Jim Chalmers:
Today as you know the Reserve Bank left interest rates on hold.
This is not the outcome that millions of Australians were hoping for or the outcome that economists or the market was expecting.
I don’t second‑guess decisions taken independently by the Reserve Bank. It’s a good thing that the Governor has the opportunity later on today to run the country through the Board’s thinking in coming to that decision.
I don’t second‑guess decisions taken independently by the Bank or its board. I don’t make predictions or preempt future movements in interest rates. I’m focused on my job. The Governor has an opportunity to talk through some of the considerations that they weighed up around the Reserve Bank boardroom table over the course of the last couple of days.
The Reserve Bank statement makes it clear that we’ve made substantial and sustained progress in the fight against inflation. That’s why interest rates have already been cut twice in the last 5 months this year. Those 2 interest rate cuts already in the system over the last 5 months are already providing relief to millions of Australians with a mortgage.
We’ve seen that when central banks cut interest rates around the world, they don’t necessarily cut at every single meeting. But it is clear now the direction of travel on inflation and on interest rates has been established. And as the Governor makes clear in the statement, the Board has decided to wait for more information in order to inform future decisions about interest rates.
It’s worth remembering that the latest monthly inflation figures show that both headline and underlying inflation were in the bottom half of the Reserve Bank’s target band for the first time since August 2021. Underlying inflation, in a monthly sense, has been in the Reserve Bank’s target band for 6 consecutive months now, and it’s at its lowest level since November 2021. On the official quarterly figures, both headline and underlying inflation have already returned to the Reserve Bank’s target band for the first time since 2021.
So, we have made a lot of progress together on inflation, and the Reserve Bank statement recognises that more broadly, under the life of this government, we’ve got inflation down, we’ve got real wages growing, unemployment is low, our economy has continued to tick over, interest rates have come down twice in 5 months.
But we know the job’s not finished because people are still under pressure and the global environment is so uncertain. And some of that global uncertainty is also recognised in the Reserve Bank’s statement today.
It should be a source of considerable pride for Australians that, unlike a lot of countries, we’ve been able to make this progress on inflation without our economy going backwards and without sacrificing the gains that we’ve made in our labour market. We’ve been able to see the lowest average unemployment over the last 3 years of any government in the last 50 years or so. We should be proud of that progress on inflation because we haven’t had to pay for it with a big spike in unemployment or multiple backward quarters of growth.
I wanted to say that I welcome the transparency of publishing the unattributed votes for the first time. This is quite a substantial change in the way that the Reserve Bank reports its decisions. I welcome the transparency that comes from the publication of those votes, and I welcome the transparency that comes from the Governor making herself available after each meeting of the board as well to talk through the reasons for the decision. Obviously, it will be a source of some interest that the Reserve Bank board was not unanimous on this occasion, that there were different views expressed around the boardroom table. We know that because of the publication of these unattributed votes, I think that transparency is a welcome change. I’m grateful to the Reserve Bank, and particularly to the Governor of the Reserve Bank, for the role that she has played in making sure that those decisions are more transparent.
In that light, I wanted to indicate that today the board agreed to the Statement on the Conduct of Monetary Policy, which is the agreement between the Treasurer of the day and the board of the day about how these decisions are taken and communicated. That has now been finalised. And I’ve also provided a statement of expectations to the Governance Board in recent times. I’ll publish both of those statements in the coming days. I’ll just formalise and finalise them, but I look forward to providing them to you and making them public over the course of the coming days. And with that, I’m happy to take some questions.
Journalist:
Treasurer, you mentioned at the top there that you don’t second guess the decisions taken by the Reserve Bank, but because of those transparency measures, we know 3 members of that board did second‑guess it. In fact, they voted for rates to cut and not to be kept on hold. So, shouldn’t Australians know who is arguing for them to have lower mortgages and where the Governor sits on that?
Chalmers:
I think this is an appropriate level of transparency. It’s certainly much more transparency than we’ve seen in all of the years that Shane has been writing about the Reserve Bank and others here. This is much more transparency, and so I think a very big step in the right direction.
We want to make sure that people can participate in these Reserve Bank meetings openly, that the public knows whether the decision was taken unanimously or otherwise. And I think this strikes the right balance. And the last thing I’d say in response to your question is it’s a good thing to have people around the table that will tease out and contest the views, whether it’s of the Reserve Bank staff or the Governor or others. We want these to be decisions which are taken after a lot of deliberation and debate. I think the fact that the Reserve Bank board was split on this occasion, that there wasn’t a unanimous view, is a signal that these decisions are deliberated and debated on properly and that’s a good thing.
Journalist:
Treasurer, you said millions of Australians would be disappointed by this decision. You’ve made the point that most economists were not expecting this outcome. You spoke quite extensively about the efforts that have been made to contain inflation. So, can you just be frank with us? Is it your personal opinion that the board got this call right?
Chalmers:
I don’t express those sorts of opinions when it comes to a decision taken independently by the Reserve Bank. And there’s a good reason for that. The reason is I’ve got my own job to focus on. The Reserve Bank, its board and its Governor has its own job to focus on. Now, we have the same objective here, which is to get inflation down. We’ve made good progress together, but we’ve got different responsibilities.
I decided some time ago that the best way for the Reserve Bank to discharge its responsibilities is without political commentary or anything that might be construed as political interference. I’ve been up front in saying that I acknowledge that there will be millions of Australians around the country who are desperately hoping for more rate relief today, in addition to the 2 rate cuts that we’ve already seen over the last 5 months. I’ve been up front in saying that this decision will come as a surprise to the market, has come as a surprise to the market and to almost every economist who’s expressed a view in recent days and weeks. Those are facts. It’s not for me to second guess the decisions that the Reserve Bank takes appropriately and independently.
Journalist:
Treasurer, are you disappointed that the GST has been taken off the table in the tax reform debate? Isn’t that the real deal reform that this government said it’s up for?
Chalmers:
I think we need to be careful not to judge the reform process on the basis of one policy or another and whether it’s that one that you mentioned, Tom, occasionally other tax changes which people float in good faith, I encourage people to come to this roundtable, as I have and as I will, with an open door and an open mind.
I think the views, the government’s views about the GST, are well known. I’ve expressed them publicly myself, and the Prime Minister has in recent days as well. We don’t want to artificially limit the suggestions and the ideas that people put to us. We’ve got views about all of these issues, as you’d expect of a government. The Prime Minister has expressed that view in the last couple of days, and I’ve expressed that view multiple times over recent years as well.
When it comes to the reform process and the roundtable in the last couple of weeks, I’ve met with the leadership of the Business Council, I’ve met with the leadership of the ACTU, Katy Gallagher and I have written to 37 regulators to see what we can do in our efforts towards better regulation and cutting compliance costs. And so the wheels are turning in advance of this Economic Reform Roundtable. I’m looking forward to gathering people next door. People will come with a whole range of ideas, and I don’t intend to sort of artificially limit them, nor are we walking away from the views that we’ve expressed on some of the issues, including the one that you raised today.
Journalist:
How much is the uncertainty around Donald Trump’s tariffs clouding the outlook? And if I can, just one on the broader economy, the Fair Work Commission decision yesterday on the BHP labour hire laws. BHP claim that’s going to cost them a million dollars a year, could be upwards of a billion if it expands across its whole operations. How much of a hit is that to a vital sector, to the economy?
Chalmers:
First of all, we believe in a fair day’s pay for a fair day’s work and that’s really one of the defining motivations of our government, making sure that people can earn more and keep more of what they earn. It’s what’s behind our wages policies, our industrial relations policies, our efforts on 3 rounds of tax cuts are all about making sure that people can earn more. And our policies are bearing fruit. They are delivering significant wage rises for workers across the economy.
Now, this loophole legislation, the Same Job, Same Pay changes, they’re about making sure that labour hire workers aren’t paid less than people who are doing the same job on the site. And so we welcome the decision by the Fair Work Commission. It will pay for decent pay for thousands of workers, I think in this case, across Central Queensland.
I know that BHP has a view about that, we’ve engaged with them privately and publicly about this. I respect the view. BHP is a huge employer in our economy, a crucial part of our economy, including in regional Queensland and right around Australia. So, we take their views very seriously but our job is to weigh up all of the considerations. We want to make sure that people are paid fairly and I think this decision is really about giving life to that objective.
Journalist:
How much is the tariff uncertainty clouding the outlook?
Chalmers:
You can see in the Reserve Bank statement that global uncertainty is really one of the defining influences on our economy at the moment and I think it will be the main thing that shapes our choices as a government in this second term.
The international environment is very unpredictable, very volatile and the Reserve Bank board has put that view in the statement pretty clearly. So for us, our job is to make our economy more resilient in the face of that uncertainty, make our economy more productive, that being a long‑term challenge in our economy, and also try and make our budget more sustainable. And these are really the 3 goals behind the reform process that we kicked off at the start of this second term. Because that global environment is going to constrain us, it’s going to shape our choices, it’s going to be such an important influence, and it’s an important influence on monetary policy as well, and you can see that in the words released by the Reserve Bank.
Journalist:
Treasurer, just picking up on the tariffs issue, President Trump has written to a number of economies, not Australia at this stage with fresh rates of tariffs being negotiated, targeting in particular, countries like Japan and South Korea. Can I get a sense of how that could impact Australia? And we’ve also had a Productivity Commission report suggesting that there’s another 300‑odd nuisance tariffs that Australia itself could get rid of. Is that something you’ll look at?
Chalmers:
A couple of things about that in your question. First of all, there’s no change to the US approach to Australia. We’re still subject to the lowest baseline rate, which is the 10 per cent. We’ve made it very clear that we think these tariffs are bad for the US, bad for Australia and bad for the global economy. And whether it’s our key trading partners, Korea, Japan and elsewhere, one of the things that we are most concerned about, in addition to the impact on our own workers and industries and employers, is the impact on global demand more broadly. And so that’s why we’ve been, at every opportunity, making the case that these tariffs are unjustified, they should be removed in line with our Free Trade Agreement, and that these tariffs, these reciprocal tariffs, should be zero. We’ve made our view very clear.
Now, where that links to the work released by the Productivity Commission in the last day or so is whether it’s the Productivity Commission’s work or the Treasury’s modelling, we are better placed and better prepared than most countries to deal with the uncertainty that comes from these tariff decisions, partly because we have the lowest rate, but also because we’ve got a lot of advantages in a world where people are looking for new places to invest or they’re looking for more reliable, more robust supply chains. And so I think the PC Report really goes to that, that these tariffs are a bad development for the global economy and for Australia, but there’s opportunity in that for us as well.
And when it comes to the nuisance tariffs, I was really pleased to see the PC acknowledge that we have undertaken the biggest unilateral tariff reform in 2 decades. We abolished almost 500 nuisance tariffs to get compliance costs down for business and to make sure the system works more efficiently and more effectively.
Of course, the PC is going to argue that we go further and faster, and I think people know how I come at these sorts of questions. I’m very enthusiastic about knocking off these nuisance tariffs where we can do that, and that’s why I’ve already knocked off almost 500 of them. Pleased to see it recognised, pleased to see them urging us to go further and faster. There are a whole range of considerations tied up in that. That work is ongoing but a good contribution to the debate.
Journalist:
So, just on the unattributed votes, firstly, can you just confirm that they’re not attributed to you privately, but also specifically your Treasury Secretary, one of those voters, do you ever have discussions with the Secretary about her vote, and are you aware of how she voted?
Chalmers:
First of all, no. I don’t know who voted in which way. Secondly, I don’t discuss the Treasury Secretary’s vote. And thirdly, I’m not aware of how Secretary Wilkinson voted on this occasion.
Journalist:
You expect her to vote with your view, wouldn’t you – if she’s your Treasury Secretary, you’d expect her to vote broadly in line with –
Chalmers:
That’s not how it works, Greg, no.
Journalist:
On tariffs, you said that effectively Australia’s policy is to keep our head below the parapet, not to raise tariff levels –
Chalmers:
Those are your words, Charles, but yes.
Journalist:
Is there a policy change that can be made or some different approach Australia can take that doesn’t leave mums and dads white knuckling at the whims of the President?
Chalmers:
I think the approach that we’ve taken is broadly the right one. It’s certainly been endorsed in lots of ways by the Productivity Commission and others. And in the discussions that I have with my international counterparts and colleagues, certainly they recognise that the approach we’ve taken has been a sensible one, which is to respond by engaging more with our trading partners, to respond by making our economy more resilient, to look for more diverse, more reliable markets for our wonderful exports.
That’s our strategy, and I think that’s broadly recognised as the right one. I think from an Australian point of view, the last thing we should be doing is engaging in tit‑for‑tat tariffs. And I think the response that the Prime Minister made in the teeth of an election campaign, which was considered and sober and methodical and responsible, has proven to be the right one for us.
Journalist:
The PM’s obviously going to be heading to China pretty soon. We’ve had the Chinese ambassador want to upgrade the Free Trade Agreement to include things like AI for healthcare and green tech, and digital economy stuff. Is this something that the government is open to? That perhaps the antidote to Donald Trump’s tariffs is freer trade with our trading partners, China, Korea and Japan. And one of the perennial Chinese complaints is always around our foreign investment regulations. Is there any room at all for you to move on that and to relax those sort of restrictions?
Chalmers:
First of all, I don’t want to preempt the discussions that the Prime Minister will be having with President Xi in China and discussions that will take place with other decision makers in the Chinese system.
I think even absent the developments out of the US, this government has been really successful at stabilising the relationship with China in a way that’s really good for our economy and for our workers and employers and industries. So people should expect us to continue that approach.
Good, stable, reliable trading relationship with China is key to making sure that our economy continues to grow the right way. We want good, reliable, diverse trading relationships right around the world. We’ve got wonderful exports, we’ve got huge opportunities. We’re quite optimistic about the future when it comes to Australia’s place in the global economy.
Foreign investment is for us, like it is for a lot of countries, including China, a really important way that we manage investment in our country, and foreign investment has an important role to play in Australia. It has for a very long time, and it will for a very long time. My foreign investment reforms have been all about strengthening the system and streamlining it, streamlining it for low‑risk cases, strengthening it for higher‑risk cases. That is a genuinely non‑discriminatory approach that we take. It’s not country‑specific. It takes a closer look at investments which are proposed in critical areas, critical minerals, critical infrastructure, critical data, critical energy, for good reason, but that’s not specific to any one country or another.
It would be unlikely that we would weaken our arrangements in those critical areas. But we are always looking for ways to speed up and streamline the process; whether that’s in our national economic interest. We’ve put in place a lot of reform in this area, which is already bearing fruit. We’ve actually quite substantially quickened the pace of approvals without trading away the stringent approach that we take in riskier areas. And people can expect that work to continue.
Journalist:
Treasurer, the bank statement today talks about looking for more information, particularly about inflation. We do now have monthly inflation figures, we have had for about 3 years. The whole idea is to move away from quarterly to monthly because that was one of the issues identified in the RBA review. Are you concerned that the bank is continuing to focus on the quarterly when it does have a monthly inflation rate?
Chalmers:
I think there are good reasons to take the quarterly numbers more seriously for the time being than the monthly numbers. The monthly numbers, as you know, don’t compare the same basket from month to month. They’re a bit more volatile, a bit less predictable. But they have painted a pretty compelling picture, particularly those last monthly figures where inflation surprised on the downside in a good way. So they’re part of the picture, they’re not the whole picture. I think there are good reasons why people rely more heavily on the quarterly numbers than the monthly numbers.
But as you imply in your question, Shane, one of the really good developments that we have funded, which will be rolling out before long, is we’re going to make the monthly figures of a sufficiently high standard as the quarterly figures. And here I tip my lid to Andrew Leigh, to David Gruen and others who’ve been working on this. Before long, we will have very robust, very reliable monthly inflation figures as robust and reliable as the quarterly figures, and that will help not just the Reserve Bank make its decisions, but more broadly inform our economic considerations as well. That’ll be a very good development.
As I understand it from the top of my head, they’ve been doing a bunch of trialling, there’s been a heap of work, as you’d expect. People like David and Andrew are very passionate about these sorts of things. And before long, we’ll get a monthly read which will be as reliable as the quarterly read.
Journalist:
Are you surprised they didn’t come down today, Treasurer?
Chalmers:
I think I’ve made it clear already, Cam, that I acknowledge it’s not the outcome that a lot of people wanted. It’s certainly not the outcome that the market was expecting or economists were expecting. But there are good reasons why I don’t make predictions in advance. There are good reasons why I don’t second guess decisions after they’ve been taken. And there are good reasons why the Reserve Bank Governor gets the opportunity to talk through all the considerations of the Reserve Bank Board. And she’ll be doing that in 6 minutes, so you’d better get back to your offices.
Thanks very much.