TOM LOWREY:
Jim Chalmers has used a speech to the International Monetary Fund to warn a ceasefire in the Middle East is needed for humanitarian and economic reasons. He’s in Washington, D.C. for meetings of the IMF, World Bank and G20 Finance Ministers, discussing the state of the global economy just over a week out from what could be a pivotal US election. He joined me earlier.
Jim Chalmers, thanks for joining Afternoon Briefing.
JIM CHALMERS:
Thanks very much, Tom.
LOWREY:
You’re soon to give a speech to the IMF there in Washington D.C., warning of the economic threat posed by the conflict in the Middle East. What’s the message you’re trying to send here? Is it that if things worsen in that conflict, inflation here in Australia might be somewhat beyond your control?
CHALMERS:
We’re gravely concerned about the escalation of the conflict in the Middle East primarily for the human consequences, the loss of innocent life. But there will also be economic consequences if there’s a further escalation. The most obvious place that we will see that is when it comes to the global oil price. We saw quite remarkable volatility a couple of weeks ago because of events in the Middle East when it comes to global oil.
The point that I’m making to my colleagues and counterparts here in Washington, D.C., is one of the biggest risks to our economy is an escalation in the Middle East because that does risk higher prices on global oil markets, but it also risks compounding some of these other pressures we’re seeing. From the war in Ukraine, from softer growth in China, from political uncertainty in the US, there are a lot of pressures which are feeding a global economy which is volatile and vulnerable right now.
LOWREY:
You touched on this, but in the midst of a humanitarian crisis, why is this economic argument one that needs to be made?
CHALMERS:
Our primary focus is on the humanitarian aspects of the conflict in the Middle East. We’re worried about the loss of innocent human lives, too many innocent lives have been lost already in this horrendous war, and we don’t want to see it escalate in a way that sees more of those innocent lives lost. That’s our primary concern but there are economic consequences as well. There’s a lot of uncertainty in the global economy, and what we’re seeing in the Middle East risks making that worse. And why that matters for us is because we have seen petrol prices in Australia have actually come down quite considerably over the course of the last year or so. But this risks higher global oil prices, and that can flow through to the prices that people pay at the bowser. We saw some volatility in the global oil price a few weeks ago. The point that I’m making is that the sources of economic uncertainty in the global economy right now are really conflict; conflict in the Middle East, conflict in Ukraine, as well as some of those other issues that I’ve run through.
LOWREY:
You’ve just come out of meetings with Jerome Powell, the Chair of the Fed, Janet Yellen, the Treasury Secretary there in the US. The US is seeing inflation fall faster than us, interest rates are being cut over there as well. Are there any insights you’ve gained from those meetings that might be applicable back here in Australia and your own efforts to do both of those things?
CHALMERS:
Incredibly productive and fruitful conversations with the Chair of the US Federal Reserve, the US Treasury Secretary, also the new Chancellor of the Exchequer in the UK, the Deputy Prime Minister of South Korea, a number of other very productive and fruitful conversations that we’ve been having here. It’s mostly been focused on this global economic uncertainty that you and I have been talking about, but also making sure that we get on top of this inflation challenge that we’re seeing around the world and in our own economy in Australia, without ignoring the risks to growth. The difference between our experience and other countries is our inflation peaked a bit later and mostly lower than the countries we compare ourselves with and we’ve also got a much more positive story to tell when it comes to our labour market, for example, compared to some of these other countries like Canada.
What we’ve been able to do in Australia is strike a really effective balance, a primary focus on fighting inflation – we’ve made a heap of progress getting inflation down, halving it since we came to office – but we’ve been able to do that at the same time as we preserve the gains that we’ve made in our jobs market, at the same time as we keep our economy growing, even though that growth has been soft. And it’s important to remember that most of the OECD countries in the last year have had a negative quarter of growth or worse. We’ve managed to avoid that so far, and that’s because of the effective balance that we’ve been able to strike in the way that we’ve managed the budget and the way that we’ve managed the economy in the most responsible way we can.
LOWREY:
You’re in the US at the pointy end of what’s been a pretty close and very contentious election campaign over there. Treasury back here has been doing scenario modelling on the outcomes of this election and the Australian economic impact. What does that modelling say?
CHALMERS:
You’re right we’re 13 days from an election here in the US and it’s been a big feature of the conversations here because there’s always an element of political uncertainty when the Americans are choosing somebody new to lead them. And there are different policy platforms that the 2 presidential candidates have. We’re very careful as Australians not to engage in the domestic political debate here. We’ll work closely with whoever the Americans choose to lead them after this presidential election.
We’ve made it clear on other occasions that when it comes to trade, we want to see free and fair and open markets when it comes to trade, we’re big beneficiaries of that. But we don’t get into the commentary around the different presidential candidates’ policy proposals. We have done, like most countries, we have done some scenario planning, some modelling. We don’t make that public for good reason, but we do want to understand the choices and the implications for Australia under either scenario, whether that’s a President Harris from January next year or President Trump.
LOWREY:
You touched on the issue of free trade. How worried are you about new tariffs being applied globally and to Australia under a Trump or Harris administration? Are you confident Australia could be carved out of any new tariffs?
CHALMERS:
I think Australia’s got a lot to gain from markets which are open. We’ve made that point, really, for a long time now, we’ve been a big beneficiary of that. What we’ve seen in recent years has been an increase, not just from an American point of view, but for most countries around the world there has been a tendency to return to some of those policies from the past. What we’ve tried to do with our own policy, our industry policy, our Future Made in Australia agenda, is to make sure that that’s focused on engaging with the world, not retreating from the world, trying to become an indispensable part of the global net zero transformation. That’s been our big priority and that’s because we’ve got a lot to gain from free and fair and open markets. We’ve made that clear.
We don’t make commentary about the different policies on tariffs or other policies being put forward by the presidential candidates here in the US for good reason, and that’s because we want to work with whoever wins. We’ve shown a capacity to do that in the past and we can do it again.
LOWREY:
We’re at the very pointy end of another election campaign much closer to home for you in your home state of Queensland. You’ve been out and about on the hustings, I think, around your home in Brisbane. What’s your sense of where this one’s heading?
CHALMERS:
I think it’s tightening up, and it’s tightening up because the choice is crystallising for a lot of people. They know that Steven Miles and his Labor government is focused almost exclusively on helping people with the cost of living. And they know that David Crisafulli’s LNP is all about savage cuts to essential services. We know that because that’s what they did last time when they came in under Campbell Newman. They had a secret agenda for cuts, and they have a secret agenda for cuts once again because they’ve said they won’t increase taxes, they’ve got all these commitments to fund, and they’ve said they’ll balance the budget. That can only mean one thing, and that is that David Crisafulli is a big, big risk. He will absolutely gut the place like Campbell Newman did. Most of us Queenslanders see that Campbell Newman period as a cautionary tale to be avoided at all costs. David Crisafulli sees the Newman period as some kind of golden era that he wants to recreate.
The choice is really clear, and I think that’s why it’s tightening up. And I say this about Steven Miles – I mean, he is an absolute force of nature, Steven Miles. The way that he has been campaigning, interacting with real people and real communities like the one that I’m fortunate to represent, and he has really put his back into this. And I think the more people have seen of Steven Miles in this campaign, the more they like him, the more they think about the risks associated with David Crisafulli, the more worried people are about his secret and savage cuts.
LOWREY:
The polls are tightening, but they are still forecasting perhaps a slimmer LNP victory. Do you think there will be any lessons out of tomorrow night, regardless of the result, that you might take into next year’s federal election contest?
CHALMERS:
I think obviously this state election is being fought on state issues, but wherever there’s an election in Australia, we try and learn the lessons that we can from that. We look at what’s happened and why, and we try to understand what it means for future elections, whether that be state or federal, but this will be primarily fought on state issues. We don’t take any vote for granted. We are obviously the underdog in this state election.
But as I said before, Steven Miles has given such a good account of himself. The government, the state Labor government has been focused like a laser on cost‑of‑living pressures and helping people with 50 cent fares and cheaper registration and cheaper energy bills, all of the ways that they’ve been helping people deal with these cost‑of‑living pressures. They deserve to be re‑elected but it’s in the hands of the people of Queensland and we’ll respect the outcome no matter what it is.
LOWREY:
Jim Chalmers, it’s already been a long day for you in Washington, D.C. and I think it’s not quite done yet. Thank you for making the time for Afternoon Briefing.
CHALMERS:
I appreciate the conversation, Tom, thanks very much.