Jim Chalmers:
Our economy grew in the March quarter, but slowly. Just 0.2 per cent in the March quarter, and 1.3 per cent through the year. Our economy continues to grow despite very substantial global headwinds. We saw those set out by the OECD overnight and also in the commentary in the Reserve Bank minutes that were released yesterday. There wasn’t a lot of growth in March, but what growth there was was private sector led, and that’s an encouraging sign.
With all of the uncertainty in the world, any growth is a decent outcome. Even modest growth is welcome in these global economic circumstances. Growth was weaker than expected because public spending came off in the quarter, and we also saw the impact of natural disasters and global volatility on exports, but also on the economy more broadly. Productivity was flat again, and I’ll come back to that towards the end.
But even in this environment, even in this difficult global context, there were a couple of very positive developments that I wanted to talk about today with you before I take your questions. And those 2 positive developments are around private demand and also the continuing recovery in real disposable incomes.
On the first one, the private sector is stepping up now, as the public sector takes a step back. All of the growth in the March quarter was from the private sector, and that’s a good thing. That private growth was broad. Consumption grew a bit more weakly than we were anticipating, but it grew. Business investment made a contribution, or it was flat, and dwellings grew as well. I think when it comes to new dwellings investment, I think we’re seeing the strongest growth from memory in about 4 years. And so the private economy did all of the heavy lifting in this March quarter.
The second thing which was pleasing in this data is that there was quite solid growth in real incomes per capita. And you’d know that this is the chosen measure of living standards adopted by really all the participants in this national economic conversation. Real incomes per capita and living standards, we saw solid growth once again. The measure of real incomes per capita was up 1.1 per cent in the quarter. That was the third consecutive quarter of growth. Now remember, real incomes were falling 1.7 per cent when we came to office, and they’re now up 1.7 per cent through the year. And this comes from the combination of moderating inflation, solid wages growth and the tax cuts, which are all central features of our economic plan, combined with lower interest rates as well.
If you think about it this way, in the second half of last year, real incomes in Australia grew faster than the OECD average and almost twice the G7 average and that is a welcome development. When we came to office, real incomes per person were falling sharply, and we’ve been able to get them growing again and we saw that again in this data. We also saw that the prices measure fell again in these numbers, it’s the lowest in 3 years now, which more or less mirrors the moderation we’ve seen in the CPI. The wages share rose again, it means wages share of income is almost 54 per cent which is up from less than 50 per cent when we came to office. And it’s also worth remembering that only a tiny bit of the interest rate cuts which began in February are captured in this data.
So if you think about the full effect of the now 2 interest rate cuts that we’ve got flowing in our economy, we expect that to add about $10 billion to household balance sheets over a year and about $6 billion to business balance sheets over a year as well. And so there’s a little bit of that captured in these March National Accounts, but overwhelmingly the benefit of those 2 interest rate cuts will be captured in subsequent quarters, remembering that this is the March quarter, and so a very backward looking measure. And so it’s clear from this data, that in the March quarter growth was subdued in our economy, also clear that our economy is not productive enough.
But I also wanted to offer this perspective when you look at these numbers today. No major advanced economy has our combination of unemployment in the low fours, inflation below 2.5 per cent, and 3 years of continuous growth. That 0.2 per cent in the quarter, the 1.3 per cent through the year should be seen in the context of most of our peers in the OECD have had negative quarters, a number of them have had multiple negative quarters and recessions. What we’ve been able to do collectively as Australians, is to get inflation down without paying for that with negative quarters of growth or substantially higher unemployment and because of that progress the Reserve Bank has had the confidence to cut interest rates twice in the course of 3 months this year.
So we are well placed and we are well prepared to deal with what is coming at us from around the world at the same time as we do what we can to make our economy more productive and our Budget more sustainable over time. And with that, I’m happy to take some questions. We’ll start up the back and then come down to Greg, and then Tom and then Ben.
Journalist:
Treasurer, the UK has had an exemption from some of Donald Trump’s steel and aluminum tariffs. They’re now only going to have a 25 per cent one instead of the doubled 50 per cent levy. What do you make of that? Does that give Australia more hope of securing its own carve out from those levies?
Chalmers:
I don’t take any outcomes for granted when it comes to that engagement we’ve got with the Americans. We’ve made it very clear what we think about those tariffs, and so we will continue to engage, as the friends in the UK have, and most countries have, trying to get the best deal that we can for our people and for our industries. That’s the approach we’ve adopted to here, and it’ll be the approach we will take from here as well. Greg then Tom then Ben.
Journalist:
Treasurer, are you willing to drop the unrealised capital gains component of your proposed superannuation tax reforms and negotiate a new model with the Coalition?
Chalmers:
First of all, I’m not convinced that the Coalition wants to have a conversation about these changes. I think we all saw what Matt Canavan, for example, said today about these changes. I think even on the same day that Ted O’Brien was occupying real estate in your paper, the Finance Spokesman was saying something completely different. So first of all –
Journalist:
– the finance –
Chalmers:
Well, can I just finish my answer, Greg? So first of all, I’m not convinced that they are fair dinkum when it comes to bipartisanship. I don’t think they’re being real about that.
When it comes to the comments that the Prime Minister made yesterday and reported in your paper today. I think they’re important points, obvious points, self‑evident points. First of all, that we don’t have the numbers on our own in the Senate to pass any of our legislation, including this legislation, and so there’s always an element of engagement. Second point that the Prime Minister made, again, reported accurately in your piece today, is that there are a number of opportunities for the Coalition to behave in a bipartisan way, including our efforts to cut student debt and some of the other things that they’ve opposed. And so let’s see that bipartisanship beyond an interview in a newspaper which contradicts the comments made by other senior colleagues in his Coalition parties.
Now on the point more broadly about unrealised gains. It is important to remember that these changes were announced almost 2 and a half years ago now. We did multiple rounds of consultation, and we said to people, if there is a better, fairer way of making this calculation, tell us about it. The unrealised gains calculation was recommended to us by Treasury. We provided years of opportunities for people to suggest different ways to calculate that liability, and nobody has been able to come up with one. And so that’s an important bit of perspective as well.
When it comes to the issue more broadly, this is a change which is modest, it is methodical – as I said it has been on the books for years now – and it makes a meaningful difference to the Budget, and it helps us fund some of our other priorities. It’s all about making sure that the superannuation system is fairer, that it’s more sustainable. It only impacts about half a per cent of people with superannuation accounts. And so we put this proposal out there some years ago. There have been multiple occasions for people to propose alternative ways of calculating the liability. This is the way recommended by Treasury, and it’s the way that we intend to proceed.
Tom then Ben.
Journalist:
Treasurer, a question on 2 different budget headaches. Chris Minns has had some comments in recent days about tobacco excise, obviously, that revenue is falling away. What’s your view on whether a change is needed?
And secondly, on defense spending, the US suggestion of 3.5 per cent of GDP, that’s quite a lot of course, for you to fit in the Budget. From a budget perspective, what’s your view on that?
Chalmers:
Two important questions. First of all, I’m not proposing to cut taxes on cigarettes to make them cheaper for people. We’ve seen tax revenue for cigarettes come down for 2 reasons. One of them is a good reason. One of them is a bad reason. The good reason is fewer people smoking. The bad reason is we know that we’ve got a challenge when it comes to illegal tobacco, that’s why we’ve provided 2 substantial amounts of money in 2 consecutive budget updates to work with the states on compliance. And so I respectfully disagree with Chris, he’s a friend of mine, I work closely with Premier Minns. I don’t think the answer here is to make cigarettes cheaper for people. I think the answer here is to get better at compliance. And the feds have come to the table I have, and Mark Butler has, and the relevant ministers like Tony Burke and others have come to the table with hundreds of millions of dollars in new funding to try and combat the scourge of illegal tobacco.
On defense spending, we’re already making a very substantial increase in investment in our Budgets, and we’re proud to be doing that. We’ll see defense spending as a share of GDP rise substantially. I think about $10 or $11 billion in extra spending in tight budgets over the course of the forward estimates, I think $50 billion plus from memory over the course of the next 10 years. And so we’ve made room for substantial new and increased investment in defense spending. There will always be calls to do more. There will always be people who say we should spend more on defense. There’ll be a lot of people who say we should spend less on defense. We’re doing what we can to responsibly and substantially increase defense spending in our Budgets.
Journalist:
Almost since the day you came to office, you have been asked about major tax reform, about making big tax reform. When will big tax reform come? Where’s the big tax reform? At the same time, we’re entering almost the second year of a big campaign against your superannuation changes, which, as you’ve said, affect not every Australian household. Given the reaction to these superannuation changes that has been the community, do you think that makes the challenge of even larger tax reform that may even affect every Australian even more difficult and potentially impossible?
Chalmers:
That remains to be seen. It doesn’t augur well for bigger, broader tax reform, when such a modest and methodical change is being resisted in some quarters. We should resist the temptation to think that because overwhelmingly 2 media outlets don’t like this change, to assume that that concern is broadly and deeply felt in the Australian community, we’re talking about half a per cent of people with superannuation being impacted, people with more than $3 million balances.
What it means, and what I could have said if in the answer to Greg’s question as well, don’t forget, the concessions here are still very generous. We’re not eliminating tax concessions for people with big balances. We’re still providing very substantial tax breaks, just slightly less substantial.
If someone’s got $3 million in super by one set of assumptions, their superannuation tax concession before this change is a bit over $14,000, after this change a bit over $13,000, so still very generous tax concessions for people with big balances in super.
I think that there’s an issue here when it comes to tax reform. A lot of people say they’re in favor of tax reform in the abstract, but they very rarely, if ever, support it in the specific and I think there’s an element of that playing out here as well.
I also think and this coheres your question with Tom’s a moment ago as well, a lot of the same people say we need to dramatically increase defence spending, we need to dramatically cut the company rate, we need to abandon the changes to make superannuation tax concessions fairer, and we need to deliver bigger surpluses. Often it’s the same people saying that, if you can believe it. And so my job, and Katy’s job and the Cabinet, the government’s job, is to make it all add up. Sometimes that involves decisions which not everybody likes. Obviously I understand that not everybody likes this change, but we have to do what’s right and responsible, and I’m confident that this.
Journalist:
People are opposing not so much the getting more revenue through superannuation, but the actual model of unrealised capital gains.
Chalmers:
First of all, I’m not convinced that’s right, Greg. Respectfully, I’m not convinced that’s right. I think some of this opposition comes from people who would like the extremely generous tax concessions, not the slightly less extremely generous tax concessions, to be fair, and we’ve given people multiple opportunities to propose alternatives to this calculation.
It’s also important to remember that this calculation of unrealised gains exists elsewhere in the tax system, multiple places in the tax system. It’s not new that this is the way that we are proposing to calculate it. Treasury proposed it to us. We did multiple rounds of consultation.
People will say it’s about the calculation. Some people will say it’s about the indexation. But I think in a lot of instances, again, respectfully to you and to people making these comments, and I welcome people making a contribution to the national economic debate, but I think a lot of it is not really about the method of calculation.
Journalist:
Can you confirm that the tax on $3 million superannuation funds will only apply to the Prime Minister once he leaves office, that he won’t pay any extra tax on his superannuation until he leaves office under your legislative proposal.
Chalmers:
I’m so pleased you asked me this question, because people have been lying about this. We’ve had people, I think shamefully, say that the Prime Minister or other senior politicians at the federal level, on defined benefits, are somehow exempt from this change. They are not. We made that clear that they are included in the legislation we released in November 2023 and in the regulations we released, I think, in March of 2024 more than a year ago. It’s been abundantly clear in black and white that the Prime Minister is included here, and people should stop lying about it.
Now to the substance of your question, which I do understand, you’re making a more specific point about the calculation. We’ve been clear about how defined benefits would be treated since we announced the policy, just as the previous government did with their changes to super we apply commensurate treatment to defined benefit interests to ensure that there are equivalent tax outcomes and the same rules apply to everyone on defined benefit schemes without the constitutional exemption, including federal politicians.
Now when it comes to the deferred liability, which is the very specific kernel of your question, these deferred liabilities on defined benefits are consistent with the long standing approach taken in other areas of super, like the extra contributions tax for high income earners. Tax liabilities are deferred until the pension phase because members in those schemes can’t access their super to pay tax debts until that point. It’s a function of necessity that that’s how that calculation is made. But we charge an interest rate on those liabilities to make sure that people don’t receive an inappropriate advantage from the necessity of calculating and paying those liabilities on retirement.
So you have to be very careful with what some people, including, I think some of the lower echelons of our political opponents, some of the things that they’ve said, and unfortunately, some of those things which have been reported as fact, have to be very careful here. Defined benefits schemes like the Prime Minister’s are in. They’ve been in all along. The calculation reflects the same sorts of ways it’s been calculated in the past. And because the liability is paid on retirement, there’s an interest rate applied to it to make sure that there’s no inappropriate benefit.
I genuinely really appreciate the opportunity to clear all of that up, because too much has been written about that which has been wrong.
Journalist:
Just on the Australia‑US relationship. We spent the last 6 months talking about how tariffs, whether they’re on or off, causing havoc across all of the world’s economies, really, can we afford to keep kind of trying to meet the demands of the US now they’re calling for defence spending increases? Should Australia be looking elsewhere?
Chalmers:
The Prime Minister did a terrific job of explaining our approach to this. I think it was yesterday, or might have been the day before, in Perth, when he said that we’ll determine our defence priorities and we’ll fund the capability that we need in a world that is becoming more dangerous, and our funding for defence is determined by our government. We obviously take into consideration what’s happening in the world and the views of our allies and partners, but our decisions about defence funding are made in this cabinet room, and in the national security room next to it as well.
The world is a dangerous place. It’s dangerous in security terms. It’s dangerous in economic terms as well. One of the defining influences on this second term of this Albanese government will be what is shaped by global circumstances, certainly in the defence sphere, but in the economic sphere as well.
I was speaking to a very large American investor this morning about trying to attract more capital here, whose decisions may be influenced by the unpredictability and the volatility in the US. And so all of this churn and change in the global economy is obviously very concerning for us, but also an opportunity for us. We intend, as we have been doing throughout, we intend to try and be beneficiaries of all that change, rather than victims of it.
Journalist:
As you’ve acknowledged, the Trump effect is subduing growth. But what are the opportunities for Australia amongst Trump’s tariff war?
Chalmers:
A lot of global investors are rethinking their investment strategies, and without going into the details of private or commercial in confidence conversations, including a great conversation I had this morning, that I referenced before, there is a global scramble for capital because people are rethinking their investment strategies. You can see in the American bond prices, for example, that people are rethinking their approach to the American economy.
I think primarily for me, my focus, including today, is, how do we get that capital deepening that we want to see to make our economy more productive. Foreign investment from trusted sources has a really important role to play there. And the opportunity for Australia as a country with wonderful human capital, stable government, big opportunities in the energy transformation, big opportunities in technology and data, an economy that’s grown despite all the challenges thrown at it, we’ve got a very compelling story to tell the world, and there is a big global scramble for capital, and we will be a very competitive part of that.
Journalist:
Just on the National Accounts, investment in machinery and equipment has fallen 3.7 per cent over the last year, and you rightly point out that productivity remains flat. Most people agree that business investment is the thing that’s needed to be required to lift productivity. What is the government’s plan to lift business investment to get productivity growing?
Chalmers:
We’ve got quite a substantial reform agenda already underway, but we are prepared to contemplate next additional steps when it comes to attracting investment. I strengthened and streamlined the foreign investment review process. The feedback I got today and the discussion I had earlier is that that is working to speed up, strengthen, but also streamline and speed up the FIRB process. That’s part of it. Also the work that we’re doing on the Single Front Door to try to concierge investment in major economy changing projects in our country, recognising that the time it takes for approvals can be too long.
I think Andy Leigh gave a great contribution on this front, I think it was earlier this week, when he was talking about the abundance agenda, that thinking has been very influential in our circles. This idea that if we want good things to happen in our economy, we need to make it easier for those good things to happen, faster, more efficiently. So the Single Front Door is part of that effort as well. All the work I’m doing on competition policy, unilaterally and with the states, the Productivity Fund, all of this is about making Australia a more attractive destination for investment.
If you think about the major challenges we have in productivity, even though the level of business investment is the highest it’s been in 12 years. Growth rates, including today in the National Accounts, were not especially strong, and we’re not making the most of these deep available pools of domestic and national capital. And if we do a better job of making the most of that, we will make our economy more productive over time, not overnight, but over time. That is a huge, huge part of the work that I’ve been doing in the month or so since we’ve been re‑elected, but before that as well.
If people come to us with great ideas, whether it’s about attracting investment, capital deepening, making our economy more productive, then we’ve got a very open door and open mind to those suggestions.
Journalist:
Just running through the good things in the economy. Unemployment is down. Inflation is back in target. Interest rates coming down, GDP still positive. Things are actually pretty good on a fair analysis of what is going on. But usually when things, the only thing that’s out of kilter is that usually governments run surpluses when things are good, like this, you’ll probably be one of Labor’s longest serving Treasurer, do you think you’ll ever see a surplus again in your time? And is this as good as it gets for the Australian economy? Does it only sort of soften and get worse from here? Or what are you trying to sort of soften the ground for?
Chalmers:
First of all, while you’re away, Matthew, I knocked out a couple of surpluses, and that’s the first time that’s happened for almost 2 decades. So I like to see that acknowledged sometimes. That was a combination of savings and banking most of the upward revision to revenue. Those are choices that governments make, and if we’d adopted the approach of our predecessors, those surpluses wouldn’t have happened. So let’s not dismiss those 2 surpluses that Katy and the Cabinet and I worked very hard to deliver.
It’s self‑evident that the pressures on our Budget are intensifying rather than easing. I do acknowledge that, I think one of the things, partly as an aside, which you may have noticed, or you will notice in the course of the afternoon, poring through the National Accounts data, we’re actually making really good progress in areas like the NDIS. One of the reasons why public demand fell in the quarter is because of the progress we’re making on the NDIS, aged care as well, even with the developments that Mark and Sam announced this morning, we’re making progress there. We’re making progress on interest costs, but overall, the pressures on the Budget are intensifying rather than easing. Of course, we don’t ignore that.
Your question about is this as good as it gets? I am quite optimistic about the future of our economy. There are some temporary factors in this quarterly outcome. There are natural disasters in here, not just Alfred, but the flooding in Townsville and Cairns and the surrounding communities earlier in the year, the fall in public demand because some of the big state projects came off, there are some temporary factors in here as well. We shouldn’t overinterpret that March data.
But growth is softer than we would like it to be, and I’m confident that growth will accelerate in our economy. Even if you look at that OECD report, you would have pored over it, Matthew, what it said was there was a little downgrade for growth this year for Australia, but actually an upgrade in growth for 2026.
And so the rest of the world looks at Australia, it’s an experience familiar to me from the GFC, most of the rest of the world looks at Australia, and they see low unemployment, lower inflation, interest rates coming down, real wages and incomes growing, debt‑to‑GDP is much smaller here than in most other countries. We’ve knocked out those 2 surpluses. Most of the rest of the world sees what’s happening in Australia, and they think that there are some very good things happening in Australia. This is part of the story to link your question with John’s, that we tell the world. It’s a compelling story.
But I firmly believe that there are good reasons to be optimistic about our economy. If I believed that Australia had peaked, or this was the best that we could hope for, I wouldn’t be here.
Journalist:
Treasurer, just to follow up from Tom’s question – tobacco consumption fell 6.4 per cent for the quarter, almost 16 per cent over the year for households. Do you actually believe that? Because that’s not being reflected in what’s going on in what’s going on in the streets of Sydney and Melbourne and Queensland.
Do you think that there is a causation effect between the increases in tobacco excise and what’s going on? Are you going to end up like Eliot Ness – ‘oh, look, we can’t control it. We can police it and police it, but you can’t control it.’
Chalmers:
First of all, I did notice that obviously there’s substantial decline in tobacco in the national accounts. We have to resist the temptation to think it’s either 100 per cent people giving away the darts, or 100 per cent illegal activity.
I think, as I acknowledged in my response to Tom’s good question, it’s both of those things. One of those developments is very good. One of those developments is very challenging. We’re not ignoring it. We’re not dismissing it in the way that the end of your question implied.
We’ve invested hundreds of millions of dollars in compliance. Because we do acknowledge that this is a real challenge. More people are giving up the darts, but more people are also doing the wrong thing. I’m not convinced that cutting the excise on cigarettes would mean that that would be the end of illegal activity.
Journalist:
Would continually increasing excise just add to the financial incentive for people to go buy illegal ciggies?
Chalmers:
I know that that’s a view put forward, but I don’t share that view. I don’t propose to be cutting taxes on cigarettes. I don’t propose to be making cigarettes cheaper. It is a substantial public health challenge still in our economy. It’s also a law and order challenge, and we’re addressing both of those things simultaneously.
Journalist:
But freeze, Treasurer – might you freeze rather than cutting it? Freezing it because this, the 2 are related to legal activity and –
Chalmers:
It’s not something we’ve been considering.
Journalist:
Earlier you said the Coalition haven’t offered any alternative proposal to the super tax changes, but the Greens have proposed an alternative around indexing the threshold. Are you open to good faith negotiation with the Greens to change the model, to say they’ve achieved the same outcome, but addresses one of those concerns that’s been put forward? Or are you determined to push it through without any change?
Chalmers:
Our preference is to push it through without any changes. The timing of that is to be determined, and unless I missed an announcement, I’m not sure that there’s a shadow Treasury spokesperson yet in the Greens team. If there is, at some point between now and the parliament going back, obviously, we engage with the parliament in an effort to pass our legislation, but my preference, my intention, is to pass the changes that we have proposed.
I will obviously engage in a respectful way with the crossbench in the Senate, because, as the pm said yesterday or the day before, and as I repeated today, we don’t have the numbers on our own in the Senate, so there’s always an element of discussion to try and get our legislation passed.
Journalist:
You briefly mentioned the changes to aged care being delayed. A couple of questions on this issue. Presumably it means that Australians will not start paying more for their aged care for another 4 months than you were originally planning. So what impact does that have on revenue?
Also, the government voted multiple times against amendments put forward by the Coalition to have a 12‑month transition period for this legislation. There’s been warnings for months that this was not ready to go. There’s been complaints the whole way through. Is this not a failure on the government’s part to actually have communicated effectively the information that the sector needed to be able to implement the changes on July 1?
Chalmers:
I think Mark and Sam have been through most of the answers to your question earlier today in terms of the fiscal impact. We’ll update that in the usual way in the mid‑year budget update, but a delay like this is likely to cost in the order of $900 million over the forward estimates. I think we’ve done this in good faith, out of necessity, it wasn’t ready to go, and so we’ve got a responsible delay here.
We shouldn’t forget that, even with this modest delay, the changes that were worked up by Anika and Mark and are being implemented by Sam and Mark are really important changes to make our budget more sustainable. You think about those areas where there is substantial pressure on the Budget, areas like aged care, like the NDIS, like interest costs, we have made good progress. And so even with this delay that mark and Sam have announced today, these are really important reforms. They’re really important for the Budget. Most importantly of all, they will help ensure that we deliver the standard of care that older Australians need and deserve.
Journalist:
Very briefly, you acknowledge that you can’t pass legislation by yourself.
Chalmers:
I don’t think that’s new news, Tom.
Journalist.
No, no, of course. But in the context of $3 million super the Greens have said indexation, or a $2 million threshold – any interest on the threshold, you’ll probably have to compromise somewhere?
Chalmers:
Really the same answer as I gave before. My preference and my intention is to legislate the package that we proposed more than 2 years ago, the legislation and regulations we made available 18 months and a year ago. That’s my preference, that’s my intention.
I think pointing out that we don’t have the numbers on our own in the Senate is just a reflection of the reality. I’ll have a discussion with the crossbench, with the Greens at some point between now and when the parliament returns.
Journalist:
Treasurer, in the months before the election, Australians heard you say that the economy had turned a corner and better days were ahead. Just wondering if your comments just then that the pressures are increasing and not easing on the Budget. Are better days still ahead, but just a bit further off?
Chalmers:
It remains the case that the Australian economy is turning a corner as the global economy has taken a turn for the worse. It’s still the case. There are some temporary factors playing out in this March quarter – as I said, natural disasters, state public demand, the conclusion of big projects in some state budgets, for example. But overwhelmingly, our economic story in Australia is a story of relative economic strength. I’ve had the opportunity to speak with a number of my colleagues over the course of – international colleagues and counterparts over the course of the last 2 months or so, and they all look at the kind of data that we’re getting as a good thing.
I think I’m having a discussion with my new Canadian counterpart tomorrow morning at 7am – so the Australian story is a compelling one. The economic story is a story of economic strength, as I said before, that combination of lower inflation, very low unemployment, higher wages and incomes, interest rates coming down, debts come down. We haven’t had a negative quarter of growth.
In the context of what we’re seeing around the world, those are very decent outcomes – better than that, and I still am very firmly optimistic about the future of our economy. Despite all of these very substantial global economic headwinds, we have a lot of advantages that a lot of other countries don’t have.
Journalist:
It seems Australia [inaudible] the letter to US and other countries asking for their best offer on a trade deal. Just quickly, what would your elevator pitch be to the US president about why we need a better deal?
Chalmers:
I’m unlikely to see him in an elevator. But the point that we have made repeatedly is that ours is a relationship of mutual economic benefit. We are different to a lot of these other countries that the Americans are negotiating with in that, apart from some unusual quarterly outcomes, overwhelmingly they’ve run a big trade surplus with us, and so we’re different. It’s a relationship of mutual economic benefit, and we see these tariffs and trade tensions as self‑defeating.
I really encourage you to read that OECD piece of work that came out yesterday afternoon – it really lays out, I think, in quite confronting ways, the costs and consequences of these escalating trade tensions, and even in a world where some of these tariffs get unwound, when you speak to global investors like I do as part of my job, it’s the unpredictability as well that is buffeting people’s investment intentions and the global economy more broadly, and so I would say to the Americans publicly what we say to them privately: it’s a relationship of mutual economic benefit. We are different to a lot of the other countries that they are negotiating with, and we overwhelmingly, to be blunt about it, see these tariffs as a very bad development for the American economy, for the global economy, for the regional economy, and we won’t be immune from that.
Journalist:
Just following on from both of those 2 last questions, amid all this global uncertainty, you say that Australia has still turned the corner, and you’re optimistic about things ahead, but if you could put that into context for the everyday Australian, are living standards going to get better, worse or the status quo for the rest of this year?
Chalmers:
Living standards are getting better. One of the stunning, positive components of these national accounts is that we’ve got the most appropriate measure of living standards growing at 1.7 per cent – they were falling 1.7 per cent when we came to office. We finished last year, the second half of last year, where living standards in Australia were growing faster than the OECD average, growing I think around twice the G7 average the measure of living standards. And if you look at the Treasury forecasts in the Budget, they expect growth in living standards to accelerate. That’s because of the progress that we’ve made as Australians together.
The measure of living standards reflects inflation coming down very substantially. It reflects interest rates coming down. It reflects the tax cuts. It reflects the progress we’ve made on wages, and what a sensational outcome yesterday was for a fifth of the workforce relying on awards in our economy.
This is not accidental. This is deliberate. This is our economic plan, lifting living standards in our economy, and we expect that to continue. We acknowledge that people are doing it tough still; that they’re still under pressure. We acknowledge the big hole that people were in when we came to office, and we’ve worked our tails off to try and turn that around and we’re seeing in these national accounts data that that is being turned around. Now we acknowledge, as I have probably 30 or 40 or 50 times in your presence, that sometimes or often, how people feel and fare in the economy doesn’t match the aggregate national numbers that we see in the national accounts, but you’d rather them heading up than heading down? They’re heading up now under us. They were heading down under our predecessors, and the fact that they’re heading up now is deliberate, not accidental. It’s gradual, but it’s important.
Journalist:
Treasurer, are you concerned that the Prime Minister might be about to poach Steven Kennedy to lead Prime Minister and Cabinet?
Chalmers:
A little! But I don’t know.
I pay tribute to Glyn Davis in the first instance. Glyn Davis and I go way, way back. I was a researcher for Glyn in the Premier’s department in the late 1990s and I’ve just got a mountain of respect for Glyn Davis. I’m personally sorry to see him go. He is a person of towering intellect. He is a massive brain who made a huge contribution in this gig that he’s leaving shortly, but also over a lifetime of service, and so I pay tribute to Glyn in the first instance.
I see the speculation about candidates for that role that Glyn is vacating. No doubt the Prime Minister is considering a handful of wonderful people. I’m very fortunate that I get to work with Steven Kennedy, and the decisions about the secretaries are decisions for the prime minister in consultation with us, and no doubt, before long, he’ll make his views clear.
Journalist:
Treasurer, just back on back on defence spending, the sorts of increases that our comparable countries are looking at would be for us in the order of $40 billion a year. Joel Fitzgibbon was out publicly a month ago saying he worried that there wasn’t an appetite in Australia to do what needs to be done on defence to get ready for what’s coming in the not too far future.
Do you think – is that sort of money, $40 billion a year, like is that even feasible in the economic environment that we have at the moment?
Chalmers:
Well, it’s a substantial amount of investment. I think one of the unfortunate things about this – I respect Joel’s view, obviously, and Kim Beazley and others – I know that there will be a constituency always for more defence spending. There will also be a substantial constituency for less defense spending. We get pressure. We get pushed and pulled in both directions when it comes to defense spending and our job, our responsibility, which we embrace, is to try and make the right decisions for the right reasons, and recognising the global environment is tricky.
The global environment in security terms and economic terms is dangerous, and that’s why we are substantially increasing investment in our defence capability. We’ve sat in here for hours and hours and hours on end, finding room in budgets to make very substantial increases to defence spending, and that’s because we share the view overall that defence spending needs to rise, and that’s why it’s rising in the 4 Budgets that we’ve handed down.
Is that everyone? Thanks very much, guys, thank you.