Jim Chalmers:
We have just got the new figures from the ABS which show that inflation ticked up in September and that the numbers in today’s data are still too high. Headline inflation is up 4.3 per cent in the year to the month of September, compared to 4 per cent in August. Trimmed mean was 3.6 per cent in the year to September, it was 3.5 in the year to August after the revision.
In the quarterly data, headline inflation was unchanged at 3.9 through the year. Trimmed mean was 3.7, compared to 3.6 in the quarter before it. Inflation has increased in every major advanced economy in September, and that’s why the markets are expecting rate rises in all of them. Annual inflation has been increasing more in other countries than here, but we know that this doesn’t make it any easier for Australian families and Australians more broadly who are under pressure.
We already had an inflation challenge in our economy and the war in the Middle East is making it worse. We’ve seen higher oil prices driving higher inflation around the world, and today’s figures confirm that we are not immune from that. That’s why, once again, from an economic point of view the end of the war in the Middle East can’t come soon enough.
If you look at the specific drivers of the inflation numbers we’ve just received, the single biggest driver of higher headline inflation was higher fuel prices. Automotive fuel was up 9.4 per cent in the month, and that makes it 23.6 per cent higher through the year. We expect to see that trend continue in October, in fact worsen.
If you look at the global Brent futures price it’s averaging $107 per barrel in October, and higher today, compared to $102 per barrel in September. Remember that the futures had around $70 per barrel before the conflict and $60 a barrel at the start of the year. That does give you a sense of one of the big drivers of inflation in our economy. If you look at another interesting element of the numbers today, electricity prices in the CPI fell 0.8 per cent in the month. That means since the month of June, they’ve fallen by 2.4 per cent.
Inflation is much lower than it was in 2022, but it is still much higher than we would like. That’s the reality of it. Budgets aren’t the primary driver of prices in our economy, but we can and intend to continue to play a helpful role in the fight against inflation. That’s why we found $180 billion in savings. It’s why the last Budget had a record amount of savings, more than $60 billion in savings in one budget. It’s why we’ve been able to manage the budget in a much more responsible way than it was being managed by our predecessors.
If you think about the contribution being made by public sector and the private sector in the last financial year, if you compare that to the year before, public demand growth in our economy halved while private demand growth tripled. That tells you that there are other factors at play, including the global factors that Secretary Wilkinson and Governor Bullock have been talking about through the course of today.
For every $5 of demand in our economy, 4 is private and one is public. I think that’s an important bit of perspective when it comes to some of the commentary that is around today. If you think about comparing this time of this year compared to this time last year, the additional inflationary pressures have come from 2 sources. In the first instance – as Secretary Wilkinson said this morning – a much faster‑than‑expected recovery in the private economy towards the end of calendar ‘25 and into the beginning of ‘26. And then, obviously, the biggest oil shock on record with the beginning of the war in the Middle East. That is also, I think, an important perspective.
We accept our part in the fight against inflation. We take responsibility for government policy when it comes to the fiscal settings and when it comes to managing the budget in a responsible way in the face of this inflation challenge, which is persisting longer than anyone would like. That’s why the next budget update in December will have a savings package in it, just like the first 8 Budgets and budget updates as well. In every single one of our 8 Budgets and budget updates, we’ve had a savings package. There will be one in the ninth as well, and the government is working to finalise that for release closer to the end of the year. Happy to take some questions.
Journalist:
Today’s inflation figures, as you just said, put another rate rise firmly on the table next month. I appreciate the most recent productivity figures run to June. It won’t capture all the Budget measures, but you’ve sold this Budget as one of the biggest productivity pushes since the ‘90s. Right now, latest data shows productivity still remains stagnant. There’s a concern, even if there is still no sign of the turnaround the government has promised. If productivity remains stuck, isn’t the consequence that the Reserve Bank has to keep fighting inflation through high interest rates rather than the reforms that Michele Bullock’s called for?
Chalmers:
First of all, more than acknowledge that our economy’s got a productivity problem, we have put in place the biggest and broadest productivity package in any budget for at least 3 decades. That’s because we take the productivity challenge very seriously. I don’t think any objective observer would expect that a productivity package announced in May and being bedded down with the states and with others would automatically fix our productivity challenge towards the end of October in the same year. We know that this productivity challenge is long‑standing in our economy. It hasn’t just been there for the last couple of years, but for the last couple of decades. We’re doing more than any recent government to try and turn that around, but it will take time.
Journalist:
When’s inflation going to drop to the target band in Australia? Can you tell us this, Treasurer?
Chalmers:
The expectation is that we’ll see inflation back in the band towards the end of the next calendar year. Obviously, the Treasury and the Reserve Bank will update their forecasts in the usual way. There’ll be a set of inflation forecasts in the mid‑year budget update. When it comes to the Reserve Bank, they’ll update their forecast in the usual way in the statement of Monetary Policy. But the current expectation is towards the end of next year.
Journalist:
Treasurer, you’ve spoken a lot about the Middle East war and you mentioned it again today. I guess you were watching the Israeli election results this morning. Are you disappointed that they didn’t achieve the kind of clarity that might point to an end in hostilities?
Chalmers:
I haven’t been watching closely the outcome of the election. Obviously, it’s an important election for the people of Israel and for the region more broadly. But I’m not going to pretend that I’ve been watching the results come in. I haven’t caught up on it yet.
Journalist:
Plenty of people, from the Treasury Secretary to yourself, have pointed out that the biggest driver of this is fuel price and the biggest driver of fuel price is the war in the Middle East. Is an interest rate rise or using interest rates to combat fuel prices the best way to go about fighting inflation, given the Ayatollah and Donald Trump don’t give a lick what you or I or anyone in Australia pays for their mortgage rates?
Chalmers:
Well, the most important thing that can happen for Australians under pressure is to see an end of this war in the Middle East. This war in the Middle East has been disastrous for Australians, for cost of living and for inflation right around the world. The point that Secretary Wilkinson made today, in fact the point that Governor Bullock made today, is that global energy prices are much higher than had been assumed and we know what’s driving that.
I have acknowledged, including today, we had an inflation challenge in our economy but this war in the Middle East is absolutely turbocharging those cost‑of‑living pressures. That’s a point made by both of those decision makers in the course of today.
Journalist:
You’ve said that policy decisions will deliver some savings in the mid‑year budget update. Will they be net savings? And on the inflation numbers today, non‑tradable is still above 4 per cent. Are you comfortable with that?
Chalmers:
Obviously, right across the board we want to see lower inflation, whether it’s the partial figure that you mentioned or in other figures as well. It’s encouraging to see electricity prices come down and come down by more than a couple of per cent since June, but there are a number of other concerning components of the inflation data. So, obviously, we would like to see that lower.
On your first question, we haven’t finished the mid‑year update yet. In the last 2 updates, we’ve had net policy decisions making a positive contribution over the 4 years of the budget. We’ve got some pressures coming at us, including pressures I’m assuming that you have covered on other occasions, including our borrowing costs and bond yields. So how all of that nets out remains to be seen, because we haven’t finished our deliberations yet on the mid‑year update, as I’m sure you would understand.
Journalist:
Treasurer, why were high fuel prices a good reason to cut the fuel excise at the start of the war, but not now? And if that’s not something the government is considering doing to help households, what are they supposed to do between now and end of next year when inflation returns to target?
Chalmers:
I think we made it really clear when we announced the policy and when the policy ended that the budget couldn’t afford to do that in an ongoing way, in a continuous way. We have to balance the inflationary pressures in our economy with the fiscal pressures in our budget and try and do the best that we can for people. In our case tax cuts, bulk billing and cheaper medicines and some of the other cost‑of‑living relief we consider to be the most responsible way to provide that relief in an ongoing and sustainable way. That excise relief was a really important way that we took some of the sting out of these cost‑of‑living pressures earlier in the year. But we made it clear, including to a similar question from you on an earlier occasion, that the budget can’t afford to do that forever.
Journalist:
Secretary Wilkinson likened the AI build‑out to the competing against public infrastructure. One of the biggest increases over the past year has been toys which are connected to computer games –
Chalmers:
Yes, toys with chips.
Journalist:
Yeah. Does that mean that with so much activity going on because of the AI buildout that the government should be looking both federal and state to winding back their CapEx expenditure to give the private sector space?
Chalmers:
Well, first of all, on AI and data centres, the government right across the Cabinet is doing a heap of work on some of the key considerations there. And so I don’t want to preempt that part of it. I know your question is a broader question on the pressure being placed on building material costs and the like. Obviously, as the Governor said today, that AI boom is playing a role in some of these inflationary pressures. And so for us, we have to strike the right balance building the sort of infrastructure that the country desperately needs.
I think on Sunday, opening one of the most important, most exciting pieces of public infrastructure. You and I discussed it at the end of last week. We have to balance the need for more infrastructure with the pressures on our economy, including the pressures on our workforce. And from budget to budget and budget update to budget update, we try and strike the best balance that we can.
Journalist:
Are there any particular parts of the budget that are particularly under the microscope for cuts and do you think you can realistically find enough savings to offset the blowout in borrowing costs from higher bond yields?
Chalmers:
Well, again, I mean, it’s a similar answer to the one I gave Matt. You know, we’re still doing the work on the, on the mid‑year update. It’s not unusual for it to not be finished towards the end of October if we’re releasing it as we currently expect to sometime in December. And so a lot of those questions are still unresolved and I’m reluctant to preempt bits of it where there are discussions with ministers to come. So, I hope you understand that. Our goal in the ninth budget update is similar to our goal in the first 8, to manage the budget in the most responsible way that we can and find savings where that will play a helpful role in the fight against inflation.
Journalist:
Thanks, Treasurer. Just on the balance that you’ve mentioned several times in this press conference, you’ve got competing pressures. Obviously you need to cut spending in the budget for structural reasons, but you’ve got an electorate, as you said today, facing turbocharged cost‑of‑living pressures. Is it though that trying to strike that balance at the moment you have to give greater emphasis to cutting spending and that people might have to wait for additional cost of living, accepting there is cost‑of‑living relief in the budget at the moment, but they might have to wait a bit for additional cost‑of‑living relief.
Chalmers:
Look, we try and be upfront with people and say that we need to make sure that when we provide cost‑of‑living relief that it’s not counterproductive. And you’re right to pick up on the word I’ve used a few times here, which is balance. I mean, every budget update calls on governments, and not just our government to try and strike the most effective balance between the pressures on the budget, the pressures on people, the pressures on our economy. And so in that respect, this mid‑year update will be similar to the first 8.
Don’t forget as well, in our first year of government, we had inflation, we inherited inflation much higher than this. When we came to office, it was north of 6 per cent, absolutely rocketing. So, in 2022, inflation was higher than it is now. That doesn’t make it easier for people right now, but it’s just an additional bit of perspective and it reminds us that really at different points over the course of the last 4 and a half years, we’ve tried to strike that balance. We think we’ve struck it relatively effectively. But there’s always more work to do. Phil wants to give his question to you again. I want the transcript to show that Phil’s given his question away twice now.
Journalist:
Treasurer, you’ve pointed to other countries having also increased inflation. You pointed to this government having inherited high inflation. I mean, what solace, if any, does that bring to the everyday Australian? And do you have any message of support for them to have to wait it out for more than a year now?
Chalmers:
First of all, I acknowledge that the fact that inflation is going up right around the world, there’s high expectations of interest rate rises. I know that that doesn’t make it necessarily any easier for people in Australia, it’s the reality. But I know that doesn’t take the sting out of these cost‑of‑living pressures. We’re providing cost‑of‑living help, we’re managing the budget in the most responsible way that we can because we acknowledge people are under the pump. And there are a number of reasons for that, primarily oil prices and other reasons as well. And so we will do what we can to manage the budget in the most responsible way we can, manage the economy in the most responsible way that we can so that we can all get to the other side of this together. Why don’t you go next, Phil? I’ll come next Amanda.
Journalist:
This is a little bit pointy too, but –
Chalmers:
Amanda?
Journalist:
– you often announce every budget, MYEFO announced savings and we all report them, then we move on and forget about them. I just want to take you back to last year’s MYEFO announced 20 billion in savings. I think one of the biggest items, $6.8 billion on cutting back on consultants. Have you actually achieved any of that? Or can you off the top of your head give us an update on whether that’s –
Chalmers:
I don’t have the number off the top of my head but we’ve made some progress there. But we’ve got more work to do and it has been part of the discussions that we’ve been having in and around this mid‑year update to see whether it is possible to do more of that. I mean one of the reasons why we’ve taken those steps on a couple of occasions is because often the work that would otherwise be done by public servants is being done by more expensive external consultants. We’ve tried to right the ship a bit, we’ve tried to rebalance that a bit but we acknowledge, and I’m sure if Katy were here she would acknowledge that there’s more work to do on that front. Amanda?
Journalist:
Perhaps less pointy, more curious. On the private‑sector demand space. Do you think that there is perhaps too much demand when it comes to data centres and AI? Is that almost having too much of a good thing?
Chalmers:
Well, I think our job, not just as governments but as Australians is to try and find a way to maximise the upside of AI while we manage and minimise the very substantial and very legitimate risks and concerns that people have. Obviously, this is one of the things which is putting some pressure on inflation in our economy. I refer you to something I think Governor Bullock said earlier today. First of all, she said the conflict in the Middle East has re‑escalated. Global energy prices are now much higher than had been assumed in the August forecasts. Oil and related prices have increased sharply again and will add materially to inflation both directly and indirectly, as businesses facing increasing pressure from higher transport and related costs attempt to pass them on.
Other global cost pressures have increased in addition to the energy price shock, the AI boom and extreme weather events. And so the Governor, the Secretary of the Treasury, I think, in her contribution this morning, has recognised that when you’ve got this boom, we welcome investment, obviously, when you’ve got a boom of this magnitude and of this nature, then obviously it can put some pressure on our economy, including inflationary pressures. And that’s what the Governor and the secretary were talking about this morning.
Journalist:
Just on the CGT carve‑outs. The mining‑exploration sector are disappointed that they were excluded. Can you explain the reasoning for that? Does that disincentivise the sector and also how does that align with the Albanese government’s critical minerals agenda?
Chalmers:
Well, I think part of the answer is in the last part of your question and that is that we have a number of ways that we’re supporting the critical‑minerals sector. We see it as an absolutely golden opportunity for this country and that’s why we’ve got a whole range of different policies to support the sector. We think that’s a more effective way to do that than some of the other proposals that have been put to us.
Journalist:
In a couple of recent statements – I think one to The Sydney Morning Herald and one to the Inside podcast – talking about the government losing bark or paint, I think was your words. I think it’s only right and only fair that I put up my hand and take responsibility for my share of that. Do you feel like you’re getting an oversized amount of the blame for the government’s predicament? And who are you talking about when it comes to others who should take some of the blame?
Chalmers:
Look, it was the same journalist and I repeated the same thing, I think essentially to Paul from the Herald and Shane was there on the second occasion. I meant what I said. We’re doing some difficult reform right now and when you do difficult things, governments lose a bit of paint. And of course I take responsibility for the policies in my area. It would be kind of strange if I didn’t. So, that’s really the point that I’m making, that I acknowledge that when people are under pressure, that governments come under pressure. And when you’re doing difficult things like reforming the tax system, that puts additional pressure on some of my colleagues as well, who I appreciate going out into their communities and selling and making the case for some of these difficult reforms.
Now, if economic reform or tax reform was easy, our predecessors would have done something. They didn’t do any, right. So, it was left to us to do some of this difficult stuff. And I take responsibility for the additional pressure that that puts on the government. And on the last part of your question, I mean, don’t read too much into that. Really the point that I’m making is we’re all responsible for our own parts of the shop. Tax reform is my part of the shop and so I take responsibility for it.
Journalist:
Thanks, Treasurer. I’m just wondering if there’s any hope you can offer. Australians are hurting and they’re angry. When will life get easier?
Chalmers:
Well, inflation will ease in our economy, not as soon as we would like, but it will come off. If you look at the drivers of this inflation, some of it is temporary. We’re held hostage unfortunately, in a lot of ways to decisions taken elsewhere in the world. Inflation will come off again and these pressures will ease in time, but not as soon as anyone would like them to.
Journalist:
Thanks Treasurer, are you concerned that the ATO Commissioner is fast losing confidence with the small business community. And given the data from the Tax Ombudsman sold yesterday, do you think the tax office needs to rethink how it treats small business tax debt?
Chalmers:
We expect the ATO to work with business, and small business in particular, in a collaborative way. The ATO’s got important responsibilities when it comes to administering the tax system. We asked them to take into consideration people’s particular circumstances, particularly during any stressful or difficult situations for family‑run businesses and small businesses. The ATO put a lot of their debt collection on hold during COVID‑19. That was appropriate and it’s trying to find the most appropriate way to engage in the kind of debt recovery that’s been a feature of the work of the ATO for some time.
So, we do want them to be compassionate about it, we do want them to be sensitive about it. Particularly right now, when a lot of small businesses are under pressure, the ATO administers the tax system. I saw my opponent pretending otherwise this morning like it was some directive from government to be especially harsh on small businesses. Obviously we don’t interfere in the administration of the tax system and we ask the ATO to go about that in the most appropriate way.
Journalist:
Do you think the ATO could do or either should you better?
Chalmers
I’m not in the practice of taking shots at agencies like the ATO. You know, I work closely with the ATO. They’re in my portfolio. Daniel Mulino does a wonderful job with them and Andrew Leigh as well. And so I try and resist the temptation to take shots at agencies like that. They’ve got a big, important, difficult job to do. I believe that they go about that to the best of their ability. The best way to do that is consultative and compassionate where that’s appropriate and that’s what we need to see.
Journalist:
Thanks Treasurer, the RBA has one tool to tackle inflation. It’s often said that it’s a blunt tool and indications that it’s also becoming a less effective tool given the frequency of shocks from supply shocks from overseas, and the imperviousness of AI investment to borrowing costs. Have you looked at other tools that could be provided to the Reserve Bank to manage inflation and what other possibilities could there be?
Chalmers:
Thanks for that. And you reminded me of the other part of Charles’ question that I didn’t mean to ignore earlier on, Charles. We haven’t been examining other tools for the Reserve Bank and we don’t interfere with the work that they do independently. They have monetary policy levers which are long‑standing. They have a dual mandate which is long‑standing. My job is to focus on my part of the fight against inflation, providing cost‑of‑living relief in an appropriate way, managing the budget and the economy in the most responsible way that I can. And that’s my focus. Thanks very much, everybody.