JIM CHALMERS:
I wanted to talk primarily about the new inflation data out an hour ago. But first I wanted to touch on a counter‑terrorism operation that’s underway as we speak. And then after I talk about inflation, I’ll throw to Minister Wells to talk about one other matter.
We understand that operational activity is occurring today connected to the ongoing investigation into the Wakeley incident. Questions about this activity should be directed to the relevant law enforcement agencies. I wanted to take this opportunity to salute the courage of the people involved and to thank them for their professionalism as well. No doubt more details will be provided in due course by the relevant agencies, and I would encourage you to direct your questions to them.
I’m here primarily to talk about the inflation data which was just released for the March quarter. Inflation has now almost halved since we were elected a couple of years ago. It is still too high, people are still under pressure, but we are making some progress. When we came to office inflation had a 6 in front and now it has a 3 in front of it. And the Budget next month will be about easing cost‑of‑living pressures rather than adding to them.
The figures today show that the CPI moderated to 3.6 per cent in the year to the March quarter, and that was down from 4.1 per cent the previous quarter and more than 6 when we came to office. It is particularly encouraging to see annual headline inflation moderate like this when you remember that headline inflation has ticked up in North America and in other parts of the world. We also know that annual inflation is still lower than the inflation forecast in the MYEFO – the mid‑year budget update – that we released towards the end of last year.
Now, we’ve said for some time that the monthly indicator can be volatile, it can bounce around a bit. It doesn’t even compare exactly the same combination of goods and services from month to month. And today we saw the monthly indicator tick up slightly to 3 and a half per cent for the 12 months to March from 3.4 per cent in February.
What the Australian Bureau of Statistics makes really clear today is that our policies are putting downward pressure on inflation when that’s most important. The ABS says that our policies took something like half a percentage point off inflation in the year to the March quarter 2024. And if you think about the components of that, in the year to the March quarter electricity prices rose by 2 per cent; they would have gone up 14.9 per cent without the energy plan that we put in place and that our opponents voted against.
In the year to the March quarter 2024 rents rose by 7.8 per cent – far too high. But it would have been 9 and a half per cent without the biggest increase to rent assistance in 30 years that was in our last budget. And I think most stunningly, in the year to March childcare prices fell 5.6 per cent. They would have risen 15 per cent without our policies on early childhood education.
So what we’re seeing here is inflation which is moderating in headline terms not as fast as we would like, not as far as we would like yet, but certainly in annual headline terms heading in the right direction. The Budget will maintain a primary focus on fighting inflation but not a sole focus on fighting inflation. The balance of risk in our economy is shifting from inflation, which is still persistent, to growth, which is the other big challenge in our economy that our budget will be designed to help.
Cost of living will be a big feature of the Budget that we hand down next month, and housing will be a big feature of the Budget that we hand down next month as well. The centrepiece of our cost‑of‑living help will be a tax cut for every Australian taxpayer to help with the cost of living. And we now have another week or 2 to finalise any other cost‑of‑living help that we can provide in a responsible and affordable and meaningful way.
Another important way that we are taking the pressure off inflation is by managing the Budget responsibly. The first surplus in 15 years is a key part of that, and we’re still aiming for a second surplus in the Budget next month. We’re not there yet. The degree of difficulty on that has come up, but that is our aspiration, that is our objective because this is another way that we put downward pressure on inflation.
We see a second surplus not as an end in itself, but as a way to put downward pressure on inflation and also make sure that we can fund and make room for other priorities, like updating the growth model in the Australian economy, renewable energy superpower and a Future Made in Australia as well.
So all of these considerations and all of these new numbers that we received today will help us as we finalise the Budget to hand down next month. As I said, a primary focus on inflation and the cost of living, but not a sole focus on inflation. The Budget has a number of jobs to do. We’re encouraged by annual headline inflation coming off today quite substantially from its peaks in 2022. Very substantially compared to what we inherited, and it’s come off since last quarter as well. It had a 4 in front of it last quarter, a 3 in front of it this quarter. It had a 6 in front of it when we came to office, and that shows that we’re making welcome and encouraging progress in the fight against inflation, but we know that people are still under pressure, and that’s why fighting inflation remains one of the government’s top priorities.
We’re going to hear from Anika, and then happy to take some questions.
ANIKA WELLS:
Jim and I as Queenslanders know innately in our blood that bleeds maroon that Wally Lewis is King. And the King gets it right most of the time, and he’s right about CTE, and that’s why we’re going to back him. And we’re going to have more to say about that in the Budget, but we wanted to use this opportunity today after he’d spoken at the National Press Club to back Wally in.
Sometimes I get questions about why I’m the Aged Care and Sport Minister, and it might be a strange mix, but it does place me in a unique position on a couple of issues. And the issue of concussion and dementia are exactly those kinds of issues that I stand in a unique position to take action. It’s an insidious disease. Dementia is the second leading cause of death in Australia. It is something that we need to know more about. It’s something that we need to do more about. It’s certainly something that parents when considering the choice of sport for their kids are worried about. We need to keep that confidence. We need to keep people having their kids actively participate in sport. So we're going to say more about that in days to come.
JOURNALIST:
Given today’s inflation data came in above expectations, should Australians dampen their expectations of an interest rate cut this year?
CHALMERS:
I obviously won’t pre‑empt or predict the future trajectory of interest rates; that’s rightly the job of the independent Reserve Bank to determine. But I will say again that these inflation numbers that we’ve seen today, annual inflation, is tracking below the forecast that we had in the mid‑year budget update in December. And I think that’s an important bit of perspective. Even when you consider, if you look at those mid‑year budget update forecasts, they were expecting headline inflation in annual terms to get to 3.75 per cent by the end of this financial year. Already we’re at 3.6 per cent. And so I think that’s an important bit of perspective. I think people can get carried away, frankly, with the sorts of numbers that we’ve seen today.
We know that inflation is persistent. We know that it is lingering, but we are making welcome and encouraging progress, particularly when you compare it to the peaks of 2022 and the situation that we inherited. Whether it is headline annual inflation, whether it's annual trimmed mean inflation, both measures have moderated in the most recent data, and headline inflation has moderated substantially. That’s a good thing.
JOURNALIST:
Treasurer, with the [inaudible] for the quarter, and also you’ve had certain economists saying we don’t want to see any more spending that’s pumping up inflation in the economy. What concerns do you have about how the Budget is going to be shaped? How are you going to avoid it being an inflationary budget?
CHALMERS:
One of the reasons why inflation is moderating in our economy and has moderated so substantially over the course of the last couple of years is our responsible economic management. And you can expect to see responsible economic management to be a defining feature of the Budget that we hand down next month. Whether it's shooting for a second surplus, having delivered the first in 15 years, whether it’s designing our cost‑of‑living help to take the edge off inflation rather than add to it, these are ways that we know have worked to help moderate inflation in our economy. That’s not an opinion; that’s a fact which is laid bare in the ABS data today.
So as we hand down the Budget and finalise the Budget to hand down next month, we are required to strike a number of difficult and delicate balances – still a primary focus on inflation but not a sole focus on inflation, recognising that we can take some of the pressure off inflation in the near term but still invest in the long‑term drivers of growth in our economy, and that will be our approach.
JOURNALIST:
[Inaudible] spending proposals will be balanced out by spending cuts elsewhere? I’m just wondering if there’s going to be zero‑sum game here?
CHALMERS:
What we’ve demonstrated already in our first 2 budgets is a willingness to make modest but meaningful tax changes to help pay for our priorities, to trim spending where we can do that responsibly but also to take a responsible approach to any upgrades to revenue in the Budget. I’ve made it clear before and I’m happy to make it clear again: people shouldn’t expect anywhere near the kind of revenue upgrades that we saw in the first 2 budgets in our third budget. That changes a little bit the way that we come at some of our fiscal challenges and some of the necessary investments that we want to make in growth and in the future of our economy. But people can expect us to take the most responsible approach that we can. Being responsible means getting the Budget in better nick when we can but also investing in the long‑term drivers of growth in our economy. And those will be important features of the Budget in May.
JOURNALIST:
Treasurer, what about the state budget? The Miles government has said repeatedly that [inaudible] lower cost‑of‑living measures. Do you have concerns about that effect on inflation?
CHALMERS:
What I’ve seen today is that the efforts that the Commonwealth and Queensland state government put into energy rebates are one of the key reasons why inflation is moderating here in Queensland and, indeed, nationally. I pay tribute to Steven Miles and Cameron Dick and the Queensland Labor government for the way that they have enthusiastically partnered with us to provide energy bill relief.
Anika and I are engaged in our own local communities, and people come up to us about the bill relief that the state government has provided and, indeed, the federal government as well. And what it has shown is that there are ways to provide cost‑of‑living relief which take the edge off the inflation figures rather than add to them. And I ran through what that has meant to the March quarter nationally. Cameron, I think, has put out some analysis of what it has meant at the state level.
We want to work with the states and territories to help people with the cost of living. The Queensland state government has been an enthusiastic partner in that, and we expect and hope that that will continue.
JOURNALIST:
You mentioned housing coming up in the Budget. Can we expect more rental assistance for renters around the country?
CHALMERS:
One of the big drivers of the inflation that we still have lingering in our economy is rent inflation. We’re very aware of that, very conscious of that, very focused on that. It is the key reason why we need to build a heap more homes in our communities and in our economy. And we’ve got something like 17 different ways and $25 billion worth of different investments in trying to build more homes. The vacancy rates are low. Rents have been going up faster and further than we would like, and that’s why housing has been a central feature of our economic policy so far, and it will be a central feature of our economic plan in the Budget as well.
We need to build more homes. Rents are far too high. They would be even higher were it not for the rent assistance that we budgeted for in the last budget. We haven’t taken a decision about the final composition of any additional cost‑of‑living help in addition to a tax cut for every taxpayer in the Budget. We’ve got another week or 2 to do that.
JOURNALIST:
Today’s figures mean HECS‑HELP loans will go up by 4.8 per cent. What do you say to young people who think they’re being punished with indexation due to their large debts?
CHALMERS:
I think to his credit the Prime Minister and to his credit Jason Clare, the Education Minister, have made it clear that we acknowledge and recognise and understand the pressures that students and young people are under. That’s a big motivation for the rent assistance that was in the last budget. It’s a big motivation for the way that I rewrote the tax cuts to give a tax cut to people on low and middle incomes a bigger tax cut. And that has overwhelmingly been better for young people.
The Universities Accord that is with Jason Clare makes a number of suggestions around HECS‑HELP, and we are considering those suggestions. And as the Prime Minister, the Minister and myself have all made clear on earlier occasions, if there’s something that we can do on that front in addition to the cost‑of‑living help that we are already providing, then we are prepared to consider that.
JOURNALIST:
Why should Australia subsidise the manufacturing of products made cheaply overseas, particularly solar panels?
CHALMERS:
What we’re talking about here with a Future Made in Australia is not replacing private investment but attracting more private investment in areas where we have obvious advantages and compelling imperatives. And whether it is solar, whether it is critical minerals, hydrogen, there are a whole range of opportunities for Australia in the global net zero economy. Our goal here is to align our national security interests, our economic security interests in a way that makes us an indispensable part of the global net zero economy, and a Future Made in Australia and our policies around a renewable energy superpower are all about grabbing that opportunity.
And critics of the vision that the Prime Minister set out on our behalf here in Brisbane I think fail to recognise the way that the world is changing, the way it has changed, the way it is changing and the way the pace of that change is accelerating. And if you take, for example, the comments made by former Prime Minister John Howard today – I respect John Howard, I have great respect for former prime ministers like John Howard, but those comments that he made today belong to another era. The world has changed. The world is changing. The pace of that change is accelerating, and we need to recognise that.
And for Australia, it’s not about protecting ourselves from what’s happening in the world; it’s about maximising our advantages and making the most of what’s happening in the world. And so these sorts of investments that we’re talking about – and they will be substantial – they will still only be a sliver of the private investment that we need to attract, and so you can expect in the Budget to see a big emphasis on private investment as well.
I also wanted to flag at the Lowy Institute next week, I’ll be talking about how we align our economic interests and our national security interests in the context of a Future Made in Australia. So I’ll have more to say then.
WELLS:
Could I add, what that looks like on the ground here in Brisbane, my northside electorate of Lilley used to be a manufacturing hub. You know, it used to have huge manufacturing come out of Queensland and go elsewhere. What investment from the federal government looks like on the ground on the northside is training and skilling up our fitters, our turners, our welders who’ve worked all their lives in a suburb near their house to be able to do robotics, things with AI that allows them to compete with those people overseas, allows us to keep that work and support them in that work on the northside, allows them to continue to live in their homes in Zillmere or Taigum, as they have all their lives, continue to work in Eagle Farm or Pinkenba as they have all their lives. That’s what investment looks like to them on the ground. It’s really important for them.
JOURNALIST:
Treasurer, just to go back on the inflation issue, and you’ve got people they’re worried about their home loans and you’ve got the economists saying we need to get this budget, make that contraction possible. Can you give us any sort of certainty – is it going to be a contractionary budget?
CHALMERS:
A couple of things about that. First of all, when it comes to interest rates by the time that the independent Reserve Bank meets in May it will be 6 months without an interest rate hike, and that has given people I think a welcome breather when it comes to the higher interest rates which have been putting such substantial pressure on people right around the country.
When it comes to the final budget position, obviously I’ll make that clear in the evening of the 14th of May. But I think it’s important to recognise it’s not just the magnitude of the investment that matters; it’s also the quality of the investment that matters and the timing of the investment. And as we strike a series of fine balances in the Budget – primarily inflation but also growth – I think it requires a more nuanced approach from government and, indeed, from commentators and others like yourself.
The amount of spending matters, but the quality of spending matters and the timing of spending matters. Now, some people when they are thinking about the Future Made in Australia vision that the Prime Minister set out assume wrongly that all of this substantial investment hits the economy at once and at the front end of the Budget. What we’re talking about instead is a longer‑term plan to update and upgrade the Australian economic growth model with a bigger reliance on the global net‑zero opportunity.
And so, as you saw in the first 2 budgets and you’ll see in the third, we will be very focused on this inflation challenge. We’ll be focused on the cost of living and housing. We think we can do that at the same time as we make key investments in the foundations of future growth in our economy.
Thanks very much.