JIM CHALMERS:
Thanks, everyone, for coming. I’m going to say a few things about the inflation number. Katy’s going to talk about inflation and the Final Budget Outcome. Then I wanted to preview my trip to China this week, and then obviously happy to take your questions.
The new inflation numbers for August showed that headline and underlying inflation both went down substantially. Headline inflation went down from 3.5 to 2.7 per cent. This is less than half the 6.1 per cent we inherited, and it’s now less than a third of its peak.
Trimmed mean inflation went down from 3.8 to 3.4 per cent. That is the lowest in more than 30 months. If you exclude volatile items, it went down from 3.7 to 3. Non‑tradeable inflation, which is what others call homegrown inflation, went down from 4.5 to 3.8 per cent. And services inflation went down as well.
These are very welcome, very encouraging and very heartening numbers. We expected headline inflation to come down. We’ve also seen underlying inflation come down considerably. That’s a very good thing.
Our policies are a factor here, but they’re not the only factor. If you look at rents, they went up 6.8 per cent in the year to August, but without our increases to rent assistance, they would have increased by 8.6 per cent. Electricity prices fell 17.9 per cent in the year to August, but without the energy rebates they would have decreased 2.7 per cent.
But the story here goes beyond the government’s policies, which are helping in the fight against inflation. Whether it’s rent, whether it’s energy rebates, our cost‑of‑living policies are an important part of the story, but they’re not the whole story here. We’re seeing right across a number of measures of inflation, including underlying inflation, that it is has come off considerably in the new numbers that we see today.
These are heartening numbers, encouraging numbers, they’re welcome numbers. But we’re not getting carried away because we know that the monthly numbers can be volatile. We know that inflation doesn’t always moderate in a straight line and we know that people are still under pressure. That’s why our cost‑of‑living help is so important, and it’s also why our responsible economic management is so important, and Katy’s going to say a few things about that.
KATY GALLAGHER:
Thanks, very much, Jim. It’s lovely to be here in your home city today.
CHALMERS:
You’re always welcome, Katy.
GALLAGHER:
It’s glorious to be here. Thanks, Jim.
What we’re seeing is our responsible economic management is helping in the fight against inflation, and you’re seeing that in those numbers today.
That budget management, particularly our returning revenue to the budget, findings savings in the budget and reprioritising spending, has helped us with our budget improvements that we’re seeing.
On Monday we’ll be releasing the Final Budget Outcome. That will show our second surplus and it will be an improvement on the number that we released during the Budget. That improvement in the budget outcome is not related to increased revenue but is related to less spending on the spending side of the budget. We know from the comments that the RBA Governor has made in the past that surplus budgeting is helping in the fight against inflation. You’ll see that reflected in the FBO that we do on Monday.
That’s really our approach to budgeting, Jim and mine – find savings, return revenue, deliver budget surpluses when the inflation challenge has been what it has. That’s helping overall in that fight against inflation.
CHALMERS:
I’ll just say a few things to preview meetings in China, and then we’re happy to take some questions.
The key influences on our economy right now are the inflation that we’ve been talking about today combined with global economic uncertainty and the impact of the rate rises which are already in the system. Those 3 things are combining to slow our economy substantially.
Particularly when it comes to the Chinese economy, we’ve seen a weakness in the Chinese economy which obviously has consequences for us. We’re not immune from weakness in the Chinese economy. That’s why it’s so important that over the next 2 days I’ll be meeting with key Chinese counterparts in Beijing.
This is another really important step towards stabilising our economic relationship with China. This will be the first visit to China by an Australian Treasurer in 7 years. It will be part of the Albanese Government’s methodical and coordinated efforts to re‑establish dialogue with China, Australia’s largest trading partner.
The main purpose of this visit is to co‑chair the Australian‑China Strategic Economic Dialogue with the Chairman of the National Development and Reform Commission. That will happen tomorrow.
Our relationship with China is full of complexity and it’s full of opportunity. We recognise that a more stable economic relationship between Australia and China is a good thing for Australian workers and businesses, investors and our country more broadly. That’s why just in the last week in the context of these meetings in China I’ve consulted directly with the chairs, CEOs and senior executives of major China‑facing Australian employers, including Rio Tinto, Wesfarmers, BHP, Woodside, Fortescue, Macquarie, BlueScope, HSBC, King & Wood Mallesons, Port of Newcastle, Sydney Airport, Cochlear, University of NSW and GrainCorp, and I’ve also been consulting with the Business Council of Australia.
We believe that dialogue and engagement give us the best chance to properly manage and maximise these really important links.
Our approach to China has been to cooperate where we can, disagree where we must, but always engage in Australia’s national interest.
The Strategic Economic Dialogue hasn’t been convened since 2017, but our government has agreed with Chinese counterparts to restart it, and I’ll be meeting with other counterparts from the Chinese government during my 2 days of engagements as well.
We recognise that there’s a lot at stake and a lot to gain from a more stable economic relationship with China.
We’ve got a big opportunity to make sure that both countries benefit from the complementarity of our economies while always advancing and protecting Australia’s national interests.
With that, I’m happy to take some questions.
JOURNALIST:
Will the Treasury be looking at negative gearing and capital gains tax?
CHALMERS:
First of all, the real story today is inflation. The story today is about a substantial moderation in headline and underlying inflation in our economy. We’ve got a housing policy, and that’s not in it. We’ve made that clear today.
JOURNALIST:
Did you direct Treasury, though, to look into negative gearing policy changes, perhaps to take to the election?
CHALMERS:
Treasury looks at all kinds of policy options all of the time. It’s not unusual for the public service – and in my case, my department, and I’m sure Katy’s department is the same – to examine issues that are being speculated about in the public or in the parliament. That’s how a good public service operates.
JOURNALIST:
But you’ve basically agreed with the argument that reining in negative gearing will have a negative impact on rental supplies?
CHALMERS:
I’m not going to engage in hypothetical impacts of hypothetical policies when we’ve already got a housing policy. We’ve got a housing policy which is about building more homes for Australians. It’s about making it easier to rent and to buy.
We know from today’s inflation figures that we’ve taken some of the sting out of rents. But rents are still too high, and that’s because we don’t have enough homes. Our motivation throughout this has been to build more homes for Australians. That’s what our $32 billion of investment, including $6 billion in the last Budget, is all about.
If our political opponents cared about housing, they would vote for our policies in the Senate. Instead, in their usual, characteristically destructive way, both the Greens and the Coalition are teaming up to prevent more homes being built. Building more homes is the best way to ensure that people can find a home to rent or buy.
JOURNALIST:
On the Stage 3 tax cuts you argued several times that the circumstances have changed and that the government has formed a different view. Can voters expect you to make that same argument on negative gearing in the lead‑up to the next federal election?
CHALMERS:
I’m very proud of the changes that we made to the Stage 3 tax cuts because it meant that every Australian taxpayer gets a tax cut, not just some. We explained our rationale and our reasoning for that at the time, and you referenced that in your question. The changes to Stage 3 at the beginning of this year meant that more people got a bigger tax cut to help with the cost of living. We’re proud of what we did. We were upfront and we explained that changes that we made. I think the public has recognised that we’re trying to do the right thing.
JOURNALIST:
Would your government consider a legitimate use of tax laws and not [indistinct] current negative gearing figures?
CHALMERS:
We’ve made it clear that our housing policy is all about building more homes. More homes for Australians, making it easier to rent or buy a home at a time when there aren’t enough homes. That’s what’s pushing rents up, even with our efforts, with Commonwealth Rent Assistance.
When it comes to tax changes, our priorities have been the PRRT, the biggest balances in superannuation, tax incentives for build‑to‑rent and other tax policies that we’ve already announced.
JOURNALIST:
Polling does show the public is open to negative gearing changes, so why not do that?
CHALMERS:
We’ve got a housing policy and that’s not in it.
Our housing policy, I’ve explained answering some of these other questions, is to build more homes for Australians – $32 billion across 20 different policies now. We’ve made it clear what our housing policy is, and we want to see it pass through the Senate. If our political opponents to the left of us and to the right of us really cared about housing, they’d support our policies in the Senate.
JOURNALIST:
But I guess policy‑making is dynamic, right? Why not look at negative gearing? Are you insisting that – was it either you or Minister Gallagher that asked Treasury to have a specific [indistinct] negative gearing?
CHALMERS:
Treasury looks at all kinds of different policies from time to time. It’s not unusual for us to get advice from departments on issues that are being speculated about in the public or in the Parliament. That’s not an especially unusual thing.
I couldn’t haven clearer today – we’ve got a housing policy. It’s costing the budget $32 billion. We’ve found room for that even in the context of turning 2 big Liberal deficits into 2 big Labor surpluses for the reasons that Katy outlined a moment ago. We’ve got a housing policy and that’s not in it.
It’s not unusual for governments to get advice from time to time from departments on issues which are in the public domain.
JOURNALIST:
Just going back to inflation, looking at that 3.4 per cent rate, do you think Michelle Bullock needs to look at cuts a bit sooner?
CHALMERS:
I’m not going to give free advice to the Governor of the Reserve Bank. I don’t tell Michelle Bullock how to do her job and she doesn’t tell me how to do my job, and that suits us both just fine.
Underlying inflation has come off substantially in these new numbers today – from 3.8 to 3.4 is very encouraging, very welcome, very heartening when it comes to underlying inflation.
I refer you back to our political opponents and critics who said that today’s numbers would only reflect the energy bill rebates, which we are proud to be delivering for every Australian household. I wanted to make a couple of points about that.
They say that that is artificially lowering inflation. There is nothing artificial about helping people with their power bills. We know that the Liberals and Nationals don’t support that, but we’re proud to be helping people with their power bills because we know that people are under pressure. Same when it comes to Commonwealth Rent Assistance, cheaper medicines, getting wages moving again and the tax cuts.
The other point that I would make about headline versus underlying is you may recall a couple of years ago in the former government’s last Budget they had changes to the fuel excise which had the same impact when it comes to temporarily modifying the headline inflation rate. I don’t remember them making these points then.
We’re proud to be helping people with the cost of living. We’re proud to be doing that in the context of a responsible budget and a couple of surpluses, which our opponents were incapable of delivering after 9 attempts. We’ve gone 2 from 2.
So we’re providing cost‑of‑living help. We’re not just seeing headline inflation coming off, we’re seeing underlying inflation coming off as well. Not just the main measure of underlying inflation, headline is down, trimmed mean is down, excluding volatile items is down, non‑tradables is down and services is down as well.
Across the board, across the main measures, in this data today we’re seeing very welcome, very encouraging progress. We’re not getting carried away because we know that people are still under pressure. That’s why our cost‑of‑living help is so important.
JOURNALIST:
When do you expect to receive the Treasury advice on that negative gearing policy?
CHALMERS:
As I said a couple of different ways now, we get advice all of the time on different kinds of issues which are in the public domain and before the Parliament. It’s not especially unusual for the public service to be doing that. We’re not expecting one piece of work, which is implied in your question. We get briefed regularly on all sorts of policies and all kinds of issues, and that’s as it should be.
JOURNALIST:
I’ll just try one more time: when will Australians know if your government is going to make changes to negative gearing or capital gains reductions?
CHALMERS:
I’ll say the same thing I said in response to all of the other questions – and I understand why you’re asking it, I’ve got no problem with you asking these questions – but we’ve got a housing policy and that’s not in it.
For all of the reasons I’ve gone through a few times today, we think that the highest priority needs to be building more homes. Housing supply is our big priority as a government. It’s not easy to find $32 billion in one policy area, but the fact that we’ve done that, working closely with Julie Collins and now Clare O’Neil, that demonstrates to Australians how serious we are about fixing the issue that we have with housing supply.
You can’t click your fingers and overnight build the 1.2 million homes that we need over the next 5 years. You need to come at it in a responsible way, a considered, methodical way across a range of different policies.
We’ve announced our policies on housing. We want to see them pass through the Parliament. We want to see the money flowing, and we want to see the houses being built, because that’s the best way we can make housing more affordable for more Australians.
JOURNALIST:
Is it still frustrating to see that the RBA is not taking into account the fact that electricity and fuel is coming down, but they are not enforcing these rate cuts?
CHALMERS:
I don’t see it that way, and for the same reasons as in my answer to your earlier question.
I don’t second guess the decisions taken by the independent Reserve Bank or the commentary that they make about those decisions.
It’s a good thing that Governor Bullock makes herself available and senior officials make themselves available to talk with the Australian public about how they’re seeing the economy and what that means for inflation and interest rates. That’s a good thing that they take those opportunities to do that. I don’t second guess that. I don’t parse every word that the governor says.
We’re focused on our, and our job has been to deliver 2 big Labor surpluses, to roll out cost‑of‑living help, to be helpful in the fight against inflation.
What we see in these numbers today – in these very welcome and encouraging numbers today – is that our policies are helping in the fight against inflation.
That is a big part of the story but it’s not the only story. That’s why underlying inflation is coming off as well. We’re managing the economy responsibly. The Governor of the Reserve Bank has her own job to do, and it is good and welcome that Governor Bullock takes the opportunity to explain her part of it in the same way that we’ve been explaining our part of it here today.
Thanks very much.