Tom Elliott:
Joining us on the line, earlier than promised, which is welcome news, the federal Treasurer, Jim Chalmers. Good morning.
Jim Chalmers:
Good morning, Tom, how are you?
Elliott:
Good. So, at least 6 articles I’ve read this morning say that very high federal government spending, now approaching 27 per cent of the economy, or GDP, is largely to blame for yesterday’s rate rise. Is this true?
Chalmers:
It’s not, Tom. There’s a lot of commentary and there’s a range of views amongst economists, but for the clearest indication of what’s happening in our economy have a look at the statement that the Reserve Bank put out yesterday. They made it really clear that that up‑tick in inflation, that unwelcome up‑tick in inflation that we saw towards the end of last year was really about accelerating private demand. The story of the economy last year was really public demand retreating and private demand taking its place.
So it still remains the case that there’s more work to do for us in the budget, but we’ve got spending as a share of the economy down from about a third of the economy under our predecessors to closer to a quarter, but we do know there’s more work to do, and that will be a big focus for us in the Budget.
Elliott:
So, will you cut government spending? If private spending is going up, will you cut public spending to try and counteract that?
Chalmers:
We’ve done that in all of our budget updates, and that is our objective in the May Budget as well. People can expect us to continue to manage the budget in a responsible way. We’ve actually found $114 billion in savings already, $20 billion of that was in the budget update less than 2 months ago, and so people can expect to see us continue to look for ways to make room for other priorities like spending on Medicare and Urgent Care Clinics and the like.
Elliott:
How many more rate rises do you think the Reserve Bank might throw at us?
Chalmers:
There’s good reasons, Tom, why Treasurers don’t make those kinds of predictions or pre‑empt the decisions that are taken independently by the Reserve Bank. One of the good developments in recent times is that the Reserve Bank Governor makes herself available after rates decisions to talk through all of these things with your colleagues in the media. I think that’s a good thing, but I don’t intend to make predictions about the future in that regard.
Elliott:
When do you think inflation will come down?
Chalmers:
Well, we’ll update our forecasts in the Budget, but if you look at the forecast that the Reserve Bank put out yesterday they’ve got inflation higher than we’d like, and they’ve got it peaking towards the middle of this year and then trailing away every quarter after that. But we’ve been really upfront about this, Tom, and I’m obviously happy to do that again with all of your listeners.
We know that inflation’s too high in our economy. We know that those most recent inflation numbers came in higher than anyone would like, but more than acknowledge that that puts pressure on people, we’re acting on it. We’ve got 2 more tax cuts coming, we’ve got cheaper medicines, we’ve got student debt relief, we’ve got Urgent Care Clinics and more bulk billing. All of this is about recognising and responding to the fact that people are still under pressure.
Elliott:
I love a tax cut as much as the next person, but if the Reserve Bank is putting up rates to stop people spending money, and you’re cutting taxes to give them more money to spend, isn’t that somewhat counterintuitive?
Chalmers:
Well, you’ve got to look at the budget right across the board – $114 billion in savings, as I said. We’ve actually engineered the biggest nominal improvement to the budget in our history in a 3‑year term, a $233 billion budget improvement, not that you read about that in the papers. We’ve delivered a couple of surpluses, we got the debt down $176 billion.
The story of our budget is actually that we’ve made a heap of progress, it’s in much better nick than it was 3 years ago, but again, to be upfront with you and your listeners we know that there’s work to be done. We know there’s much more work to be done, and that’s our focus.
Elliott:
One of the big growth areas of spending is of course the NDIS. So your former colleague, Bill Shorten, told me over a year ago, it was still growing at 10 per cent per annum. Have you been able to rein that in, that spending?
Chalmers:
Yeah, we have. When came to office I think it was running at about 22 per cent growth, now we’re on track for that 8 per cent target. Mark Butler, to his credit, working with state and territory colleagues, to their credit, have made some progress on this over the last week or so. The highest priority is to make sure we continue to deliver a very high standard of care to people who need it, who are counting on us, but in order to do that, we’ve got to make sure that the NDIS is sustainable. We’ve made some good progress there, but again, I think this work that Mark is doing with his colleagues in the states and territories is really, really important, because we want to make sure the NDIS is sustainable into the future.
Elliott:
Finally and very quickly, rising power prices were the single biggest contributor to the bad inflation number. Can you promise any sort of relief when it comes to power prices?
Chalmers:
What we’ve seen in power prices – we got a report, I think it was last week, but it might have been the week before – what it said was for the first time ever we’ve got mostly renewables in the system, and that’s driving a big decrease in wholesale prices. I know that wholesale is different to what your listeners are paying in their bills, but the wholesale price is coming down, and that will flow through to retail prices.
We also know retail prices would have been 22 per cent higher without the impact that solar and wind had on the grid so far. But again, more progress to be made. One of the really good things that’s happened in this regard is a whole bunch of Victorians and a whole bunch of Australians have installed batteries with our assistance, and that will help people get their bills down.
Elliott:
Alright. We’ll leave it there, federal Treasurer, Jim Chalmers. We had him on for a couple of minutes longer than I hoped, than I expected, and that’s good news.