JIM CHALMERS:
Today we got important new data for inflation in our economy. And what that showed was that headline inflation in the June quarter was 1 per cent and 3.8 per cent through the year. Trimmed mean inflation was 0.8 per cent and 3.9 per cent through the year to June 2024.
This means that underlying inflation in our economy continues to go down. Underlying inflation is going down in annual terms and in quarterly terms, and this is the sixth consecutive quarter that we’ve seen underlying inflation in our economy moderate, and we welcome that development.
The headline inflation of 3.8 per cent is consistent with the Reserve Bank’s forecasts for the June quarter as well. Non‑tradeable inflation, which some call homegrown inflation, actually halved in the quarter in this data. And the monthly inflation indicator is also down in June.
So what this means is that we are seeing underlying inflation in our economy moderate. We would like it to moderate further and faster, but this is the sixth consecutive quarter that underlying inflation has moderated and it is also moderating in quarterly and annual terms, and we welcome that. As I said, headline inflation is consistent with the Reserve Bank. Non‑tradeable inflation has halved in the quarter, and the monthly indicator is also down.
Inflation in our economy is sticky and stubborn, but it is much, much lower than what we inherited when we came to office. Inflation in our economy is more persistent than any of us would like, but it is much lower than the more than 6 per cent inflation that we inherited when we were elected a little over 2 years ago. When we came to office inflation had a 6 in front of it and now it has a 3 in front of it. We’ve seen those 6 consecutive quarters of lower underlying inflation, and that’s a really important development as well.
We also know from experience around the world that inflation, headline inflation, rarely moderates in a straight line. We see it zig and zag in other economies, and we’ve seen some element of that in the headline figure today. But, as I said, the underlying figure continues to moderate, and that’s a good thing.
We also know that the government’s policies are helping in the fight against inflation, not hampering the fight against inflation. We know from the Reserve Bank Governor that the 2 surpluses that we’ve handed down in our first 2 years in office are helping in the fight against inflation. By turning those big Liberal deficits into big Labor surpluses, we are helping in the fight against inflation.
But it’s also important how we have designed the substantial and meaningful but responsible cost‑of‑living relief that’s rolling out right now. Every taxpayer is getting a tax cut, every household is getting energy bill relief. There’s cheaper medicines and there’s more rent assistance on the way as well. And we know from the ABS today that our cost‑of‑living policies are taking the edge off these cost‑of‑living pressures rather than adding to them. And the ABS has once again been incredibly clear about the positive and meaningful impact of our cost‑of‑living policies.
The ABS has made it clear today that without our policies, inflation would be another half a per cent higher than what we saw in these June figures. And we also expect via the Treasury forecast that our cost‑of‑living policies will take another half a per cent off in the year to come.
And if you look at the composition of the help that we are providing in the fight against inflation, the ABS has said today that electricity prices would have gone up 14.6 per cent in the year; instead they’ve gone up 6 per cent. Rent would have gone up 9.1 per cent; instead it went up 7.3 per cent, and early childhood education would have gone up 14.9 per cent; instead it fell by 5.7 per cent.
So the combination of our responsible economic management turning Liberal deficits into Labor surpluses with the design and the rollout of our cost‑of‑living policies is helping the fight against inflation, not hampering the fight against inflation. And we can see in the substantial progress we’ve made in the last couple of years that our policies are the right ones when it comes to seeing the moderation in inflation from more than 6 per cent when we came to office to a 3 in front of it right now, and those 6 consecutive quarters of moderating underlying inflation.
So, we will continue to manage our economy in a responsible way, continue to roll out this cost‑of‑living relief in a meaningful way, and the 2 surpluses that we have delivered, having inherited an absolute mess of a budget, chock‑full of wasteful spending and higher inflation, we have made some substantial progress. We’d like to make more progress. We need inflation to moderate further and faster. Inflation is sticky and stubborn in our economy, as it has been in other economies early in the year. It’s more persistent than we’d like, but we have made substantial progress, and in these numbers we continue to make progress when it comes to underlying inflation and the monthly figure and the non‑tradeable homegrown aspect of what we’re seeing in these numbers. Over to you.
JOURNALIST:
Headline inflation is still going up. Can you realistically expect the RBA to deliver a rate cut before the end of the year?
CHALMERS:
Well, I don’t pre‑empt decisions taken independently by the Reserve Bank. They will consider these numbers today, but not just these numbers; they’ll consider the broader conditions in the economy as well. Headline inflation is precisely what the Reserve Bank forecast up to the June quarter. And underlying inflation is moderating. They will weigh all of that up along with the weakness that we’ve seen in the economy, the softening around the edges of the labour market. They’ll factor in conditions in the retail sector and all the rest of it.
I’m not in the business of giving free advice to the independent Reserve Bank. My job is to manage the budget responsibly along with my colleagues in the cabinet and in the government, to deliver those big surpluses which the Reserve Bank Governor has herself said are helping in the fight against inflation, but also to roll out this cost‑of‑living relief in a way that makes a meaningful difference to household budgets, but also puts downward pressure on prices in a way what the ABS has confirmed today is effective.
JOURNALIST:
Just on Rex – unless you want to ‑‑
JOURNALIST:
Just one more on inflation. Is there any indication as to what is leading to that headline inflation to continue to go up?
CHALMERS:
The very small tick up in headline inflation is unwelcome, but it’s unsurprising. We expected there to be some temporary factors around fruit and veg, also travel costs. But we also know that rent and insurance are persistent price pressures in our economy. As I said before, some of these price pressures are more persistent than we would like. But when it comes to rent, for example, inflation would be even higher if our political opponents had their way and we weren’t rolling out this substantial and meaningful and responsible cost‑of‑living relief.
And when it comes to our political opponents, remember, Angus Taylor has said it’s underlying inflation that matters most. Underlying inflation moderated again in these figures. He said it is non‑tradeable homegrown inflation which matters most. Well, in a quarterly sense, those numbers have halved in the new data today. This is why nobody takes Angus Taylor very seriously. The Liberals can’t even agree what the job of the Reserve Bank is. Angus Taylor said it’s not the Reserve Bank’s job to care about inflation. Jane Hume says it’s their only job to care about inflation. They’re both wrong. They should check out the responsibilities that are given to the Reserve Bank. Nobody takes them seriously. He has said the number one focus needs to be underlying inflation, and we’ve seen underlying inflation moderate for the sixth consecutive time in these figures.
JOURNALIST:
With Rex being the second private equity‑backed airline to collapse this year, will this play into your thinking when it comes to FIRB with potentially Qatar investing in Virgin?
CHALMERS:
First of all, I’m conscious that my colleague Catherine King, who’s doing a heap of characteristically diligent work in this area, was up a short time ago from this lectern, as I understand it, and so from a personal point of view and from a portfolio point of view, we are prepared to consider a whole range of options.
My focus and the government’s focus has been the maintenance of these regional services. I think that’s the most important thing. And it’s a relief, frankly, the reassurance that the administrators gave us about the continuation of those regional services. We know how important regional services are to regional people and communities and economies. And so we want to see those continue.
The administrator was only appointed this week and so I think people would understand that the government will consider and deliberate on a whole range of possible responses to what we’re seeing. And my portfolio will be part of that, and I manage the FIRB regime. That hasn’t been front of mind. The FIRB arrangements haven’t been front of mind so far as we consider these developments.
It’s been a horrible week for Rex, for its workers and for communities that rely on Rex’s services. And I really want to give credit to Catherine King for the way that she’s been working around the clock to make sure, working with the other airlines to make sure people can get home if they’re stranded, that their tickets are honoured by other airlines, but also to try to find jobs for people who are the victims of the developments we’ve seen in Rex this week.
We want to see people re‑employed and redeployed elsewhere where that’s possible. We want to see job losses absolutely minimised. We want to see regional services continue, and those are the sorts of things that will be the main motivations and priorities as we work through or response to what the administrator said a short time ago this morning.
JOURNALIST:
But just on FIRB, I mean, with the trend this year, would it be fair to say foreign airlines might be a more patient investor in this market than private equity?
CHALMERS:
I’m reluctant to kind of engage in a commentary or make predictions about how the rest of the market, including overseas players, might react to what we’re seeing here. As I said, in the course of this week the big priorities for me have been regional services. I know how important they are. And also to make sure that the workers are looked after hopefully with new jobs – good, secure, well‑paid jobs. Beyond that, there’s a whole range of issues that the government is prepared to consider. Catherine King gave a very good account of the sorts of things that we care about as we work through that. My portfolio will play a role, but I’m reluctant to get into a commentary or make predictions about how international players might react.
JOURNALIST:
First Bonza, now Rex. Is there space in the Treasury for the government to look at propping up, subsidising any form of regional services that might be affected?
CHALMERS:
I think Catherine King made it clear a moment ago – and I did earlier today in a whole bunch of TV interviews – that we’re prepared to consider a constructive role that the government can play here. It doesn’t necessarily mean the options that you’ve summarised in your question. We’re prepared to play a constructive role in getting to a good outcome here. In the near term, the maintenance of those regional services matters a lot to us. That’s a good thing. It’s a relief, frankly. And looking after workers as well is an important priority. All of these other sorts of considerations, given it only just went into administration this week and it’s only Wednesday, you’ll understand that we’ll take a little bit of time to work through our options.
JOURNALIST:
Will the white paper in this sector contribute or have an impact on competition that we’re lacking at the moment?
CHALMERS:
Obviously competition is a factor in the really great work that Catherine King is doing in relation to the white paper. I don’t really want to pre‑empt her announcing the outcomes of that work, but I know that competition is a feature and a factor in her thinking. And we know that this is a difficult sector in our economy. We know that because of recent history, decades of history too. We know it’s a difficult sector. We know that there have been challenges and we want to make it as competitive as it can be. We want to make it as strong as it can be, and we want to make sure that it’s providing those good, secure well‑paid jobs and services to as many Australians as possible, and those are our motivations.
Thanks very much.