TANVIR GILL:
I'm right on the sidelines of the G20 Finance Ministers and Central Bank Governors meeting right here in Bengaluru, India and I'm joined by a very special guest. I'm joined by the Australian Treasurer, Jim Chalmers, to talk more about how it's going right here at the G20 special meetings. Treasurer, great to have you on the show. Thank you very much for your time. Yesterday, the French Finance Minister made headlines saying that he would not sign any communique where the Bali statement is watered down ‑ what's your standing?
JIM CHALMERS:
I share the French Finance Minister's view on this and the views expressed.
GILL:
Is your stance equally as strong?
CHALMERS:
It is yes, I think it's crucially important that the G20 Finance Ministers stand as one against the brutal aggression from Russia on Ukraine. This is the source of so many of our economic challenges around the world, and at home in Australia as well. We need to stand as one, we need to be resolute. I congratulate the France Finance Minister and so many of my colleagues for making a similar point.
GILL:
What if the communique doesn't happen then? What do you think you would take away from the G20 meetings?
CHALMERS:
It's still a very important opportunity to engage on so much of what challenges us in similar ways around the world. And as we work on reform of our multilateral institutions, we work on the energy transition, payments, data and digital, all of these important things, we need to not lose sight of the main game, which is the inflation challenge. The macro‑economic environment is still incredibly tricky, as you know. There is a path through this for the global economy, but it's a very narrow and very perilous path. On one side is a big downturn, on the other side is inflation getting out of control. So central banks, and finance and economic ministers need to stay focused on that challenge.
GILL:
Wouldn't it be disappointing for the G20 member nations, if you all come down here to Bengaluru and at the end of it you don’t sign a communique at a time when the world is discussing the Ukraine war and how to help Ukraine with relief measures, the IMF is drawing up plans, not just military aid but financial aid ‑ wouldn't that be disappointing?
CHALMERS:
One of the best things that can happen for the global economy would be a Ukrainian victory in Europe, we've made that clear. Australia has provided a heap of support, militarily and otherwise, to our Ukrainian friends who have exhibited the most remarkable bravery and courage, and we commend them for that. Obviously, we would prefer to see a communique which has strong language on Ukraine. We don't want to see backsliding from the G20 leaders declaration. We'll see how that all plays out ‑
GILL:
Would you be disappointed if that doesn't happen?
CHALMERS:
Of course, yes, of course, but that doesn’t mean‑
GILL:
And it's all about using the word ‘war’ in the statement.
CHALMERS:
Well, ideally we wouldn't backslide from the leaders statement. We'll see how that plays out through the course of today. It's going to be a long day, here in India. But regardless, we are engaging on so many crucial economic issues, the inflation challenge, data and digital, climate change, all of these important things. And from an Australian point of view, we believe that we give ourselves the best chance of meeting this moment and getting on top of these challenges if we engage, and that's what this is about.
GILL:
Okay. You have a bilateral lined up with the Indian Finance Minister later today. What are you expecting out of that bilateral, especially in terms of stronger trade and investment ties between the two countries? What are you expecting from that?
CHALMERS:
I'm really looking forward to speaking with Minister Sitharaman about all of our common challenges. We've also got Prime Minister Albanese from Australia visiting Prime Minister Modi in the next fortnight or so, and so no doubt that will be part of the conversation as well. But we've got a big opportunity to work very closely with Indian friends and we want to do that, we want to make the most of this opportunity. It's not easy to be in the big chair of the G20 right now but we have so much faith and so much confidence in Minister Sitharaman and Prime Minister Modi, to make this year worthwhile. And we want to be part of the G20's success from an Australian point of view.
GILL:
What about your relationship with China amid all of this?
CHALMERS:
We're putting a lot of effort into stabilising that important relationship. We are realistic about the complexities of that relationship but again‑
GILL:
More so than your predecessor?
CHALMERS:
We believe that we give ourselves the best chance to deal with some of the obvious challenges and complexities if you engage in good faith, and that's what we have tried to do. Now we do want to stabilise that relationship. We believe both sides have an interest in a peaceful, prosperous, stable, secure region. And that's what our engagement is all about.
GILL:
China's recovery, how much has that helped your economy over the course of the last two to three months?
CHALMERS:
Obviously, it's one of the most important relationships that we have from an economic point of view. And we were monitoring very closely the difficulties when it came to supply chains in the midst or the peak of that very difficult COVID wave that they were going through. Now we expect the Chinese economy to recover a bit quicker and a bit sooner than we might have thought a few months ago, and that's obviously a good thing for the Australian economy.
GILL:
What does that mean for commodity exports coming out of Australia?
CHALMERS:
We’ve been getting incredibly strong prices for our exports out of Australia, and particularly our commodities, that's one of the things that we've got going for us. We've got a lot coming at us in Australia but we've got a lot going for us as well. It's one of the reasons I'm optimistic about the future even while I'm realistic about some of these near‑term challenges. But commodity prices have been very strong. We want to sell our commodities to the world at good prices. It's an important part of our economic foundations, and China obviously is a crucial part of that.
GILL:
Given tight supplies do you expect prices to go back up again, despite demand coming in on increasing, rebounding countries like China and India?
CHALMERS:
Prices have been particularly volatile and I think particularly in the energy market, for obvious reasons ‑ the war Ukraine ‑ but also iron ore, also thermal coal and metallurgical coal. These are key exports for us, there's no there's no secret about that. We want to sell it to the world at good prices and the Chinese markets is very important to us.
GILL:
I want to talk about the interest rates back home and the outlook on rates. Now, obviously the RBA is looking at that very closely, looking at the housing market, looking at the debt situation. What is your own take on how the inflation issue needs to be tackled and whether it's really the responsibility of the central bank? Because it seems like right now, the onus also lies on how fiscal policy is managed?
CHALMERS:
Yes, two very different jobs here. The central bank takes its decisions in Australia independently about interest rates, and they are in a tightening cycle as almost all of the central banks around the world are. And that is a difficult job that they have to get on top of this inflation without crunching our economy. I focus on my job, which is the budget and fiscal policy as you rightly identify. And we've got a three part strategy there, which is about relief for people doing it tough, repair of our broken supply chains and restraint in the budget. And the combination of those three Rs gives us the best chance to make the job of the independent Reserve Bank not that much harder.
GILL:
I understand that, but are you happy with the job that the RBA has done because obviously the Governor has come under pressure since the RBA started raising rates aggressively over projections made over a year ago that rates wouldn't rise before 2024?
CHALMERS:
Governor Lowe has explained that commentary that he provided at the time. He's taken a number of opportunities to explain where he was coming from in those instances. There's a long standing convention in Australian politics for treasurers of either political persuasion not to second guess or take shots at the Governor of the independent Reserve Bank. I think that's an important thing. I cherish and respect the independence of the Reserve Bank, and I work with Governor Lowe in other areas. Their job is monetary policy, it's a difficult job. My job is fiscal policy, equally difficult but we've got a plan there and a strategy. We think the inflation peak is behind us in Australia, we certainly hope that that is the case. But inflation will be a bit higher than we'd like for a bit longer than we'd like in Australia, and that's why our three point plan is so important.
GILL:
Just last two questions. On the housing market, do you see signs of easing because it’s really quite bothersome for the people in Australia, right? The way rents are going up, affordability is a challenge.
CHALMERS:
There are a couple of issues there which are really important and are putting pressure on people. But house prices have come off a bit, which is inevitable when you have a number of interest rate rises consecutively ‑ that's not a surprise to us. But more broadly, when it comes to housing affordability, we need to build more homes. Our vacancy rates in the rental market are incredibly low, rents are incredibly high. We need to build more homes but we've got to do that at a time where we've got labour and skills shortages, and inflation when it comes to building materials.
GILL:
How do you address those issues?
CHALMERS:
We've got a number of funds, which we're trying to put through the Parliament, which is about co‑investing in building more housing supply, more affordable homes. There's a $10 billion Housing Australia Future Fund, which is an important part of our policy. But I've also brought together the big investors ‑ superannuation and institutional, the state and local governments and the building industry ‑ to try and come together and work out how we can build the homes that people need, particularly near where the jobs and opportunities are being created.
GILL:
And finally, do you see the need for an Australian version of the IRA, in response to subsidising investments in new energy?
CHALMERS:
Not necessarily in response, but we have a huge program of investment in cleaner, cheaper, more reliable, increasingly renewable energy. This is Australia's big chance. We want to be a renewable energy superpower in the world. We obviously follow closely what our American friends are doing in this regard, but we've got our own investments. We've got a big opportunity, and we want to attract investment in Australian energy.
GILL:
Isn’t it a race to the bottom, when we start subsidising investment?
CHALMERS:
No I think it's a race to the top when it comes to cleaner and cheaper energy. And we want to see the world make this transition successfully. There's a role for traditional sources of energy in the interim. But we want to see the world make this energy transition, it's a big part of our discussions here at the G20. India wants to talk to us about it, the other countries want to talk to us about it
GILL:
If you want to collaborate ‑ and this will be my final question ‑ if you want to collaborate at the headline level in terms of, obviously, coming together and meeting your decarbonisation targets, but then you're also competing for investments at the same time?
CHALMERS:
That's healthy competition, and we do want to collaborate, we do want to work closely with friends right around the world about this important thing. This will be a large part of determining the future trajectory of the global economy, and our own economies at the domestic level. Engagement is absolutely critical. When it comes to our supply chains and the supply side of our economy, we want to shore up our supply chains, not shut people out of them. We want to make these investments. Australia is a wonderful place to invest, particularly now that we've got a much more forward looking and forward leaning policies on the energy transition. We hope that people right around the world consider Australia when they're making these really important investments.
GILL:
Alright, Treasurer, thank you very much.
CHALMERS:
Thanks so much.