Tom McIlroy:
Hi, I’m Tom McIlroy, coming to you from the lands of the Ngunnawal and Ngambri peoples in Canberra. We have a special early episode in your podcast feed this week.
Ahead of his trip to the G20 Finance Ministers meeting in Durban this week, Treasurer Jim Chalmers joins the podcast to talk about Australia’s dream scenario in dealing with Donald Trump’s trade war.
Jim Chalmers:
Oh, the dream scenario is that these unnecessary tariffs are lifted. I mean we have to be realistic about that.
McIlroy:
As well as immediate challenges at home on housing and taxation.
Chalmers:
We’ve all got an interest in building more homes, it’s one of the defining challenges in our economy is that we don’t have enough.
McIlroy:
Plus, on a lighter note, the reading challenge laid down by his wife.
Chalmers:
And I gave her about a 12‑book head start in the lead‑up to the election. I’m trying to rein that in.
McIlroy:
From Guardian Australia, this is the Australian Politics podcast.
Jim Chalmers, thanks for joining us on the pod.
Chalmers:
Thanks for having me back, Tom.
McIlroy:
This is actually my first face‑to‑face podcast interview with you, but I think you’ve been in the pod cave a few times over the years.
Chalmers:
I’ve been in here a bunch, all the way back to Murph days. And I really like it ‘cause it’s a good chance to go beyond the sound bites and key lines and themes that often dominate press conferences – a good chance to have a chat.
McIlroy:
That’s great, that’s great. Well, you’ve got a busy week. We’re going to talk about the G20 Finance Ministers meeting in a moment.
I’ll start with the story of the day. There’s been a bit of a snafu with the Treasury incoming government brief, parts of it that would have been redacted, some sub‑headings have been made public. You say you’re relaxed about it. Tell us what’s going on here.
Chalmers:
Every incoming government, whether they’re a re‑elected government or when there’s a change, every department writes one briefing for a Labor government, one briefing for a Coalition government. And that advice is provided to you – well, in both of our instances, both times we’ve been elected I’ve received it on the Sunday morning after the election. And it runs through really all of the challenges in the portfolio, all the issues around policy.
What’s happened this time is that there’s been a mistake made in the Treasury. Somebody’s sent out a document which has usually got bits of it pulled out, and they’ve left those parts in. And when I say I’m relaxed, we can’t change it now, it’s out there, so be it, is really my view about it. But the other reason I’m relaxed about it is because the Treasury is talking about a lot of things that I’ve talked about publicly when I’ve tried to be upfront with people about our economic challenges.
Our economy is growing, there’s lots that’s going well in our economy, but it’s not productive enough. We’ve made a lot of progress getting the budget in much better nick, but we need it to be even more sustainable. And at a time when the global conditions are so volatile we need our economy to be more resilient as well. And those are really the major themes of the Treasury brief that was released. But also the major themes of really every opportunity I’ve taken since the election to talk about our challenges and what the government is doing about them. I’ve been focused on those 3 things too.
McIlroy:
One of the things that we’ve picked up with you today is that the brief says that the housing targets might not be met, or will not be met, I think is the language. You say that’s not quite right, that the government’s got real ambition. Give me some examples of the things that are happening, cutting red tape and speeding up housing construction that you think mean you will hit that 1.2 million.
Chalmers:
We’ve all acknowledged that this is an extremely ambitious target, and the Treasury advice is that we need to do better, and we need to do more in order to hit that target.
I think that’s entirely consistent with what we’ve said, what the government and its ministers have said publicly.
So there’s lots of things we’re focused on, we’re investing tens of billions of dollars in housing – record amounts of housing from a Commonwealth investment point of view. We’ve changed the tax arrangements when it comes to Build to Rent, for example, a whole range of things. A really important piece of the puzzle is around zoning and regulations and what you call red tape.
We’re engaged with the state and territory governments and with local government to see where we can sensibly minimise that to get more homes built sooner. We’ve all got an interest in building more homes, it’s one of the defining challenges in our economies that we don’t have enough. And that’s why rents are higher than we would like, it’s why it’s harder than we would like for people to get a toe‑hold as first home buyers.
Really the best solution is to build more homes. We have a whole bunch of ways that we intend to go about that, and the Treasury is really warning us that we’ll need to be better, we’ll need to do more, we’ll need to be quicker in order to hit the target.
As I said to you earlier on when we did our press conference here in Canberra, I think it’s good to have ambitious targets. I think this challenge has been hanging around for so long, and the alternative to the ambition that we’re showing is to not build enough homes for our people. And we’d rather be ambitious, we’d rather set a big target and try and hit it than to continue to pretend that there’s not a challenge here.
McIlroy:
The incoming government brief talked about the need to increase taxes, and we’re going to talk in our interview today about the upcoming roundtable. That’s probably one of the things that has to come out, right; some taxes might have to be higher when the mix is reassessed?
Chalmers:
I think it’s good to think about the mix, as you just did in your question, Tom. Because for example, in our first term, we increased taxes on the PRRT, which is offshore gas, so that people – Australians – would get more return for their resources earlier. And that helped us pay for some other things like income tax cuts.
We’re a government that’s actually enthusiastically been cutting income taxes 3 times for every Australian taxpayer. There is a mix in the tax system. We’re trying not to artificially limit the ideas or narrow the ideas that people will bring to that reform roundtable next month. There will be a whole bunch of ideas, some that the government will want to pick up and run with and some that we won’t be able to for whatever reason.
But there’s a lot of pressure on the budget, and what we showed in the first term is we could deliver budget surpluses, we could engineer the biggest nominal turnaround in the Budget in a single term in our history, we could get the Liberal debt down, we could do all of those things. But we need ongoing effort to make the budget even more sustainable, and that will typically require a combination of spending restraint, which we’ve shown, spending cuts, which we’ve been able to deliver $100 billion worth working with Katy Gallagher. But also if there are opportunities like we found in multinational taxes or the PRRT, then sometimes that can help pay for lower taxes elsewhere.
McIlroy:
Today you’ve talked about the themes for the roundtable; resilience, productivity and sustainability. I think it’s going to attract a lot of attention; we’ll certainly be watching closely for Guardian readers. Are you expecting concrete outcomes quickly from that process; will they guide the rest of the term?
Chalmers:
I’m certainly expecting a lot of guidance. I think it’s still to be determined whether we pop up at the end of the 3 days and we’ve got some immediate changes that we want to make or whether we’ll need a bit more time to work with the States or with my Cabinet colleagues, or in other ways of consultation.
So I think that remains to be seen, that’s an open question. But I spend a big chunk of my week thinking through the ideas that have already started coming in to us and thinking about the structure of the agenda and who we’ll invite and all of those sorts of things.
I think the most likely outcome is that there are a couple of obvious things which we can commit to in one way or another, but obviously there will be the need to further explore and work up some of the other ideas that are put to us.
But one of the things that’s been really encouraging, really surprised on the up side, is this – really this tsunami of interest that people have shown in that.
We can’t have everyone in the room, ‘cause there’s a lot of interest in being in the room. But all these other opportunities people have taken, including the superannuation sector today have put forward a whole bunch of considered ideas; that’s good, that’s exactly what we want.
And ideally the government can take from that ways to build on the progress we’re already making in our economy, to build on the big agenda we already have in economic policy and to work out what the next steps are. And that’s because from the Prime Minister down we genuinely believe that the best way to work out what the next steps are are together. And that’s why we go to this roundtable with not just an open door but an open mind.
McIlroy:
You’re off to Durban this week for the G20 Finance Ministers meeting hosted by South Africa. You’re going to meet with your counterparts from Canada, Indonesia, Japan, Germany, the UK. Will tariffs be one of the big things you’re talking about with your counterparts, will economic uncertainty around the world be guiding those talks?
Chalmers:
I think that will be the dominant theme, and the way we come at this is to recognise that the best defence against all of this uncertainty in the global economy. All this unpredictability and volatility which comes from either the trade tensions or conflict in the Middle East, conflict in Eastern Europe. The best defence against all of that is more engagement, not less, more diverse markets, not less diverse markets, and also more resilience in our own economy.
And so that’s – when we engage with the world we engage with those objectives in mind, finding good reliable markets, good reliable partners and making our economy more resilient.
I expect that the – really the foundation of all of the discussions we have with our international counterparts will be this global uncertainty and the big shift that’s happened in my thinking. But also I think in the world’s thinking, is that it used to be that periods of uncertainty were these sort of punctuation points. There’d be long periods of calm, they’d be punctuated by kind of an outbreak of uncertainty, temporary uncertainty, and I think there’s a more structural thing going on here where uncertainty and volatility and unpredictability has become the norm rather than the exception.
We’ve had 4 big economic shocks now in less than 2 decades, and so this rolling challenge of volatility in the global economy is something that we’ve all had to adapt to.
When I meet with my G20 counterparts, obviously trade will be a big part of the story, supply chains, critical minerals, how we get capital flowing more effectively in the global economy. These are the sorts of things I expect to be talking with them about.
McIlroy:
Are you and those ministers that you’re meeting with the same as the rest of us, you wake up every day and think, God what’s Donald Trump done this morning? Another round of tariffs, another setting his trade war. It must be taking years off your life.
Chalmers:
Look, I don’t know about that, but certainly when you check in with the international media every morning we’re becoming more and more accustomed to, probably more and more desensitised to some of these big announcements, and not just out of D.C., to be fair. That’s an important source of the uncertainty in the global economy but it’s not the only source of uncertainty.
A lot of the old rules, as I said a moment ago, have kind of been thrown out the window. There’s a step change in the way that the world conducts its business, and that is – what I was trying to say earlier – uncertainty’s gone from a cyclical challenge to a kind of a structural challenge and part of that means expect the unexpected. Whether it’s the pretty much weekly news out of different parts of the world, some element of these escalating trade tensions, but also conflict, real conflict as well.
I think all of that really feeds into this sense that the global economy is a dangerous place. We’re pretty well‑placed and pretty well‑prepared to deal with it as Australians, but we’re not spared from it. And that’s why our engagement’s so important, whether it’s what I’m doing at the G20 or what the Prime Minister’s doing in China.
McIlroy:
The proposed tariffs on pharmaceuticals were a big story last week, and a concerning one for you and for the economy here. Give us an update on how things are going in that specific area. You must have heard a lot from business about the possible effect those tariffs could have.
Chalmers:
The big developments from our point of view last week, I mean our baseline tariff has not changed, 10 per cent is at the low end. The lowest end of what the Americans are proposing as a baseline, but last week there was news about developments on copper and pharmaceuticals.
Now copper is, we export less than 1 per cent of our copper to the US, it’s a very small part of our market. We, I think from memory, export 5 times more to Indonesia than we do to the US. And so our copper sector, our wonderful copper sector will work out the best way to adapt to those tariffs if and when they occur.
Pharmaceuticals are a bit different in that a bigger part, a bigger chunk of our industry, are exports to the US. And President Trump has said he will take some time to work out the pharmaceutical arrangements. And so that gives us the opportunity to do what we have been doing, which is engage with the industry, try and work out what they think their exposures are. CSL, for example, has made a public contribution to our thinking about all of that.
So we work through these issues, even when there’s a sense of unpredictability and volatility, we actually work through these issues in a pretty calm and considered way. And I think that’s been important, whether it’s been reacting to the initial tariff announcements on so‑called Liberation Day, or subsequently. We work through these issues in a methodical, calm, considered way from the Prime Minister right down, and that’s served us pretty well.
McIlroy:
Would a good outcome be Australia sticks on the 10 per cent, it’s the best deal going, the baseline, and the other steel and aluminium, pharmaceuticals, those kind of things we get an exemption from; is that your dream scenario?
Chalmers:
The dream scenario is that these unnecessary tariffs are lifted, we have to be realistic about that, and it feels like this discussion has a long way to run. Partly because as you rightly pointed out in your question before, you know, there’s a shift in emphasis or policy relatively frequently. And so we’re engaging at every level that we can to try and get the best outcome from Australia.
We see these tariffs as unnecessary and self‑defeating; we’ve been pretty blunt about that, certainly blunt by the standards of international diplomacy. We’ve made it really clear that we think these tariffs are bad for the US, bad for Australia and bad for the global economy. Big implications potentially for global demand at a time when global growth is not exactly thick on the ground.
We come at these issues, as I said a moment ago, in a pretty considered way. But we’ve been very, very clear that the best outcomes would be if they’re not levied in the first place.
McIlroy:
All right. Let me bring you home to some domestic matters here. The parliament’s coming back next week, it will be our first taste of Sussan Ley as Opposition Leader up against Anthony Albanese. What’s your assessment of her and of Ted O’Brien, your new Coalition counterpart, shadow? How do you see the term playing out politically in the parliament?
Chalmers:
Yeah, my general rule with politics is you don’t underestimate anyone. And for all his faults I didn’t underestimate Angus Taylor when he was my opposite number. And I won’t underestimate Ted O’Brien or Sussan Ley either.
I personally get a bit worried by this idea because we won a big majority that the next election is kind of assured, I don’t believe it is. There are few such assurances I think in politics in modern times, but I think there are good reasons not to assume the outcome of the next election. Politics is volatile, and I mean it when I say I don’t underestimate either of those 2 people that you mentioned.
I’s been interesting to see their reaction, you know, I invited Ted O’Brien to the reform roundtable in good faith. It’s been interesting to see his reaction to that, whether he takes up that opportunity in a mature way or wastes that opportunity, whether he reads the room. If Ted O’Brien comes to the reform roundtable and treats it as an extension of Question Time, I think that will go down pretty badly in the room.
I also think if they aren’t constructive it will show that they haven’t learned anything from the last term which delivered that pretty stunning outcome on 3 May. And so let’s see how they perform.
We intend to engage with them in a respectful way but there will be robust exchanges as well, no doubt, that’s the nature of our politics. But I for one won’t be underestimating anyone.
McIlroy:
They’ve signalled strong opposition to the $3 million super changes from the last parliament. You say you’ve got a mandate on that having won the election. Is the test for the Opposition on tax reform more broadly, that constructive approach that you mentioned? Is there any possibility of a bipartisan tax reform plan coming out of this?
Chalmers:
Oh, we’ll see. We need to have realistic expectations about that. I think a lot of the commentary, whether it’s from Ted O’Brien or Sussan Ley, I don’t think they are by their nature constructive, collaborative types. Here again, it feels like – when I listen to them it feels like they weren’t paying attention on 3 May.
Ted O’Brien kind of looks like Scott Morrison but he sounds like Peter Dutton. And I think that’s interesting, because if I were them and I saw the outcome of 3 May I’d try and work out how to be different from the last term. Whereas they seem to be putting a lot of effort into working out how they can be the same with that obstructionist kind of hyper‑partisan, hyper‑critical approach.
So let’s see, I might be wrong about that, let’s see. But by inviting Ted O’Brien to the roundtable, what we are trying to convey is we think that these big challenges in our economy will outlast governments. We’re talking about generational challenges – we’ve got all this global volatility which I think is structural and not cyclical. But it’s against the backdrop of changes in energy, technology, demography, industry, geopolitics, and we’d be mad to think they were constrained to kind of 3‑year Australian political cycles.
From an Australian point of view, to take all of the parties out of it, all the partisanship out of it, the best outcome for our people would be if both parties could take a long‑term view about necessary reform and not just the Labor Party on its own.
McIlroy:
Are you open to the Greens counter‑proposals on 3 million super, for example, the $2 million threshold they’ve talked about?
Chalmers:
I’m grateful that the Greens have been privately and publicly pretty constructive about this. And at some stage, I’m not sure when – we were hoping that would be quite soon, but our pretty congested diaries with parliament coming back – at some point we’ll engage properly with the Greens on this. We can’t pass anything in the Senate on our own, that’s just the reality of the Senate. So we’ll have those discussions.
But this won’t be the first piece of parliamentary business. We’ve made it clear that our first parliamentary priority coming back is to legislate the student debt relief. And so at some point there will be those discussions, but ideally we would legislate the proposal we announced a long time ago.
McIlroy:
Jillian Segal presented her report on combating antisemitism last week. Have you picked up any concern within the caucus about that? Some of those recommendations are pretty broad and there’s been a bit of bumpy politics, I would say, across the weekend.
Chalmers:
I’ve had conversations with a bunch of colleagues in the last week or so, but not about that. So if there is that concern, I haven’t heard it directly, it may be that others have heard that directly.
But I don’t think it should surprise us in an area this contentious in the community, that there would be a range of views. And my personal point of view is that some of the antisemitism that we have seen, some of the attacks that we have seen are disgraceful, they have no place in a society like ours. So we are already taking a whole bunch of steps to crack down on antisemitism.
The Envoy has provided us with some proposals; I think Tony and Anthony and others will work through those proposals.
But as we do that, it would be pretty naive, I think, to assume that there was a unanimous view about the way forward here in an area which has got so much history, so much contention, where emotions are running hot for good reason. So let’s see where those considerations lead us.
McIlroy:
Okay. We’ve got a couple more minutes before we have to wrap up. Let me ask you about a budget question for the term ahead. Big big opportunities for Labor, big ambitions, as you’ve outlined. What’s a sign of success on budget repair for the end of this term, perhaps for you as Treasurer longer term; fixing the structural deficit perhaps, changing some of the settings to make things better going forward?
Chalmers:
I see it as an important part of our work, not on my own but with Katy Gallagher obviously, the Finance Minister, would see it along similar lines to the government. We’re lucky we’ve got a Prime Minister and a Cabinet very engaged and very enlightened about our budget challenges, that’s a good thing, and we have made all this progress together, that’s too easily dismissed, not by you but by a lot of commentators.
They pretend that we haven’t engineered already this stunning improvement in the budget. Hundreds of billions of dollars better off than we inherited, much less debt, 2 surpluses for the first time in 2 decades.
But Katy and I have always recognised that budget repair and budget sustainability is not the task of one budget, it’s the task of every budget.
Measuring success would be making the budget more sustainable over time. There is a structural challenge in there, we have got some fast‑growing areas in the care economy and elsewhere which we’re very attuned to. And we would like to make some more progress on that.
But the reason I’ve set up this roundtable around 3 priorities is because I think the big challenges are budget sustainability, but also our economy needs to be more productive. You can’t just flick a switch and make it more productive overnight, you’ve got to do that over time. And also resilience in the face of this global economic uncertainty. And so if we could make some progress on those 3 fronts for however long I’m here, then that would be good.
McIlroy:
Is there a risk that Labor is baking in some pretty big spending that will become part of the structural challenge itself? Your critics would say some of the big social spending – social policy areas, the spending in there is contributing to that problem even before the NDIS challenge is addressed properly.
Chalmers:
If you think about the 6 big fast‑growing areas in the budget, we’ve made really good progress on 3 of them – which is debt interest, aged care and the NDIS. And the other 3 are defence, childcare and health and hospitals. And so some of those changes are deliberate; in both directions necessary, some of them reflect demographic change. Our society is changing, our society is ageing, our preferences are changing, our industrial base is changing, the role of technology and energy, all of these things are happening, and so that has implications for the budget.
There are some structural challenges there, but we’ve made more progress, I think, than is broadly acknowledged in reining in some of those structural challenges, but we know that there’s more work to do.
McIlroy:
Okay, Jim Chalmers, you’ve got a busy job, you’ve got a busy couple of weeks ahead.
Tell us about a time when you’re not at work. What do you do to relax, what do you do when you’ve got a bit of free time?
Chalmers:
I think normal people have New Year’s resolutions, and people like me have after election resolutions. That’s because in elections you eat your feelings and you run out of time to do exercise and all those sorts of things. So my post‑election resolutions are more running, more reading – and I’m trying to get back into those 2 things.
McIlroy:
You’re an early‑morning runner, I think, right?
Chalmers:
I was, I haven’t been running a lot lately, I ran today, which was an effort, let’s say. When you’re – I’m not sure how old you are now, Tom, but I’m 47 now, and I’ve noticed that taking a break from running is more consequential than it used to be. I really felt that around Lake Burley Griffin this morning, so I’m trying to get back into better shape on that front.
McIlroy:
And what about reading? Tell us something that’s on your bedside table coming up.
Chalmers:
My reading is divided into my directly work reading and what I call nights and flights, and my nights and flights reading is – increasingly I’m getting back into a lot of history.
But also I’ve got this – what seemed like a good idea at the time at the start of the year – my wife Laura and I, we agreed we’d try and read 30 books each this year. And I gave her about a 12‑book head start in the lead‑up to the election, I’m trying to rein that in. And so I’m trying to churn through a lot, but a lot of history, but also some classics too. Obviously I’m reading your book about Jackson Pollock and Blue Poles.
McIlroy:
Thanks for the plug.
Chalmers:
Yeah, everyone should get out and buy it. But if we’ve got time I’ll tell you a quick story. I was in Noosa with my family the other day and we went into the Village Bookshop and there’s a wonderful, wonderful woman there called Noelle. And I said to her quietly ‘cause the kids were there and Laura was there, I said, ‘Noelle, I’m a few books behind in our family reading challenge’. And she said, ‘I’ve got just the thing for you’, so she recommended to me the Steinbeck novel Of Mice and Men, but it’s a bleak but beautiful thing. And she said, ‘Come over here’, and she took me to the classics and she sold me a couple of classics of shorter length, let’s say, and that helped me –
McIlroy:
Some quick runs on the board.
Chalmers:
Quick runs on the board, it will help me make up the difference. So big shout‑out to Noelle at the Village Bookshop, a former schoolteacher. She knew exactly what I needed to try and close the gap on my reading.
McIlroy:
Well, Jim Chalmers, thanks for making some time for us today, we’ve covered a lot of ground. It’s really great to speak to you on the pod.
Chalmers:
I appreciate it, Tom. All the best, thank you.