Steve Cannane:
Treasurers, finance ministers and central bank governors are currently meeting in South Africa for the G20. It comes against a backdrop of global economic slowdowns and trade tensions.
Federal Treasurer Jim Chalmers joined me earlier from Durban. Treasurer, thanks very much for your time.
Jim Chalmers:
Thanks for having me back on.
Cannane:
Australia’s unemployment rate rose to 4.3 per cent in June, the worst unemployment figure since late 2021. Is this a sign that the soft landing you were hoping for in lowering inflation without increasing unemployment is no longer holder?
Chalmers:
We did see a small tick up in the unemployment rate. This is unwelcome, but it’s also unsurprising. We’ve been saying for some time, including in our own budget forecasts, that we expect a modest tick up in the unemployment rate. But it remains the case that over the last 3 years the labour market in Australia has been a real source of strength at an uncertain time in the world.
More than 1.1 million jobs created on our watch, the lowest average unemployment of any government in the last 50 years. These have been good developments. And here at the G20 there are only 2 economies, including ours, where last year we saw continuous growth, inflation with a 2 in front of it and unemployment in the low 4s. And so we need to have some perspective when it comes to this tick up in unemployment. It is modest. It is unwelcome, but it’s also unsurprising.
Cannane:
You must be concerned about the increase in youth unemployment, which has helped drive these figures up. Do you think we’re heading towards 5 per cent unemployment?
Chalmers:
We’re not expecting unemployment to go that high. We think somewhere around the middle 4s in our current forecasts. But obviously there’s a lot of uncertainty in that. Of course we don’t want to see youth unemployment rise, we don’t want to see unemployment go up either.
But, again, unemployment has been really quite outstandingly low in our economy for some time now – 4.3 in historical terms would be seen as quite a good outcome. We don’t want it to tick up, but we have expected it to do so and that’s because the global economy is uncertain, our own economy has been relatively soft, those higher interest rates of the last couple of years have been biting, as have cost‑of‑living pressures.
And so all of that’s combined to see this unsurprising but small lift in the unemployment rate. Our soft landing is still very much the expectation here in Australia. We’ve got low unemployment. We’ve got sustainably and substantially lower inflation. We’ve kept the economy ticking over. Not a lot of countries can say that they’ve done that.
Cannane:
We know that President Trump’s on‑again, off‑again tariffs are not good for business confidence and investment. Do you think this policy uncertainty is now bleeding into the Australian economy and affecting decisions about whether to hire workers or not?
Chalmers:
That’s certainly the feedback that we get around the place, speaking with CEOs and meeting with company boards and the like and with economists. There is a real sense that this volatility and unpredictability and uncertainty is really a defining and an ongoing feature of the global economy, and our own economy is not immune from that.
So I think certainly people see this uncertainty and unpredictability as a new normal. That requires us to have a shift in our thinking. For example, here at the G20, I think there is a broad recognition that the best way to deal with this more or less permanent uncertainty is with more engagement, more collaboration, more secure supply chains, more reliable markets and also more ambition in our own economic policies at home. And for us that means making our economy more productive and more resilient and also making our budget more sustainable.
Cannane:
You’ve got meetings at the G20 in Durban with finance ministers from some of the countries that have been hardest hit by Donald Trump’s tariffs, including Japan, South Africa, Canada and Indonesia. Is there a sense of collective shock from those countries, that America is harming global trade and the global economy and then their economies?
Chalmers:
There’s certainly a sense in – whether it’s the bilateral discussions or in the larger group – that these tariffs are unwarranted, they’re unnecessary and they are, as the Prime Minister and others have said, they’re an act of economic self‑harm. Not good for the American economy or the global economy or for our own individual domestic economies round the world.
So I think there is – people have been talking about that in relatively blunt ways. And that’s because we all recognise together that if you think about these 4 big economic shocks we’ve had in the last less than 2 decades, this one is a bit different to the first 3 because this one is imposed by policy, by policy decisions out of DC and elsewhere. So that does introduce a whole new layer of uncertainty and volatility that everyone has to deal with. And I think people are pretty upfront about discussing that here.
Cannane:
What’s the mood at the G20 meeting about whether these tariffs are temporary or not? Because sometimes when tariffs come in they can be hard to get rid of, and we saw that Biden kept some of Trump’s tariffs from Trump’s first term.
Chalmers:
I think your question earlier really got to the nub of this, which is as much as it’s about the figures themselves, the percentages, you’re right that other countries have far more onerous tariffs or prospective tariffs being applied but really what’s damaging confidence and particularly investor confidence is the unpredictability around it. The fact that it seems like each week there is a new announcement around tariffs, and that’s feeding into these escalating trade tensions and creating a lot of uncertainty.
So I think that really is the defining influence on the discussions here at the G20 – trying to get our head around the best way to find those reliable markets, those robust supply chains, and the best way to do that is with more engagement, not less. And that’s why it’s so important that we’re here because engaging with the world is good for Australian workers and businesses and investors.
Cannane:
On Radio National Breakfast we’re talking to the Treasurer Jim Chalmers, and we’re talking to him from Durban where he is there for the G20 meeting of finance ministers and also central bank governors. The head of the Federal Reserve in the US Jerome Powell is not there, his deputy is. He’s had his independence undermined by President Donald Trump, and there’s been speculation he wanted to sack him. Has there been much talk of that and the impact it’s having on the US economy?
Chalmers:
I’ve not been part of any discussions about that specifically. Of course we all follow comments from President Trump and others. We don’t engage in a running commentary on the domestic politics of the United States. Obviously people are watching with a lot of interest what happens there.
For our part in Australia, we are big believes in central bank independence. My Reserve Bank reforms were really about strengthening the Reserve Bank, making it more independent, not less. And I think that’s because there are a lot of good reasons to have an independent central bank. We’ve got a similar objective or the same objective as our Reserve Bank – to get our inflation down in a sustainable way, and we’ve made a lot of progress together. But we’ve got different responsibilities. The Reserve Bank is independent in Australia for good reason.
Cannane:
You’ve said one of your priorities at this meeting in Durban is to make the most of the global net‑zero opportunity. The former Deputy Prime Minister Barnaby Joyce says when parliament resumes he wants to introduce his own bill to repeal the net‑zero target, describing it as Labor’s lunatic crusade. He says it’s treacherous to the very security of Australia.
Chalmers:
Let’s see what the Coalition parties say about that when parliament returns. They are hopelessly divided on this. Barnaby Joyce is saying something very different to other members of the Coalition. And I think what it tells us is that these Coalition parties – the Liberals and Nationals – learned absolutely nothing from the election on the 3rd of May.
We’ve made it very clear, the direction of travel on global net zero is clear. That progress won’t necessarily be linear, there will always be countries that have got a different range of perspectives on it. But the direction of travel is clear, the opportunity for Australia is very clear, and we’d be mad to waste it, as Barnaby Joyce is proposing.
Cannane:
Ken Henry, the former Treasury Secretary, gave a speech this week where he linked net zero and environmental laws to productivity. He said there’s no chance of Australia meeting stated targets for net zero, renewable energy, critical minerals development, housing and transport infrastructure without very high‑quality national laws that set clear environmental standards for major projects. Do you agree with this assessment that boosting productivity relies on proper environmental law reform?
Chalmers:
I think it’s an important part of it, and particularly when it comes to making the most of this energy transformation in our economy. We’ve quite deliberately put the energy transformation at the very core of the work that we’ve asked the Productivity Commission to do to make our economy more productive, more modern, more resilient, more sustainable.
And so, I think – I wasn’t able to watch all of Ken’s speech, I was en route to South Africa – but I’ve seen the reporting of it and I think some of the points that Ken made are points well made. The energy transformation, net zero, these are important parts of our consideration when it comes to making our economy more productive.
And this is one of the reasons why we’ll be inviting Ken Henry to the Economic Reform Roundtable in August. Later today after your program airs I’ll be issuing the next round of invitations to our Economic Reform Roundtable. All about building consensus around some of these important ways to make our economy more productive and resilient and our budget more sustainable. Ken Henry is on that list, and I’m looking forward to engaging with him there.
Cannane:
Treasurer, we’ll have to leave it there but thanks very much for joining us from Durban.
Chalmers:
Appreciate the chat, thanks so much.