TOM CONNELL:
Joining me now is the Treasurer Jim Chalmers in the studio. Thanks for your time.
JIM CHALMERS:
Thanks, Tom.
CONNELL:
How hopeful should mortgage holders be that this is the peak?
CHALMERS:
It remains to be seen and I think as the Reserve Bank Governor and the board made clear in their statement today, they'll assess the developments in the economy as they unfold, that's what we would expect them to do but I think really the main point that they made in the statement today was that the data that we've been getting for the last couple of weeks is consistent with getting on top of this inflation challenge, at the same time as our labour market and our economy more broadly continues to grow and that's really what we're trying to achieve here. The Reserve Bank takes its decisions independently, as you know, we've got our own responsibilities and really the number one thing that we're focused on is rolling out this cost‑of‑living relief because even after the welcome reprieve today, people are still under the pump.
CONNELL:
Given what you said there ‑ so for now, the economic indicators are solid, especially unemployment and clearly we're getting pretty close to the peak from what the RBA are saying there compared to previously. Are you the most confident you've been this year that we will avoid a recession?
CHALMERS:
Well, certainly the Treasury forecasts and the commentary from the Reserve Bank today, there is an expectation that the Australian economy will continue to grow but much more slowly and we need to be up‑front about that ‑ the combination of substantial global economic uncertainty combined with higher interest rates and this inflation challenge which is moderating but still significant ‑ that is slowing our economy, we saw the front end of that in the March National Accounts and we will see more of that in the months ahead.
CONNELL:
You must feel a bit better though about avoiding a recession now compared to the past few months.
CHALMERS:
Our aspiration, our goal is to get on top of this inflation challenge in a way that preserves as much as we can of the strength in our economy and if you take a step back, even from today's decision and you compare it to where we were at election time last year, the labour market is incredibly strong ‑ record jobs growth ‑ we've got a surplus for the first time in 15 years, we've got inflation moderating ‑ the quarterly peak was in March last year ‑ and so on a range of fronts we're making progress, partly but not solely as a consequence of our responsible economic management. We're making progress, we obviously need to make much more progress to try and get to a point where we're on top of this inflation challenge without crashing our economy.
CONNELL:
You mentioned partly because of your economic management. If we look at what's happened with the RBA's contractionary hike after hike, Labor's fiscal policy, though, I mean, the Budgets have been at best neutral. So does what you've done does just not make the situation worse?
CHALMERS:
No, it's better than that and if people are reluctant to take the government's word for that, I'd encourage people to look up what the Governor of the Reserve Bank said and the Governor of the Reserve Bank said that our Budget is taking the pressure off cost‑of‑living and inflation rather than adding to it and our forecasts reflect that.
CONNELL:
Did he actually say it would put downward pressure though on inflation?
CHALMERS:
I don't have the quote on me here but he said that the Budget is taking pressure off inflation and our forecasts show something like a three quarter point improvement in inflation as a consequence of our cost‑of‑living package and that's really our overriding goal here ‑ in addition to preserving as strong as we can the labour market, getting on top of this inflation challenge, is rolling out this cost‑of‑living relief in a way that takes some of the edge off these pressures that people are still feeling without adding to inflation. The Reserve Bank Governor has said that that's his expectation of the Budget and that's the deliberate design of our Budget.
CONNELL:
For the future of the RBA and decisions, they're going to have more of a focus now on employment, this dual purpose if you like. What do you think full employment is?
CHALMERS:
I want to answer that question but first of all, we shouldn't forget that full employment is already an objective of monetary policy under the Reserve Bank. If you go into the foyer of the Reserve Bank, there's a full employment inscription in the foyer of the Reserve ‑
CONNELL:
But it gains more prominence, now.
CHALMERS:
All we're saying as a consequence of the Reserve Bank review and the advice of the reviewers is that the Reserve Bank should weigh up full employment and price stability and I think that's a good thing but it largely reflects a bank which has been asked to factor in full employment for some time. Now on the definition of full employment, there are two different things here that people need to understand. First of all, you need to make a technical assumption that feeds your forecast in the Budget about what full employment is, it's called the NAIRU. The Treasury thinks that's four and a quarter per cent, they used to think it was closer to five per cent.
CONNELL:
This is where wages were supposed to get moving, this is where they said they're not moving.
CHALMERS:
It's basically a measure of where they think there is an inflationary impact of a labour market, which is ‑
CONNELL:
Is four and a quarter still about right, do you think?
CHALMERS:
Well, that's the assumption that the Treasury uses and the Reserve Bank uses a similar assumption, but it's narrow, its technical and it's for the purposes of a forecast ‑ there is a world of difference between that and what we're aiming to do when it comes to full employment in the economy and what we're trying to do there is to make sure we can create a good, secure, well paid job for everyone who wants one. One of the achievements that we are most proud of is in the first year of the Albanese government, more jobs have been created than in the first year of any other government on record, something like half a million jobs have been created since we've been in office and what we've shown is the economy can create these jobs at the same time as inflation is moderating ‑ we'd like it to be moderating faster, but we're making progress.
CONNELL:
I guess when you look at 4.25 though, that would be hundreds of thousands of people becoming unemployed and yet that would be situation achieved. That seems incongruous, doesn't it?
CHALMERS:
People don't see it the way that you've described it. If you take the comments from the Deputy Governor about full employment and interest rates, the point that she was making was purely to reflect the nature of the forecast and it comes back to what I was saying about the narrow technical definition of full employment which is the NAIRU ‑ sorry to snow your viewers with technical expressions ‑ but that's the assumption that the econocrats use ‑ there's a difference between that technical assumption and what we're trying to do in the labour market. What we're trying to do in the labour market is to create more jobs for more people in more parts of the country.
CONNELL:
A lot of talk about rent and when Labor federally is asked about a rental freeze it sort of parries it off to being a state issue. You got all the states together ‑ as in your government ‑ on energy to sort out a solution there, so why not on rent as well?
CHALMERS:
Well, we've found better ways to support people who are under pressure from higher rents, for example, one of the things I'm proudest of in the May Budget was the biggest increase in rent assistance for 30 years and that's in recognition of the pressure that people are under but the biggest challenge here is supply ‑ we want to build more houses, that's why it beggars belief that the Greens and the Coalition are blocking that in the Senate. We need to deal with the supply side issues in the housing market at the same time as we're giving people some relief from these higher rents with our increase to Commonwealth Rent Assistance.
CONNELL:
Two states at least are going down a path of rental freezes. Do they work in your view?
CHALMERS:
That's a matter for them and we have said that we think from a national, from a Commonwealth point of view, that there are better ways to attack this challenge.
CONNELL:
Better than rental freezes.
CHALMERS:
Well, the Prime Minister has said at National Cabinet that he is prepared to bring people together to address and attack this issue. Everybody understands that renters are under pressure, that's why we're reacting with billions of dollars in assistance in different ways and trying to build more houses despite the Senate's opposition. Some states and territories have chosen to go down that path and that's fine by us, we have other priorities and I've outlined them for you.
CONNELL:
Wouldn't you want to avoid though this distorted market ‑ you say fine by us. It's fair to say if you thought rental freezes were a good idea you'd be behind them, you'd be backing them.
CHALMERS:
There are a whole range of areas where states have different approaches to each other.
CONNELL:
You can have a view on whether it works or not.
CHALMERS:
We can provide national leadership when it comes to renting and when it comes to building more housing and that's what we're doing ‑ we're doing that with rent assistance, we're doing that by bringing the states and the investors together and the industry together to build more homes. We've got $2 billion to accelerate the building of more public housing, we've got this Housing Australia Future Fund held up in the Senate ‑ from a Commonwealth point of view, those are our priorities.
CONNELL:
And on that housing fund, the Greens are saying they will look at any offer above $500 million per year which is the floor for investment in that. Are you negotiating on that?
CHALMERS:
We've been engaging with the Senate crossbench for a really long time now and now is the time to end the ambit claims and the political games and build more houses ‑
CONNELL:
No more money. That's the message to the Greens?
CHALMERS:
We have already put on the table billions of dollars in investment in public housing and affordable housing, we've done our best to address a whole range of issues raised in good faith, frankly and fairly, by the crossbench, not just the Greens political party and we've done what we can but the time has come to build more homes for people who desperately need it. If these Greens senators really want to build more social and affordable housing in this country, it's time for them to vote for it.
CONNELL:
It sounds like there's no more movement on that particular one. The Greens also pushing on the measures to increase the tax take on gas in Australia. Curious as to the option you selected on this because it's been reported this week Treasury actually was plumping for a different option which would have got more money annually.
CHALMERS:
No, the Treasury advice ‑ there was a long process that predated this government, some years.
CONNELL:
Yep, the Coalition did it.
CHALMERS:
Treasury consulting with different parts of the industry but others as well, experts, and that culminated in a piece of advice to me which had three options and the option that I chose in the central case was the one that raised the most money soonest. The 80 per cent option that people are talking about ‑ the 80 per cent deductions cap was not one of the three options that was presented ‑
CONNELL:
But did Treasury suggest another option. Did they have a preferred option out of the three?
CHALMERS:
No, they gave me three options to choose from.
CONNELL:
So they didn't say here are three and here's the best one.
CHALMERS:
No, the story that you're reacting to about this, I think it was a Freedom of Information request reflects ‑ there was a whole period of consultation that pre‑dated the final advice, the final advice was three options and I chose the one that got the best return soonest.
CONNELL:
Okay, so just clarifying because if I'm reacting to those reports ‑ you weren't told here's Treasury's option but you picked a different one?
CHALMERS:
No, we were given three options and the one that the Treasury favoured in the end was the one that we adopted. I mean, they were involved ‑
CONNELL:
They did favour an option.
CHALMERS:
They were involved on a daily basis in the finalisation ‑
CONNELL:
What do you mean favoured in the end? So they didn't favour one initially?
CHALMERS:
They gave us three options as I've already explained to you, I see what you're trying to do ‑ I'm trying to be very clear with you Tom, they gave us three options, the one that we went forward with was with their support.
CONNELL:
But there was an option where ‑ you say more money soonest, there was an option that would get more money at its peak, do more for Budget repair if you want that would get more per year, albeit down the track. Is that accurate?
CHALMERS:
The one that we chose is the one that got the most revenue soonest, I've made that clear.
CONNELL:
But was there another option where you don't get the most money soonest, but you get the most money.
CHALMERS:
There are a whole range of other options that deliver you different results ‑
CONNELL:
Out of the three, though.
CHALMERS:
My priority was to get the most revenue soonest because I wanted to fund Medicare and the bulk billing incentive and the cost‑of‑living assistance.
CONNELL:
Okay. Just finally, a bit of a different one maybe, Australians are able to dip into their super to pay their mortgage which they do ‑ tens of thousands do that each year. They do get taxed on that. Average is about 22 per cent because of the nature of super accounts. Given what's happening right now, is that something you'd be willing to look at ‑ maybe not taxing people that have to do that and increasing numbers in the next couple of years?
CHALMERS:
We've got a whole bunch of priorities in the superannuation system and that's not one that I've been contemplating.
CONNELL:
Okay. It's a tough time for someone if they're having to do that and we could get a massive ‑ a much bigger number than would normally be doing that.
CHALMERS:
That's not something that we've been working on.
CONNELL:
Okay. Treasurer Jim Chalmers. Appreciate your time.
CHALMERS:
Thanks, Tom.