Jim Chalmers:
Today, the independent Reserve Bank decided to cut the cash rate to 4.1 per cent. This is very welcome news for millions of Australians. This is the rate relief that Australians need and deserve.
We know that it won’t fix every challenge we have in our economy or in household budgets, but it will help.
It’s a demonstration of the progress that Australians have made together in this fight against inflation. That progress that we’ve made has been substantial, it is now sustained, and it’s reflected in the decision taken by the Reserve Bank today.
When we came to office inflation and interest rates were rising, now both are falling. Other countries have had to pay for that kind of progress on inflation with much higher unemployment, negative quarters of growth or even recessions and Australia has managed to do better than that.
Under this Labor government inflation is down, wages are up, unemployment is low, and now interest rates are falling as well.
This is the soft landing that we have been planning for and preparing for, but we can’t be complacent about the months and years ahead. We know that there is more work to do. We know that this is not the solution to every challenge that people are confronting in their household budgets, but it will help.
It is a welcome step when it comes to providing a bit of relief for Australians doing it tough.
For a household with a mortgage of half a million dollars, the rate cut will save them $80 a month, or $960 per year.
If you look at the statement made by the Reserve Bank board today, it makes 3 things very clear.
Firstly, inflation has fallen substantially since the peak in 2022.
Secondly, the inflationary pressures in our economy are easing faster than expected.
And thirdly, the board has more confidence that inflation is moving sustainably towards the midpoint of the 2 to 3 per cent target range.
Because of those 3 developments, that gave the Reserve Bank Board the confidence to make the decision that they have made today.
Inflation is now almost a third of the 6.1 per cent that we inherited. That is a reflection of that progress on inflation that the Reserve Bank Board has referenced in their press release today.
Today’s decision and the statement from the board gives us more confidence that the worst of the inflation challenge is behind us, but we’re not complacent about that either.
Today’s decision is very welcome, but it’s not mission accomplished, because we know that people are still under pressure. That’s why the primary focus of this Albanese Labor government will continue to be the cost of living. It was before this decision, and it will be after this decision as well.
Before I take your questions, I wanted to let you know that this afternoon, after the decision was made public, I spoke to the CEOs of all 4 major banks. Each of them has made an announcement that each of the major banks will be passing on, in full, the benefits of the decision taken by the independent Reserve Bank today.
I don’t take credit for those decisions that they have made and announced already. In each case, they were already well progressed in their planning. But I wanted to say that I consider that a very good thing, that each of the 4 major banks has already indicated that the benefits of this rate cut will be passed on in full.
Happy to take some questions.
Journalist:
Treasurer, you mentioned a couple of things the statement said. It also said the central forecast for underlying inflation has been revised up a little over 2026 so in that longer term outlook, or in that outlook over the next year or 2, it doesn’t look better. Is that on you, because you’re not doing more to bring down that pressure on inflation?
Chalmers:
I’d make 3 quick points about that.
First of all, they’ve revised down their forecast in the near term.
Secondly, the further out you go, the more uncertain that forecast is.
And thirdly, what we’ve seen in recent data releases is that inflation has come in lower than anticipated by the Reserve Bank, that’s part of the reason why they acknowledge in their own press release that inflation is easing a bit quicker than expected.
I know that there’s been some changes to the forecasts. The main point that I would direct you to in those changes to the forecasts is the lowering of the forecasts at the front end of the forecast period. It’s a bit more uncertain after that.
Journalist:
Thank you, Treasurer. Given this decision by the Reserve Bank today, can we expect an election sooner? And will your March 25 Budget still go ahead?
Chalmers:
We’ve been in the Cabinet suite next door for most of today and most of yesterday, preparing for and planning for a Budget on the 25th of March. That’s certainly what we are working towards.
We acknowledge that the timing of the election is a matter for the Prime Minister in consultation with his senior colleagues, but we’re certainly working towards that Budget. That’s why the ERC met for about 4 or 5 hours yesterday and another 3 or 4 hours this morning.
Journalist:
Treasurer, the RBA Statement on Monetary Policy makes it pretty clear that they still see the outlook as uncertain, growth as quite low. Does the gel with your outlook, and will you be sort of holding your fire in terms of more stimulatory measures after this?
Chalmers:
We do share the Reserve Bank’s concern about the uncertain global outlook. I’ve expressed that to you and in other forums for some time now.
The world is an uncertain place and we see that reflected in the Reserve Bank’s statement today. And growth in our economy has been soft. People have been under very substantial pressure, and continue to be under pressure.
This decision today is partly a reflection of those 2 things, but it’s mostly a reflection of the very substantial and now sustained progress that we’ve made together on inflation.
Journalist:
You’re quite cautious about declaring mission accomplished on the cost of living. Nonetheless, this is the end of a succession of rate increases. Are you prepared to tell people that it will get better from here?
Chalmers:
First of all, rates stopped rising in November of 2023. So it’s been almost a year and a half now since rates have gone up. We’ve had that long period where rates were steady.
I wouldn’t go near any of that sort of language. It’s clear from the inflation data and the decision taken today that the worst of the inflation challenge is behind us, but we’re not complacent about that. I’ve been saying that for some time as well.
You think about that inflation peak in 2022, 6.1 per cent and rising at the election, got to 7.8 by the end of the year, now at 2.4, underlying inflation in the low threes, on both measures doing much better than was expected by around this time. And so certainly when it comes to the inflation challenge particularly, the worst of the inflation challenge is now a couple of years behind us but we have to stay vigilant, we can’t be complacent.
You won’t hear anything other than recognition from us that people are still under pressure, and this rate cut will help a little bit, but we know that those pressures on household budgets are still there, that’s why our cost‑of‑living help is so important.
Journalist:
Treasurer, we’ve been speaking to people on the streets. They say this is just part of the puzzle for them, and they’re still desperate for other immediate cost‑of‑living help. Will you commit in the Budget to have new cost‑of‑living measures to help them?
Chalmers:
First of all, our focus is on rolling out the very responsible but very substantial cost‑of‑living help that we’ve already budgeted for. Tax cuts, energy bill relief, cheaper early childhood education, cheaper medicines, fee‑free TAFE, rent assistance, getting wages moving again.
These are all rolling out in our economy right now. It’s why we saw in the most recent national accounts that recovery in disposable incomes, particularly when it comes to the intersection between lowering inflation, rising wages and the tax cuts, so that people are earning more and keeping more of what they earn.
As I’ve said to you and to others in this room and elsewhere over a long period of time, from budget to budget, we see what we can responsibly do to help people with the cost of living. That’s been a feature of the first 3 Budgets, and if we can afford it, it will be a feature of the fourth.
Journalist:
Treasurer, obviously the decision on the election date is firmly with the Prime Minister, but surely this interest rate decision, that must give you confidence about Labor’s election chances. And just on a separate issue as well, we just had a fact check about your claims that Australian households would be $7,200 worse off under the Coalition. The fact check said that the calculations were flawed because they weren’t adjusted for inflation, and that the assumption about the pace of wage growth was unrealistic. So how can Australians believe those claims that you put forward about Australians being worse off?
Chalmers:
The figures that we provided were a contrast between the wages growth we saw under our predecessors and the wages growth that we’re seeing now, combined with the energy bill relief and the tax cuts that Peter Dutton was so angry about he called for an election over.
So Peter Dutton has opposed our cost‑of‑living help, and the record of the Coalition in office was much lower wages, not accidentally but as a deliberate design feature of their economic policy.
So we are well within our rights to point out that the biggest risk to household budgets in 2025 would be a Coalition government led by Peter Dutton.
Australians would be thousands of dollars worse off if he had his way on wages and tax and energy bill relief, and they’ll be worse off still if he wins. Because when he was the Health Minister, he came after Medicare, they’ve come after wages before, his nuclear reactors would push up electricity prices, and so we are well within our rights to point that out.
Where your question began was around the politics of what’s happened today and I have been very careful and deliberately so in not applying a political lens to the decision taken by the independent Reserve Bank today. Today’s decision was about economics, not politics. The only senior person who’s tried to inject a political lens to this, or a political angle to this, was Peter Dutton was last week making the case for higher interest rates, and that’s for him to explain.
Journalist:
If I may, to take you back to David’s question, in the statement today, the bank notes that there is a number of upside risks that remain in the economy, particularly the tightness of the labour market. Do you agree with the RBA that the labour market may need to soften to see inflation fall further? And secondly, if I may, a sort of a broader question, do you believe that budgets deliver governments a political bounce in the polls these days?
Chalmers:
On the first part of your question, I’ve got the same view now that I’ve had for some time, which is what makes the Australian experience exceptional is that we’ve been able to see a very substantial moderation in inflation at the same time as we’ve maintained the gains that we’ve made in the labour market. That’s been deliberate too, remembering that the Reserve Bank has a dual mandate, full employment and price stability.
This government has a particular focus on the labour market, because that is one of the most important people facing parts of the economy. What we’ve shown over time and seen over time is that we’ve been able to keep unemployment very low at the same time as inflation has come down and wages have come up, and that’s the trifecta that we have been seeking.
On the other part of your question, that’s a matter for political scientists and commentators like yourselves, respectfully,
My job is to obsess over the numbers in the economy, not the numbers in the published opinion polls, and that will continue to be my approach.
Journalist:
At the end of the electricity bill subsidy in July, obviously, there’s an impact on the forecast around inflation. Has the government come to the decision on whether they’re to extend that, and will Australians know before the election? What’s happening with that?
Chalmers:
First of all, we treat the withdrawal of the energy bill rebates the same way the Reserve Bank does in its forecast, and it’s as you described it in your question.
That is one of the drivers of the inflation forecast that the bank has released today. We’ll release our own forecasts in due course.
When it comes to additional cost‑of‑living help, whether it’s energy bill rebates or others, as I’ve said in response to the questions over on this side, we keep that under constant review. If we can, if there’s a case for affordable, responsible cost‑of‑living help, then we will do it. We’ve done that in the first 3 Budgets. We’ve found a way to make that consistent with cleaning up the mess that we inherited in the budget itself. So if there are other ways we can do that in a responsible, meaningful, affordable way, then we will consider that between now and the Budget.
Journalist:
How big of a risk is tit for tat tariffs, a global trade war in pushing up inflation down the track? And also just on the Virgin and Qatar deal, it seems like they need approval, perhaps before June. Can you give them some guarantees that that will happen before caretaker comes in?
Chalmers:
So on the first part of your question, I think it’s a really good development that the Reserve Bank has given you a sense of its thinking on the impact of trade tensions, escalating trade tensions around the world.
They use different scenarios than what we did, but the conclusions are broadly consistent, which is that there are 2 kinds of impacts, direct versus the broader impacts on China and the US, the big economies, and how that would flow through to Australia.
I suspect Governor Bullock will have a chance to speak to some of their thinking when she’s up shortly, but I think it’s a good thing that they’re helping Australians understand the potential impacts.
On Virgin/Qatar, I am yet to receive the advice from the Foreign Investment Review Board. I would be very, very surprised if I couldn’t make a decision on that before the election.
Journalist:
Inflationary impacts that come from overseas factors like trade wars and various other things. Do you think that any upward pressure on inflation from this point created by those is best dealt with by monetary policy or government policy and fiscal policy have a role to play as well?
Chalmers:
Whenever there’s global uncertainty, or indeed any kinds of shocks in the economy, the best approach is when the 2 parts of economic policy work together, and they have been.
It’s a point that Governor Bullock has made before about our 2 surpluses being helpful in the fight against inflation, recognising that public spending is not the main game, but we can be helpful.
So anticipating some future shock from some kind of global event, I would say what I’ve said before about that, which is both the Reserve Bank and the government have got the same objectives, grow the economy, keep inflation low, maintain full employment, but we’ve got different responsibilities.
One of the reasons I’ve been so careful not to apply a political lens to the decision taken today or in the lead up to the decision taken today is because I recognise the independent role that the bank’s got to play, and the role that the government has to play. Different responsibilities, but the same objectives, and that’s why we have been focused on our job, not theirs.
Journalist:
Given the intensity of the election campaigning by both sides, do you think that there is a risk for business in delaying the poll until the very last moment, because a lot of decisions are sort of put on hold?
Chalmers:
I don’t believe in any significant way that to be the case, because we know that there’s an election due in the next 3 months.
We know observing history that typically people put their hands in their pockets around election time to wait to see what the outcome is, but we’re not talking about an election in 6 or 9 or 12 months time, regardless of the decision the Prime Minister takes. An election is more or less imminent, and it’s not a surprising timetable, because we are more or less full term now. So there is always an element of that. I don’t think there’s an extra element of it this time round.
Journalist:
Treasurer, as you mentioned, we hear from the Reserve Bank Governor shortly, expanding perhaps on the geopolitical uncertainty she’s pointing to in the statement. What’s your thinking, though? Does what Donald Trump is threatening on the trade front pose a risk to the global economy and the Australian economy?
Chalmers:
We’ve made it clear for some time that there’s a lot of global economic uncertainty. We’ve seen that more or less as a permanent feature of the last well, really, 15 years or so.
When it comes to those concerns, they’re focused on the risks of escalating trade tensions, and we’ve been monitoring those risks very closely. We did a heap of work before the change of administration in the US, as you know, because when you look around the world, there’s the risk of escalating trade tensions.
There’s still a major land war in Eastern Europe. There’s a tentative ceasefire in the Middle East. There’s been pretty serious political upheaval in places like Korea, to some extent, France. And so the global economy is a pretty uncertain and pretty dangerous place right now.
We have made that clear in our own commentary on the situation, and the Reserve Bank Governor has as well in the statement that she has released. These are things that we monitor very closely. The risk is higher inflation and lower growth around the world at a time when growth has not been especially thick on the ground, and where inflation has been a feature of the last 2 or 3 years.
So obviously, we take that very seriously, as does the Reserve Bank, judging by the statement that they released today.
Thanks very much everyone. Appreciate it.