking about billions of dollars of exports to the US when it comes to pharmaceuticals. So we’ll work through it in a methodical way. But we make it clear once again – as we have on a number of occasions in recent months – that the PBS is not on the table from an Australian point of view.
Cannane:
Many would be shocked in the last 48 hours that South Korea was whacked with a 25 per cent tariff by the US. They have a free trade deal with the US, and 95 per cent of their goods traded between the 2 countries are tariff‑free, and this is a deal that Donald Trump actually renegotiated back in 2018 and at the time said he was very happy with it. So if an ally like South Korea that’s in a free trade agreement with the US can get whacked with such a high tariff, how do we know Australia won’t?
Chalmers:
These escalating trade tensions around the world in recent months are a substantial concern to us and for 2 reasons: one, the direct impact on our industries, our workers, our businesses, but also the impact on global demand, the impact on trade in our region. You mentioned Korea, but also obviously China, Japan and the like.
When we work through the possible consequences of what we’re seeing here, that does pose a risk to global growth. It does pose a risk to the progress that the world has been making in our economies after COVID. We’ve made it really clear on a number of occasions that these tariffs are bad for Australia, they’re bad for the US, they’re bad for the global economy. So these developments, they are sometimes unpredictable. There’s been an element of volatility and uncertainty injected into the global economy, and I think the developments in Korea are just part of that.
Cannane:
When the US’s top trade representative, Jamieson Greer, was being asked in a Senate hearing why Australia was getting whacked with tariffs, he said, ‘They ban our beef, they ban our pork, they are getting ready to impose measures on our digital companies. It’s incredible.’
Has the US put pressure on Australia to relax what it considers to be barriers to trade, and, in particular, are they kicking up a stink about the news bargaining code, because that is actually mentioned in a US trade report as a barrier to trade?
Chalmers:
Obviously we’ve seen that in those reports, and it has come up in discussions publicly and privately in recent months. I don’t think that’s a revelation. When it comes to beef, there are some scientific processes underway, agricultural processes underway, to try and work through some of those issues.
When it comes to the digital economy, the news media bargaining code was implemented by our predecessors. It’s not about raising revenue for the government; it’s about making sure that there’s a level playing field in our media. We’ve explained that to Australian counterparts. It has come up from time to time.
It’s not a policy issue that I work on directly. But it has come up in discussions from time to time, and we’ve been able to provide a level of assurance that what we’re talking about here is just making sure that news media organisations are paid for the media that they generate, that there’s a level playing field in our media; it’s not about raising revenue for the government.
Cannane:
Okay, if I could just bring you to the Prime Minister’s visit to China. China’s government has flagged that it’s likely to press the Prime Minister when he travels there over his decision to bring the Port of Darwin back into Australian hands. You’ve said that your foreign investment system is not country‑specific, but can you plausibly claim your decisions over the Port of Darwin are totally disconnected from the broader strategic picture? And the Defence Minister is on the record also as saying that China is Australia’s greatest source of security anxiety.
Chalmers:
First of all, we should say that the Prime Minister’s trip to China is a really important opportunity – a very, very important opportunity. This is a trading relationship, an economic relationship, that benefits both sides, and we’ve shown a willingness and ability to stabilise that relationship, to engage in our national interests and in the interests of our workers and businesses and investors.
But there are complexities in the relationship as well. We’ve been clear that we think the Port of Darwin should never have been sold off under the previous Liberal government in the first place. We’ve made it very clear that we will see the Port of Darwin return to Australian hands. That’s what we committed to during the election. We’ll work through that methodically. We won’t speculate on prospective buyers, and we’ll have more to say about it in due course.
But there are complexities in the relationship with China. We don’t pretend that there aren’t. And this is one of them. And we’ll work through it with engagement. We’ll work through it methodically and in a considered way, as we have with some of the other issues in the relationship.
Cannane:
Treasurer, we’ll have to leave it there. Thanks for your time this morning.
Chalmers:
Appreciate it, Steve. All the best.
Cannane:
Thank you. Treasurer Jim Chalmers talking to us there.