JIM CHALMERS:
I want to start by paying tribute to the remarkable life and service of Tom Pritchard, the last of his generation of heroes, and by all accounts a truly wonderful Australian. Our hearts go out to Tom’s loved ones today as we mourn his passing and salute his service.
Today I wanted to say a few things about the interest rates decision and also the broader economic uncertainty that we’re seeing play out around the world.
As you know, the Reserve Bank Board has kept interest rates on hold at 4.35 per cent. This is a welcome decision from the Reserve Bank because it recognises the pressures that people are under, the progress we’ve made on underlying inflation, but also the severe market volatility we’ve seen and global economic uncertainty more broadly.
Australians are doing it tough enough already, the last thing they needed today was more cost‑of‑living pressure, so this decision is welcome because it recognises the progress that we’ve made on underlying inflation, the softness in our economy and also that very substantial global economic uncertainty that we’re seeing play out in markets around the world.
We have seen some really significant volatility in those markets in recent days, and our own markets have been impacted as a consequence. The market volatility that we’ve seen has been driven by weaker than expected jobs growth and tech earnings in the US, as well as rising Japanese interest rates impacting Asian markets as well. Australia’s not immune from these global developments. We’ve seen them play out in the Australian dollar and in our own share markets as well. I’ve been briefed by Treasury today on this volatility and I’ll be kept up‑to‑date on developments as they unfold.
Our government has always put a premium on responsible economic management and it’s especially important now. We’ve said around Budget time, before that and since then, just how important it is that we recognise the balance of risks in our economy, domestic and international, growth and inflation and it’s just as important now as it’s ever been that we continue to deliver that responsible economic management which is all about fighting inflation and providing cost‑of‑living relief at the same time as we get the Budget in better nick without smashing the economy.
Today’s decision comes as price pressures in our economy continue to trend downwards after annual trimmed mean inflation moderated for 6 consecutive quarters. As the Reserve Bank say today in their statement, we have made really substantial progress in the fight against inflation but we know that inflation can be sticky and stubborn and they’ve described that in their statement today as well.
Headline inflation is more persistent than we want it to be but it’s less than half its peak and it’s much lower than the 6.1 per cent we inherited at the election. I also think that having rates on hold now since November last year provides a bit more certainty to mortgage holders and small businesses who are already under pressure.
Another important point from the RBA statement today is that it forecasts that headline inflation is expected to dip below 3 per cent in the next year due to the government’s cost‑of‑living measures. They make that clear in their forecasts. We know that Australians are doing it tough, that’s why the Albanese Labor government is rolling out substantial and responsible cost‑of‑living relief that helps in the fight against inflation.
If you look at the inflation figures last week, the ABS made it really clear that across energy bill relief, cheaper childcare and rent assistance, we’ve taken half a percentage point off inflation, and they expect a similar outcome in the coming year as well. We’ve also delivered the first back‑to‑back surpluses in almost 2 decades which the Reserve Bank Governor has said is helping in the fight against inflation.
So today’s decision is not a surprise. We know our economy is soft, we know that people are under pressure, we know that previous rate rises which are already in the system are already slowing our economy, and we know that we’ve made substantial progress on getting inflation down, and we see that recognised in the statement as well.
Our economic plan, as I said, is all about fighting inflation and easing cost‑of‑living pressures without smashing the economy. That’s how we are doing our bit to ease the pressure on Australians through our responsible Budget strategy, tax cuts for every taxpayer, energy rebates for every household and a million small businesses, and all of the ways that we are going about managing our economy in the most responsible way that we can in uncertain times, which we’re seeing in the volatility in global share markets in recent days.
JOURNALIST:
Treasurer, how worried are you about that stock market volatility?
CHALMERS:
Well the volatility we’ve seen in international markets has been really substantial. Part of that has been unwound in Japan today, for example, but it’s another reminder of just how uncertain the global economic environment is.
And we are confident about the Australian economy, we are confident we can continue to see inflation moderate. We’re confident that we can continue to grow but this is a really important warning against complacency the fact that we’ve seen this kind of volatility in international markets and also the fact that we saw a much weaker jobs outcome in the US in the first place.
So we are confident but not complacent about Australia’s economic prospects. We have made substantial progress on inflation the last couple of years, but inflation is stickier and more stubborn than we would like it to be, that’s why our economic plan is so important.
We’re getting the Budget in better nick, turning big Liberal deficits into Labor surpluses. We’re rolling out of cost‑of‑living relief, we’re doing that in the most responsible way that we can.
JOURNALIST:
What are the immediate impacts of this volatility in the stock market for Australia, for Australians?
CHALMERS:
Well we’ve seen our dollar move as a consequence of what’s happening around the world. People are making assessments about the US economy, the broader global economy, prospects in China, and we know that the Chinese economy has been a bit weaker of late and that has consequences for us as well.
We also saw our own stock market be especially volatile in the last couple of days, and that’s because we’re not immune from what’s happening around the world. One of the reasons why we’ve tried to strike a really effective balance in the 3 Budgets we’ve delivered and especially the third one, is because we recognise the inflationary pressures in our economy but we also recognise there’s a lot of global economic uncertainty. We’ve been saying that throughout the course of this year and unfortunately, we’re seeing some of that uncertainty play out in global markets and that has consequences for our markets and for our dollar.
JOURNALIST:
Given that volatility do you think – was that – you know, were you hoping that the RBA would have cut to ease some of that pressure, or do you think that’s increasing the likelihood that they will need to move?
CHALMERS:
Oh look, I don’t make assumptions or predictions about future movements in interest rates. There are good reasons why I don’t do that. I don’t pre‑empt them before a decision and I don’t try and predict future movements in interest rates.
I think one of the really good developments is that we’ll shortly hear from Governor Bullock, one of the reasons I’m up so shortly after the announcement was made public was so that people can focus on the Governor’s comments which will be made shortly from Sydney and she can explain how she sees the future trajectory of our economy and the forecasts that they have released today.
From my point of view, this is a welcome decision because it recognises that people are under pressure. We’ve made progress on inflation and there’s a lot of global economic uncertainty, that’s what today’s decision recognises. It wasn’t that long ago that people were calling for much higher interest rates, and I think what we’ve seen here is a welcome outcome because it recognises that we can continue the fight against inflation without smashing our economy – that is the job of the Reserve Bank and it’s the job of the government. We have different parts to play in that. We are doing our bit getting the Budget in much better nick, rolling out this cost‑of‑living help in the most responsible way, recognising the pressures that people are under and the global economic uncertainty which is playing out here as well.
JOURNALIST:
When do you switch from controlling inflation to stimulating growth?
CHALMERS:
Well we’ve seen throughout the course of the year that we have to balance our priorities, and our primary focus is on fighting inflation. As the Reserve Bank statement rightly points out today, we have made substantial progress but the downward trajectory of inflation is often not in a straight line, as I’ve said before it zigs and zags on the way down, it’s stickier and more stubborn than we would like, particularly that last percentage point or so and in that we have a similar view to that expressed in the RBA’s statement today.
So our primary focus is on fighting inflation but we can’t ignore this global economic uncertainty, we can’t ignore the fact that growth in our economy is soft, job ads are down, household savings are down, discretionary consumption was almost non‑existent at the start of the year and so we have to strike a series of fine balances. I’m confident that we have in the Budgets that we’ve handed down and particularly that one that was handed down in May. There is a balance of risks in our economy, inflation primarily but we can’t ignore the challenges to growth.
JOURNALIST:
Just on something else, the Queensland Premier today announced plans to launch 12 state‑owned petrol stations. Do you think it’s a good idea?
CHALMERS:
Oh, that’s a matter for the Queensland state government. As I’ve said before, I really believe that the Queensland government is doing what it can to ease and alleviate the pressures that Queenslanders are under.
state governments around Australia are going about that in different ways, but whether it’s the energy bill relief or other cost‑of‑living relief being provided here in Queensland and in other states, I welcome the fact that the state governments are prepared to play a role in easing some of these cost‑of‑living pressures that people are under. We don’t have a similar plan nationally. We don’t second‑guess decisions taken by state governments, but we do welcome the efforts of the Queensland government, the Miles government, and other governments around Australia to help alleviate some of these cost‑of‑living pressures that we know people are under.
JOURNALIST:
Do you think other states should follow suit?
CHALMERS:
Well that’s a matter for them.
JOURNALIST:
Are there any – [inaudible] for people, the housing crisis and the housing market, already CoreLogic has come out and said there will be a little shift. What’s your view?
CHALMERS:
Well we’ve got big challenges in the housing market and that’s why we’re investing $32 billion of Commonwealth money to try and turn things around. We’ve got an ambitious but achievable housing target of 1.2 million homes in the next 5 years and that’s because we recognise there aren’t enough homes to buy or rent in our communities and often they’re not near where the jobs and opportunities are being created. That’s why it’s a tribute to the former Minister Julie Collins and a big job ahead for the new Minister Clare O’Neil to make sure that these tens of billions of dollars in Commonwealth investment that we’re rolling out is effective, that we’re building more homes for people to rent and to buy because the housing pipeline is not what we want it to be. We need to turn things around. You can’t just flick a switch and turn things around overnight, but we’ve got the investment flowing, we’ve got the commitments and if everybody does their bit, governments at all 3 levels, the industry and others, investors and others, if we all do our bit we can hit that target. It will be difficult but it’s achievable if we all play our part.
JOURNALIST:
Treasurer, the state government’s plan to build I guess state‑owned service stations has been described as a rather extraordinary market intervention. Are there any Federal road blocks that you see there or constitutional issues that might impact that? And are you concerned at all about how that plays out I guess on a wider scale?
CHALMERS:
First of all, not that I’m aware of. Second of all, I’m not concerned about it. As I said before in response to Lydia’s question, different states are going about this in different ways, but I think when it comes to the Queensland government and other governments around Australia, they know that their people are under cost‑of‑living pressure, the people that we jointly represent.
My focus is on rolling out a tax cut for every taxpayer, energy bill relief for every household, cheaper medicines, cheaper earlier childhood education, a pay rise for people on awards, fee‑free TAFE. We’re doing our bit to take some of the sting out of these cost‑of‑living pressures. That’s recognised in the Reserve Bank’s forecast today. It’s recognised in the ABS’s data from last Wednesday, and we want to work with states to alleviate some of these cost‑of‑living pressures that we know people are under and we welcome the efforts of states and territories right around Australia who are doing what they can to help on that front.
JOURNALIST:
Treasurer, economists and some industry figures have said that this fuel intervention will ultimately increase the price of fuel. Do you have any insight into how that would be the case?
CHALMERS:
No, I mean that’s not my understanding. You know, I haven’t been – I haven’t, you know, seen all of the details of what the Queensland government is proposing. I’m obviously aware from news reports today and there’ll be no doubt a lot of commentary about it. As I said in response to your colleagues over here, I think it’s a good thing that States are looking for ways to take some of the edge off cost‑of‑living pressures that people are feeling. In my area, for example, as a Queenslander with a Queensland electorate, the 50 cent fares are going to make a big difference. The energy bill relief’s going to make a big difference.
The Miles Labor government, Treasurer Cameron Dick and others, I think have shown a real willingness not just to understand the pressures that people are under but respond to them. Different states and territories will go about that in different ways. I’ve got my own job to focus on and that’s rolling out the substantial and meaningful but responsible cost‑of‑living relief that I budgeted for in May.
JOURNALIST:
Just on volatility, just on the volatility, have you had any more details from your briefing with Treasury about what it forecasts for our economy?
CHALMERS:
Well the briefing with the Treasury is fundamentally about the causes of this volatility we’re seeing in share markets and obviously the weaker than expected jobs numbers in the US are part of the story but not the whole story. There’s also issues around the impact of rising interest rates in Japan and what that means for investor sentiment in Japan and throughout Asia. We’ve seen some under performance in terms of reporting of earnings in the tech sector in the US, so there was a range of factors which are feeding into this volatility. We’ve seen some of it unwind through the course of today, in Japan for example, but my briefings with the Treasury are to understand the sources of this volatility, to understand the consequences for us in terms of our dollar, our own markets and any exposure of the real economy to that kind of volatility. But even before the last few days it has been really clear to us, certainly through the course of this year, that in addition to the cost‑of‑living pressures which are coming at people from domestic sources, there is a big international element to the economic uncertainty that people are feeling, the pressures that people are under. Whether it’s uncertainty in the Middle East and the prospects of a wider regional conflict, whether it’s Russia/Ukraine, whether it’s tensions closer to home, or some of these other issues that I’ve run through, the global economy is a pretty uncertain place right now and we’re not immune from that, but the government has put a lot of effort into making us as resilient as we can be, getting the Budget in better nick, helping people with the cost‑of‑living pressures, trying to do that in the most responsible way that we can as a buffer against some of this global economic uncertainty.
JOURNALIST:
Do you have to make adjustments to government policy to keep the economy growing?
CHALMERS:
Oh, look, from budget to budget obviously we take the most recent economic conditions into consideration. That’s the normal practice. We update our forecasts when we need to. We tweak our policies when we need to, but I think what developments of the last few days have shown, what the progress on inflation has shown is that the balance that we struck in the Budget was the right one.
I am confident but not complacent about the Australian economy. I think what we’ve seen happening around the world is a real warning against being complacent but we’ve done all of the things that people would expect from us in these sorts of conditions. We’re rolling out cost‑of‑living help, we’re turning Liberal deficits into Labor surpluses, we’re paying down debt, we’re fighting inflation in a way that doesn’t smash the economy – those are the sorts of things that governments should be doing in these circumstances and those are the things that we are doing.
JOURNALIST:
So what do you say to the families who are just holding on, what’s your message?
CHALMERS:
Well to people who are doing it tough, I’d say that the government is doing what we can to help in the most substantial and meaningful way that we can, but also in the most responsible way we can – a tax cut for every taxpayer is a really important part of that, energy bill relief for every household is because we recognise the pressures on people right now, cheaper medicines, a pay rise for people on awards, cheaper early childhood education – all of these things are about recognising and responding to the cost‑of‑living pressures that people face. And that’s why today’s decision is a welcome one.
The last thing people needed today was additional cost‑of‑living pressure. People are doing it tough enough as it is and that’s why we’re rolling out this cost‑of‑living help. The government’s highest priority is to roll out this cost‑of‑living help in a way that helps on the inflation front rather than hurts the efforts against inflation and I think we see that recognised in the RBA forecast today that the government’s cost‑of‑living policies are putting downward pressure on inflation, not upward pressure on inflation.
Thanks very much.