Jim Chalmers:
Today we received the very encouraging news that underlying inflation has come down again in the most recent monthly inflation figures.
Underlying inflation came down in November with the trimmed mean measure falling to 3.2 per cent, which was down from 3 and a half per cent. Headline inflation in November was 2.3 per cent.
This means that headline inflation has now been in the Reserve Bank’s target band for 4 months in a row, and it’s been at the lower half of that target range for 3 months in a row, for the first time since 2021.
These new numbers are an important reminder of the very substantial and very sustained progress that we have made in the fight against inflation.
When we came to office, inflation had a 6 in front of it and it was rising, now inflation has a 2 in front of it, and that is a demonstration of that progress.
Headline inflation is now around a third of what we inherited from the Liberals. It’s almost a quarter of its peak in 2022. In the last year alone it has almost halved as well.
Inflation was much higher and rising when we came to office and now it is substantially lower under this government across all of the key aggregate measures.
Headline inflation, underlying inflation both come off significantly since the election but were all higher and rising under our predecessors.
In today’s numbers, we also saw that services inflation has moderated quite substantially as well from 4.8 to 4.2. Still too high when it comes to services, but you can see that there has been quite a substantial moderation there.
Now, even with this very substantial and sustained progress that we’re making in the fight against inflation, we know that people are still under pressure, and that’s why our cost‑of‑living help is so important.
What we see in today’s numbers is the helpful role that our policies are playing when it comes to this inflation fight.
If you take electricity prices, for example, they have fallen 21 and a half per cent in the year to November. They would have fallen 1.7 per cent without our energy rebates for every household that we are rolling out.
Electricity prices would have come off a little bit without action. They’ve come off substantially because of the electricity bill rebates that we are providing to every household in Australia, and that’s a good thing.
Rents went up 6.6 per cent in the year but they would have gone up 7.9 per cent were it not for the changes that we’ve made to Commonwealth Rent Assistance.
Whether it’s our cost‑of‑living help, our responsible economic management, delivering back‑to‑back surpluses in our first 2 years, almost halving the deficit in the third year, that has all worked alongside monetary policy to return inflation to the target band for the first time since 2021.
As I said, 4 months now in the target range, 3 months in a row where it’s been at the lower end of the Reserve Bank’s target range for the first time in some years now.
We know that this good progress in the aggregate national numbers doesn’t always translate into how people are feeling and fairing in the economy, and that’s why the cost of living remains the Albanese government’s number one focus. We are confident about the progress that we’re making, but we’re not complacent about it.
We also know that inflation doesn’t always moderate in a perfectly straight line. We saw overnight in Europe where inflation has gone up. We’ve seen in the most recent data or in recent data from the United States and the United Kingdom that inflation, even as it moderates overall, doesn’t always moderate in a perfectly straight line.
We also know that this monthly data doesn’t compare from month to month exactly the same basket of goods and services. So it’s a more volatile measure than the quarterly figures, but still very encouraging, very pleasing to see this significant and substantial progress, particularly when it comes to the underlying measure.
Underlying inflation coming down in November is a very encouraging and welcome sign of the substantial and significant and sustained progress that Australians have made together in this fight against inflation over the last couple of years.
Remember that Australians would be much worse off under Peter Dutton. He opposed the cost‑of‑living help which is rolling out right now and he would make things worse, not better.
We know that the number one risk to household budgets is a Coalition government because we know that Peter Dutton came after Medicare when he was the Health Minister.
We know that Coalition governments push down wages. We know that they’ve got this nuclear insanity which would push up electricity prices as well.
Peter Dutton would make things worse, not better. We know that from his record on Medicare, their record on wages and these bizarre, crazy nuclear schemes which would push up electricity prices in this country.
We’re fighting inflation. We’re helping with the cost of living and we’re building Australia’s future while Peter Dutton would put more pressure on household budgets, not less. And he would take Australia backwards as a consequence.
Happy to take some questions.
Journalist:
Have today’s inflation figures boosted your hopes of a rate cut in February?
Chalmers:
As you know, I don’t make predictions about decisions taken independently by the Reserve Bank. I don’t pre‑empt or predict those decisions. I haven’t in the past and I don’t intend to now or into the future. They will take that decision independently and I’ll focus on my job, which is rolling out this cost‑of‑living help, being helpful in the fight against inflation, getting inflation down and wages up, strengthening Medicare and rolling out cost‑of‑living help. That’s my job and that’s my focus.
You would have seen that the markets in the last little while have increased their expectations of a rate cut in February. That’s a matter for the markets. That’s not my focus. My focus is on doing my job. The Reserve Bank will take their decisions independently.
Journalist:
The RBA, though, is growing increasingly confident that inflation is returning to, you know, the normal band, back to its band. Do you think that the figures today will add to that confidence?
Chalmers:
It’s definitely true that in the most recent statements from the Reserve Bank they have indicated that they’re becoming increasingly confident that we’re getting on top of this inflation challenge in our economy.
Like the government, they’re not complacent about that, but they’re confident that we have seen and are seeing substantial and sustained progress in the fight against inflation. Those Reserve Bank minutes that came out in the week of Christmas made that point very clearly and very starkly.
The Reserve Bank and its Governor and its board can speak for its own thinking.
From the government’s point of view, we’re very pleased to see underlying inflation come down. We’re very encouraged by the substantial and sustained progress we’ve made seeing inflation moderate quite substantially over the last couple of years. The Reserve Bank will factor all of that in when it meets on the next occasion and subsequently throughout the year.
Journalist:
Do you think there should be an interest rate cut, though, based on these figures today?
Chalmers:
I don’t give free advice to the Reserve Bank.
I have a very respectful approach to Governor Bullock and her colleagues on the board and the Reserve Bank more broadly. It’s an independent institution. It will work through this new data and all of the other data we have on the economy in a diligent, methodical and considered way when it meets in February and subsequently.
I’m focused on my part of this, my part of it, which was delivering 2 surpluses in our first 2 years, getting the deficit down in our third year, avoiding $177 billion in debt, getting interest costs down, rolling out cost‑of‑living help. That’s been my focus.
The market’s expectations of rate movements have changed a little bit since this new information came out this morning. But I’ll leave that to the market and I’ll leave the Reserve Bank to speak for itself.
Journalist:
Prices are still going up, although not as quickly. What promise can you make to voters who are still hurting?
Chalmers:
We know that even when Australia is making this very welcome progress on inflation we know that that doesn’t always translate into how people are feeling and fairing in the economy.
We know that people are still under pressure, and that’s why the cost of living is still our major focus.
Overwhelmingly the main focus of this government has been and will continue to be the cost of living because we know people are still under the pump, and that’s why our tax cuts are so important, the household energy rebates are so important, cheaper medicines, cheaper early childhood education, rent assistance, which we see in these figures, Fee‑Free TAFE, student debt relief, getting wages moving again.
All of these things are so important because we don’t just acknowledge that people are under pressure; we have been responding to it, providing cost‑of‑living help in the most substantial and meaningful and responsible way that we can.
What we see in these numbers today, whether it’s electricity or whether it’s rent or in other ways, you can see that our policies are making a helpful contribution to the fight against inflation, and that’s what we’re focused on.
Journalist:
You’ve mentioned how inflation already was in the Reserve Bank’s target range. Isn’t that a not‑so‑veiled attempt to suggest to the RBA board that it should cut rates in February?
Chalmers:
No, it’s just a statement of fact. It’s been some years since we’ve had inflation for 4 consecutive months within that target band. The last 3 months it’s been at the lower half of the RBA’s target band. That’s just a statement of fact. That’s what we see in the figures today. The Reserve Bank will come to its own decisions. The market has made an assessment of that in the last little while. But from my point of view, my focus is on my job, not Governor Bullock’s job.
Journalist:
Treasurer, you touched on it a little bit in your opening, but services inflation remains particularly strong at 4.2 per cent. Do you share the concerns that have been raised by the RBA Governor that it still remains too high?
Chalmers:
Services inflation has been a challenge in our economy for a little while and that’s why it’s so pleasing to see that one of the biggest improvements in these figures has been services, from 4.8 to 4.2, still too high but moving really quite substantially in the right direction now, and that’s a good thing.
Journalist:
And just on job vacancies also remaining extremely high, is that a concern when the RBA thinks the jobs market is beyond low employment and is adding to inflation?
Chalmers:
There are a few things going on in our jobs market right now. We’ve got unemployment with a 3 in front of it, which is quite remarkable. There’s been a million new jobs created under this government. That’s never happened before under a government of either political persuasion. So our labour market has been a source of quite considerable strength in our economy. That’s how we want to see it remain.
We want to see more people working, earning more and keeping more of what they earn. Jobs and wages and the tax cuts are a big focus of the government, really the central part of our efforts to help people deal with the cost of living.
There are a range of views about what full employment looks like. The Treasury thinks it’s about 4 and a quarter. The Reserve Bank has said about 4 and a half. A lot of economists think it’s lower than both of those estimates.
Our job is to try and make sure that we get on top of inflation while we preserve the gains that we’ve made in the labour market – the very substantial gains we’ve made in the labour market – and that we keep the economy ticking over.
Our primary focus is on the fight against inflation but we need to beat inflation without sacrificing too many jobs and without seeing our economy go backwards like a lot of our peers have.
Journalist:
So you’re not concerned?
Chalmers:
The job vacancies have been ticking up over a little while. We have seen some softening around the edges of the labour market.
As I said, we want to preserve as much of the gains that we’ve made in the labour market as we can. But inevitably when growth in our economy is as weak as it is, you see that softening around the edges of the labour market.
My job and the Reserve Bank’s job is to get on top of inflation without ignoring the risks to growth and without sacrificing these really important gains that we’ve made in the labour market. That’s the view that we take.
Journalist:
Is the federal government planning to press ahead with a high‑speed rail line between Newcastle and Sydney? Is it a train to nowhere?
Chalmers:
As I understand it, the High Speed Rail Authority has now submitted a business case to the government, and we’ll go through that in our usual considered and methodical way. It will be subject to very robust assessments, including by Infrastructure Australia and others. We’ll go through that business case.
The Prime Minister has made it really clear and the government has made it clear on a number of occasions that subject to the economics of what’s being proposed here, high‑speed rail has the potential to be a gamechanger for local economies, local communities, connecting people. It has the potential to open up swathes of the country, to make it more appealing for people to live in these areas. But it needs to be subject to rigorous economic and other analysis, and that’s what we’ll be undertaking now.
Journalist:
Have you received a briefing on how much such a line would cost?
Chalmers:
Not yet, but I would expect to. But typically what would happen is a business case would be submitted, the government, the Infrastructure Minister and others would go through that in detail.
We wouldn’t rush to go through that. We’d make sure that we get all of the necessary input and considerations underway. But not yet is the answer to your question.
Journalist:
And what else can Australians expect this year from Labor to help them with cost of living, especially given the energy bill relief will end?
Chalmers:
We’ve made it really clear – and I think the Prime Minister has really set the pace here and set the tone here – the Prime Minister has made it really clear in some really important announcements in Adelaide on student debt, in Brisbane on early childhood education, in Gympie – I was with him the other day – about investments in infrastructure and backing the Bruce in particular with billions of dollars in new investment.
We’ve made it really clear what our priorities are. We want to build Australia’s future. We want to maintain a big focus on helping people with the cost of living. We want to do that in the most responsible way because responsible economic management has been and will continue to be a hallmark of this government.
There’ll be a really important choice for people to make when the election rolls around.
We want to build the country’s future. We want to help people with the cost of living. We want to get on top of this inflation challenge and continue to manage the budget in a responsible way.
The alternative to that is Peter Dutton, and we know that Peter Dutton’s a risk to household budgets because we know his record.
When he was the Health Minister he tried to gut and cut Medicare.
He tried to take the universal out of universal Medicare.
We know that Coalition governments have lower wages as a deliberate design feature of their economic policy, and we know that this nuclear insanity from Peter Dutton would push electricity prices up, not down.
He presents a very serious risk to household budgets.
The choice is between a Labor government which has been fighting inflation and rolling out cost‑of‑living help versus Peter Dutton and a Coalition which would make things worse, not better.
Thanks very much.