Jim Chalmers:
These are very welcome inflation numbers. They are a powerful demonstration of the progress that Australians have made together in the fight against inflation.
These numbers represent remarkable, outstanding progress when you consider that when we came to office headline inflation was 3 times higher than what it is in these numbers today.
What we’ve seen today is quarterly inflation, monthly inflation, headline and trimmed mean, goods and services inflation all come down. This is the lowest inflation in almost 4 years. These are very pleasing, very welcome, absolutely outstanding inflation numbers when you consider how far Australians have come together in this defining fight against inflation.
When we came to office inflation was much higher, and it was absolutely galloping. In the course of the last 3 years we’ve been able to get headline inflation at the very bottom of the Reserve Bank’s target range. We’ve also got trimmed mean inflation in the Reserve Bank’s target range as well. Monthly inflation has come in below the Reserve Bank’s 2 to 3 per cent target range as well, at 1.9 per cent.
We are really encouraged by these numbers. These are outstanding numbers in the context of the recent history of inflation in this country – much higher and rising when we came to office; much lower and falling now.
All the more remarkable when you remember that while inflation across all of these measures is falling in Australia, inflation is going up in the US, the UK, Canada and New Zealand.
We’ve seen in their most recent data that inflation is going up in those comparable countries; in Australia inflation is going down. And all the more remarkable, still, when you consider that we’ve made this stunning progress in the fight against inflation at the same time was we’ve kept unemployment low, we’ve got real wages growing again, we’ve already seen 2 interest rate cuts this year because the Reserve Bank has had the confidence to cut rates – because inflation has come down so substantially.
Inflation has come down in a substantial way, and now in a sustained way at the very bottom of the Reserve Bank’s target range. That’s a very, very good development and that’s why we’re very pleased with the numbers we just saw come from the ABS a short time ago.
Journalist:
Treasurer, how much do you attribute this turnaround in inflation to what the RBA does, and how much do you attribute toward your government rebates and so forth have done? And can I ask: do you back your government to get as much of an improvement in productivity as we’ve seen in inflation?
Chalmers:
First of all, whether it’s the Reserve Bank or the government, we’ve got different responsibilities, but we have the same objective. And we’ve been able to make this stunning progress on inflation together as a consequence of those shared objectives. Our cost‑of‑living help has played an important role in taking some of the sting out of prices – whether it’s early childhood, whether it’s rent assistance, whether it’s the energy rebates – but we provided that in the most responsible way that we can in the context of a budget which is more than $200 billion stronger than the budget that we inherited 3 years ago. The cost‑of‑living help has been important and we’re rolling out more this month. Responsible economic management has been a defining feature of this government. And that’s meant that we have played a helpful role in the fight against inflation. And you see that progress in these numbers today.
The Reserve Bank has taken its decisions independently. It’s cut rates already twice this year. We know that higher interest rates over the course of the last few years ever since they started going up under the previous government, we know that’s put pressure on people. We know that the rate relief that’s been delivered this year already has been welcome, and we know that by working with the Reserve Bank with responsible budgeting and cost‑of‑living help, we’ve been able to make this progress today.
When it comes to productivity, I’ve said on a number of occasions that if there was some switch that you could flick to make our economy all of a sudden much more productive, somebody would have flicked it already. When it comes to productivity, as the Productivity Commission Chair has said, we need to come at this from a range of fronts. Progress will be made over time. It’s a challenge in our economy that has developed over the last couple of decades, not just the last couple of years, and so it will take time to make meaningful progress there as well.
We’ve got a big agenda on productivity – skills, technology, the energy transformation and competition policy. But the Economic Reform Roundtable is all about trying to build consensus on the next steps. We’ve had these cost‑of‑living pressures. We’ve got this inflation in our economy. But we’ve also got persistent structural issues in our economy as well and increasingly they will be our focus.
Journalist:
Treasurer, the monthly headline inflation went down underneath the RBA’s target. Inflation in Sydney and Melbourne – the 2 biggest consumer markets – is at or below 2.0. Unemployment has ticked up, 2 decimal places it’s gone up the last 4 months. Are you getting a little concerned that the economy is too soft?
Chalmers:
First of all, inflation is down across the board. And that’s why we’re so pleased with these numbers today. And we’ve been able to make this stunning progress on inflation at the same time as we still have unemployment in the low 4s. No major advanced economy has achieved what Australia has – inflation below 2s, unemployment below 4s, 3 years of continuous economic growth.
Of course, as we’ve expected, the has been some softening in the labour market. I think that’s an inevitable consequence of a period of higher interest rates combined with global economic uncertainty and some of the other issues playing out in our economy. I don’t want to engage in anything which sounds like or could be confused with second‑guessing the decisions taken independently by the Reserve Bank. I think it’s been clear for some time in the growth figures and in the softening around the edges of the labour market that growth in our economy is subdued. When the Reserve Bank meets and when the government sits down with other participants in the Economic Reform Roundtable, we will factor in the fact that growth has been subdued; it has been soft. The unemployment rate has ticked up a little but is still on average the lowest it’s been for any government in the last 50 years. These are the sorts of things that will play out as we increasingly focus on the bigger, long‑term structural issues in our economy as well.
Journalist:
Treasurer, on a productivity‑related issue, the Secretary of the Health Department Blair Comley has made some fairly strong comments about the imbalance in working from home – he’s only got 22 per cent of his staff turning up to the office and he has concerns about short‑term productivity but more serious concerns about the longer term ability of his department to function unless there’s a rebalance. Did Steven Kennedy ever raise similar concerns with you in Treasury, or do you have sympathy at least for the points put forward by Blair Comley?
Chalmers:
Those issues have been raised with me. Obviously I saw your report yesterday about Blair Comley’s comments. I think done right, work from home can be an important way that we get the flexibility that we need in our labour market to attract people to make a contribution in an economy which is more productive. I know there’s a range of views about that and we’re not the sort of government which tries to clamp down on people who have different views about those sorts of things. But my view is that work from home is a force for good in our economy. We see in our own communities, in our own local economies people able to work in more flexible ways to make a contribution to the economy, the sorts of people that will help us make our economy more productive. So I’m a supporter of work from home.
We’ll go to Ron, because he was here first, and then we’ll go to Tom, who was in the line at Aussies.
Journalist:
Treasurer, there’s been an abundance of talk about slashing red tape and regulation. You’ve obviously gone to regulators and said ‘give us some ideas’.
Joe Longo last month, though, said it’s not quite that simple and he suggested that you act or establish an outstanding taskforce with business, with policy makers, with regulators to tackle ideas, you know, iteratively a couple of big things at a time. Is that something you’re open to?
Chalmers:
First of all, nobody is pretending it’s simple. These are complex interactions in our regulatory architecture. And I want to thank Joe for the way that he’s come at this task – in fact, all of the regulators that I deal with in my portfolio and to my understanding a number of regulators in other portfolios are really grabbing this opportunity to work out how can we make sure that our regulatory environment achieves our ends, and at the same time as isn’t a handbrake on growth and productivity in our economy. Joe’s been terrific, as have the other regulators as well.
I would anticipate that this is something that requires ongoing work. Nobody should expect that on the Thursday night of the Economic Reform Roundtable we have every challenge in our economy fixed. But there’s an extraordinary amount of enthusiasm amongst the regulators, amongst the business community and the community more broadly to work out how we can have better regulation, smarter regulation in a way that delivers on the standards that we want to see without hampering growth and productivity.
Journalist:
[Indistinct] here, though?
Chalmers:
On a standing working brief?
Journalist:
Yeah.
Chalmers:
I don’t want to pre‑empt the discussions we have at the Economic Reform Roundtable on that. Clearly we’ll need some kind of ongoing work, and this is a government which is very consultative. We work through issues in a considered and methodical way. That’s how we roll. I can imagine there’ll be some ongoing work, but I’m not prepared to nominate now how we set that up. I take Joe’s views very seriously. As I said, you know, he’s come at this with real enthusiasm, and so no doubt I’ll have a conversation with him at some stage.
Journalist:
Treasurer, on the roundtable, we’ve heard a little bit from both business and unions this week about some of their priorities. You talk about consensus. It’s clear that business groups are a little wary after the Jobs and Skills Summit about whether there can be consensus. They’re obviously a fair way apart on AI. Where do you see opportunities for consensus between those 2 groups in particular in this instance?
Chalmers:
First of all, nobody pretends that there is a unanimous view about every element of our economy or how we confront these economic challenges together. The easiest way not to build consensus is not to try to. But what we’re trying to do here is we’re bringing people together. We recognise that there are different views and different ideas. That’s a good thing in a country like ours. We should be able to grapple with our differences and tease out our differences and try and work out if common ground exists and, if so, where and how we can move forward together.
I welcome the contributions made on all sides – from unions, from business, from the community more broadly. At last count I think I had about 800 submissions as part of this effort. I see that as a really good thing. Now, I’m not naïve enough to pretend that we say that we’ll bring people together in the cabinet room and all of a sudden everyone will have a unanimous view about everything. That would be pointless. Let’s see what we can do by bringing people together, working out where the differences are, working out where the common ground is and trying to build consensus.
Our economic challenges are considerable. We’ve made really good progress on this cyclical challenge – inflation. The numbers today bear that out. But we’ve got some persistent structural issues in our economy as well. They haven’t just shown up in the last couple of years; they’ve been persistent in lots of ways for the last couple of decades. We believe that the best way to make progress on these big, persistent structural issues in our economy is together, if we can. And if people have got disagreements and those disagreements endure, so be it. I think there’ll be enough areas where we can find some common ground and move forward together.
Journalist:
Treasurer –
Chalmers:
I might just take 2 more questions – yourself and then Pat – and then we’d better get going. I think there’s going to be a vote soon.
Journalist:
Treasurer, just on some comments that were made at Allegra Spender’s roundtable on Friday. Both herself and Ken Henry have said that the current reliance on personal income tax was unfairly affecting young people. They’re paying more taxes but they’re also paying HECS debt. Is that a personal opinion that you share? Is this an area where you would like to see more reform following the roundtable?
Chalmers:
A couple of things about that. First of all, I really welcome the constructive way that Allegra Spender and other members of the crossbench have come at this. I think the opposition, frankly, could learn from the constructive way that Allegra and others have come at it. I welcome that. Again, there will be all kinds of ideas expressed. Some of those views the government will share; some won’t. It’s a good thing. Same as in response to Tom’s question a moment ago, it’s a good thing that people have got avenues and opportunities to express those views. Both Allegra and Ken will be core participants at the Economic Reform Roundtable, and we expect them to express those kinds of views.
I think that there is an intergenerational issue in our economy. And I think about it primarily through the prism of the kind of intergenerational disadvantage that I see in communities like the one that I represent. In many ways my reason for being is to make sure that we grow the economy in a way that more people can share in the benefits. So I take those intergenerational challenges seriously.
A couple of those areas that you mentioned are really central to our economic plan. You know, the intergenerational challenge is why we’re investing so much time and money in building more homes. It’s why we’re passing legislation to give students and graduates student debt relief. It’s motivated so many of the things that we’ve already done.
But I think the intergenerational challenge will be a central consideration of the Economic Reform Roundtable. I personally see that as a good thing. And whether I agree with the specific proposals put forward by Allegra or Ken or others, I think it is one of the most important prisms through which we can see the structural challenges in our economy.
Last one from Pat and we’re done.
Journalist:
The economy started pretty weakly at the start of the year. Now we’ve had inflation, it’s down to 2.1, 1.9 on the monthly measure. How worried are you that this is a sign that the economy is proving weaker than anticipated? Are you worried that, looking ahead, we also might have a weaker than anticipated economy?
Chalmers:
The economy is softer than we would like. Growth was subdued in those last quarterly numbers – really quite weak, as you rightly identify in your question. We have had some softening around the edges of the labour market even though the unemployment rate has averaged lower than any other government in the last 50 years. So clearly, our economy is not growing as quickly as we would like. That’s a combination of things. I think a period of higher interest rates is playing a role there, global uncertainty is playing a role there, these cost‑of‑living pressures which have been a feature of the economy for the last 3 or 4 years, all of that is playing a role.
We are attending to those cyclical issues – weaker growth, getting on top of inflation – but we’re also increasingly focused on the bigger structural issues – productivity, growth in our economy, the intergenerational challenge will increasingly be our focus. We need to get the economy growing quicker in a more sustainable way. And we’ve got a big agenda that we’re rolling out but we’re interested in working out next steps, building consensus around that.
I’ve got to go and vote now. Thanks very much.