JIM CHALMERS:
Well, today’s National Accounts showed what we already knew, and that’s that the economy was really flat in the first 3 months of the year. The primary cause of this very weak growth in our economy was higher interest rates. But in combination with moderating but persistent inflation and global economic uncertainty as well. These numbers show that we got the budget exactly right. This is a justification for the government’s approach to fighting inflation without smashing the economy, given growth was already soft and people were already under pressure. Treasury expected our economy to be weak at the start of this year, and so it’s not surprising to see that the economy barely grew in the quarter. As you know by now, economic growth was 0.1 per cent in the March quarter, to be 1.1 per cent higher through the year, according to data from the ABS. This was a little bit below the median market expectation, not a lot lower, but a bit lower. And any growth is welcome in these domestic and global circumstances that we confront.
Many economies around the world are feeling the impact of higher interest rates and high, but moderating inflation. Over the past year, something like three‑quarters of OECD economies have recorded a negative quarter, while Australia has avoided one to date. Now, against this difficult global backdrop, we did record faster annual growth than most major advanced economies. We’ve also recorded faster employment growth since the election than any major advanced economy.
These National Accounts are another reminder of the pressures that people are under, that we responded to substantially in the Budget. You can see these pressures in a lot of the details which have been provided today. For example, household consumption was still subdued. It grew by about 0.4 per cent in the quarter, around 1.3 per cent higher through the year. This quarterly consumption has been growing below its decade average for the past 5 quarters. One of the key features of the consumption data is the way that spending has been dominated by essentials, by nondiscretionary items, and also people have needed to cover something like an extra $30 billion in mortgage interest costs in the quarter alone because of those higher interest rates as well. So, if you look at the household spending data, essential household spending grew by 0.5 per cent in the quarter, faster than the discretionary spending at 0.3 per cent. Discretionary spending barely grew in annual terms, up just 0.1 per cent through the year, compared with 2.1 per cent for essentials.
The household savings ratio has fallen to around rates not seen in more than 15 years. We see the higher interest rates in dwelling investment, but we also see that household disposable income was up 1.1 per cent in the quarter to be 5.2 per cent higher through the year. And whether it’s the wage increases or the government’s tax cuts, which flow from next month, that will provide some more support for household incomes as well. Income tax payable fell for the second consecutive quarter. And as I said, we’ve got those tax cuts flowing for 13.6 million taxpayers before long. New business investment was off a little bit, 0.7 per cent this quarter, but it’s up by 3.9 per cent through the year. And new business investment has improved substantially since the government came to office when you compare what we inherited to what we’ve been able to see over the course of the last couple of years.
After growing for 2 consecutive quarters, productivity growth was flat in the quarter as well. We’ve been realistic about that. Our productivity challenge is entrenched. It has been developing for some decades, and it will take more than a few quarters to turn that around. If you look at public final demand that made a contribution to growth in the quarter, that was supported by some of the substantial investments that we’re making as a government in bulk billing and also in energy bill relief. There was strong growth in imports, which meant that net exports detracted from growth. A lot of this was offset by the build‑up in inventories that many of you would have noticed by now as well. Even though these numbers are quite weak, even though growth in the economy was flat in the first 3 months of the year, we’ve still seen low unemployment, a return to real wages growth, more than 800,000 jobs created since we’ve come to office. And we’re expecting those back‑to‑back surpluses for the first time in almost 2 decades. So, we’ve got a lot going for us as well.
But the main point I wanted to leave you with before I took your questions is that our responsible and methodical and measured approach to the Budget is keeping pressure off inflation without crunching the economy. That was the objective of the Budget we handed down not that long ago. We are striking exactly the right balance between addressing inflation, providing that cost of living, help, supporting sustainable economic growth, and strengthening our public finances at the same time. And today’s data really confirms that our responsible fiscal strategy is exactly right for the conditions that we confront together in the economy which have been laid there in today’s figures. Happy to take some questions.
JOURNALIST:
Thanks, Treasurer. The savings income ratio dropped quite considerably, from 1.6 per cent to 0.9 per cent. What does that say to you about how households are going at the moment?
CHALMERS:
Well, people are under pressure and we see that in the savings ratio, and we see it in other indicators as well. In lots of ways that particular indicator is not surprising when you see the slice of people’s household budgets being eaten up by higher interest rates. These 3 months of weak growth at the start of the year, are primarily a story about higher interest rates combined with some of those other pressures as well, domestic and global, and you see that in the household saving rate.
JOURNALIST:
Given the economy barely grew at all in the 6 months, at the end of last year and early this year, would another rate hike, do you think be enough to push the economy into recession?
CHALMERS:
Well, look, as you know, Pat, I’m very reluctant to engage in anything that would be confused with commentary about the future trajectory of interest rates. And I think we’ve heard for a substantial bit of time this morning from Governor Bullock, who’s been able to address some of these issues from her point of view. Governor Bullock made it clear that the Reserve Bank takes into consideration a whole range of factors when they make decisions about interest rates. Not any one number or indeed any one quarter. They weigh up all of this together. I think it’s very clear to us, I don’t speak for the bank, but it’s very clear to Australians more broadly, that the economy is barely growing. And although we have a lot going for us in the labour market, in the Budget, in terms of real wages, you know, there are some very concerning elements in this, and whether it’s policymakers in my part of the shop or in the Governor’s part of the shop, we take all of that into consideration.
JOURNALIST:
Thanks, Treasurer, and thank you for the question. You’ve repeatedly said that real payments growth under your government is growing at a fraction of former Coalition governments. Page 415 of your own Budget shows it’s up 4.5 per cent this financial year about to end. That’s faster than any of the 5 years under the former Coalition government before the pandemic. It’s faster than 9 of the 11 years of the Howard government. So, my question to you is, when are you going to stop telling this fib?
CHALMERS:
Well, I don’t agree with the way that you’ve characterised it in your columns and again in your, in your questions‑
JOURNALIST:
The data shows it, Treasurer.
CHALMERS:
If you just— I let you finish your question, John, if you let me finish my answer. Real spending growth over the period that I’ve identified is a sliver of what we inherited and it’s lower than the average. And I accept and understand that you will use a different set of figures to make the points that you have been making in your columns, I accept that, I understand that. You and I have engaged on this privately in the past as well. What we have demonstrated in the Budget when it comes to our fiscal strategy is that it is perfectly calibrated for the combination of challenges that we confront. And because of our responsible economic management and because of our spending restraint, the cumulative bottom lines are $215 billion better than we inherited. Debt this year is $150 billion less, next year $185 billion less. We’re saving $80 billion in interest payments. We turned 2 big Liberal deficits into 2 Labor surpluses. We turned next year’s big Liberal deficit into a smaller Labor deficit. And all of these things show that our approach to banking upward revisions to revenue, our approach to focusing on essential spending, our approach to finding almost $80 billions of savings in the Budget, all of these things have helped to get the budget in much better nick at the same time as we recognise our primary fight against inflation, but our responsibility not to smash the economy at the same time. And I know, John, that you would like us to cut harder. And for those of you who think that the Budget should have been some big slash and burn exercise, I refer you to today’s National Accounts for the first 3 months of the year.
JOURNALIST:
Treasurer we obviously have a lot of focus on households because of interest rates. But a couple of figures you’ve mentioned there draw us to other issues. One of them is build‑up in inventories. And I suppose I just wonder the extent to which you are concerned about levels of activity in the broader economy and also for those of us who haven’t been paying attention, what’s behind the rising imports or high imports at a time when the economy is pretty soft?
CHALMERS:
Well, there’s a number of things at play here. Whether it’s the inventories number or a number of other factors and indicators in these National Accounts, I think this weakness in the economy is relatively broad‑based. There are some elements that we are pleased with, but overwhelmingly the story of the first 3 months of the year was a flat economy, barely any growth, very weak growth where it exists and inventories is part of that story. You’ll have to remind me the second part of your question, Laura.
JOURNALIST:
Strong imports, or relatively strong imports.
CHALMERS:
There’s a number of issues at play there as well, including the way that the consumption figures have been recast. You’ll see, or if you haven’t yet, you will. You’ll see that they’ve come up, there’s a different methodology for some of the consumption. Part of that is about international travel, you’ll see that there’s some other indicators there. But overall, the story of consumption is a story of weakness. There’s some one‑off factors in these figures today, but overall, and we’ve seen it in the retail data, we’ve seen it in other consumption data, the Reserve Bank Governor referenced it again this morning, consumption has been quite weak.
JOURNALIST:
Treasurer, as you say, this quarter was always expected to be weak. Do you see this as the nadir of growth, or do you think potentially things could get worse? Could we get a recession?
CHALMERS:
We still expect the economy to continue to grow. The Treasury forecasts anticipate growth in the economy, but weak growth in the economy. And what we’ve seen today is whether it’s the private forecasters that you’ve all covered or the Treasury expectations, everybody anticipated the March quarter to be weak and it’s been weak. I think we can expect June to be similarly difficult. And as we said around budget time, we expect growth to begin to pick up pace towards the end of the year, but again, not to kind of stratospheric levels. And again, I take you back Ben to the fiscal strategy and the budget strategy. And our job is to fight inflation, we’re putting downward pressure on inflation with the Budget, we’ve made that welcome and encouraging progress compared to the inflation that we inherited. But we’ve got to do that in a way that doesn’t smash the economy. And so, you would know that in the second half of the year our cost‑of‑living help arrives and that will support activity in our economy as well.
JOURNALIST:
Treasurer, the ABS noted that record attendance at sporting and music events saw increased spending. How much do we have Taylor Swift to thank for keeping the economy going?
CHALMERS:
I was expecting this much earlier in the press conference. There were some one‑off factors in the consumption figures and that’s why we shouldn’t get too carried away with that growth that we saw after a flatter quarter, the quarter before. But there are other bigger issues at play in the consumption data. Yes, there were some one‑off events, whether they be concerts or sporting events, but not the primary determinant of the conditions revealed in the National Accounts.
JOURNALIST:
I just want to ask about the NDIS. We’ve heard in Estimates this week, some pretty shocking examples of fraud within the scheme. Do you think for the vast majority of participants who are doing the right thing, is it acceptable that the claims process should become more onerous in order to weed out the bad actors?
CHALMERS:
We need to weed out the bad actors, and we need to do whatever it takes to do that. You know, as a big supporter of the NDIS, we need to make sure that we get value for money for the people it was designed to serve. That’s our overwhelming purpose here when it comes to the NDIS. And so, we need to weed out the bad actors, we need to weed out the opportunists, because every dollar that is thieved by people doing the wrong thing is a dollar that can’t be used to support people who genuinely need our support and our help. And that’s why Minister Shorten’s efforts are so important. Minister Shorten has been on this. He knows that there is fraud in the scheme. A lot of what we are doing, including new investments in the budget, is about cracking down on people doing the wrong thing.
JOURNALIST:
Is the by‑product of that, though, that it will become more difficult for people who are doing the right thing?
CHALMERS:
I understand your question. We want to make it as easy as possible, but consistent with our obligations to people to get value for money.
JOURNALIST:
Michele Bullock just said earlier that energy rebates won’t bring down underlying inflation and the RBA will look through anything that’s temporary. Do you agree with her analysis there that rebates don’t actually help the inflation problem?
CHALMERS:
Well, she had a number of things to say about the rebates, including that comment. She also, I think, knocked on the head for all time this argument that making bills cheaper is somehow inflationary in our economy. Obviously, the calculation that people will make about the impact on inflation is primarily about the impact on headline inflation. She made that point today. I don’t think that was especially surprising. But she also said she doesn’t expect this to feed or fuel inflation elsewhere in the economy. And I think the other important point that Governor Bullock made today in relation to homegrown inflation, she was asked about homegrown inflation and she said, I think fiscal policy has been running a surplus the last couple of years. I would say that has been helping the homegrown inflation situation.
JOURNALIST:
Treasurer, I think a lot of average Australians, although they don’t understand the data points in these sorts of announcements, get the message, which you said, households are under pressure, they get that and they’ve been under pressure for a long time. What sort of realistic hope can you give them about how long they’re going to remain under pressure? What is the outlook realistically and when do things get better?
CHALMERS:
I think Australians in communities right around our country don’t need the March National Accounts to tell them that things are tight right now and things are tough right now. And we as a government do more than acknowledge that we’re acting on that. And that’s why I’d say to everyone who’s under pressure, the start of next month, every Australian taxpayer will get a tax cut, every Australian household will get energy bill relief. There’s an increase in the minimum wage, there’s help with the costs of medicine, there’s help with rent assistance. There are a whole range of measures coming in over the course of the next few months which are designed to not just recognise, but act on and respond to the legitimate pressures that people are under right now. And that’s why the strategy in the budget and the policies in the budget are precisely right for these economic conditions. It could not be clearer now that all of these people who are advising us to cut much harder in the Budget or to provide no cost‑of‑living relief to people, they have been proven to be dead wrong. And our budget strategy has been proven to be exactly right for the pressures that people are under and the weakness in the economy which has been laid bare today.
JOURNALIST:
Treasurer. Thank you. What role has immigration played in this quarter, and indeed over the last year, in keeping that growth in positive territory? And I know I might have asked you this before, but what does it tell you about how far we can afford to cut immigration to avoid a recession?
CHALMERS:
We need to manage the migration program in a methodical and a responsible way. I don’t think any sensible person would describe the proposals made by our opponents as methodical or responsible. What we’re doing with migration is ensuring that net overseas migration next year is half what it was last year and we’re winding down the permanent migration program so it’s lower than when Peter Dutton was the immigration minister. But we’re doing that in a considered and a thoughtful and a methodical and a measured way, which recognises that you don’t solve a housing shortage or a shortage of nurses in aged care by making the skills shortage worse.
Now, in terms of migration’s contribution to growth in the quarter, it is making a contribution to growth in the quarter, but so are a range of other factors as well. When growth is only 0.1 per cent, it’s easy to find things that if they were different, then the number would be different, the number would be worse. Really, right across the data provided today.
What I’d say about this measure of per capita growth, and I see it in some of the earlier reports out of today, we know that the economy is weak across a range of indicators, not just that one. There are a range of indicators which show that the economy was flat in the first 3 months of the year. And that’s not the only one. I’d also say it’s not unprecedented for per person growth to go backwards. It happened a number of times under our predecessors and it’s not uncommon around the world as well. This is a feature of growth around the world as well. And so, when it comes to migration, our responsibility and our commitment is to manage it in a responsible and a measured and methodical way. We are getting it down, but we’re doing it in a way which recognises all the pressures on the economy.
JOURNALIST:
Just in continuation on migration. During the ERC process, you were mindful of not damaging the foreign student sector when it came to curbing the numbers. You didn’t want to do long term damage to a valuable industry. The university sector has come out today and they’ve lumped both you and the Coalition in the same basket as poll driven exercise on migration. You’re going to damage the sector. They said you wouldn’t do the same with the mining sector but you’re prepared to cause irreparable damage to the international students. Do you agree with that, or do you think you can manage it in a way that doesn’t cause a long‑term damage?
CHALMERS:
I certainly think we can manage it in a way that doesn’t cause long term damage. There’s a couple of elements to your question. First of all, as you know, I think all of you know, I don’t speak privately or publicly about deliberations of the Expenditure Review Committee. It’s hard enough to get into that room without wasting the opportunity and speaking about those conversations outside the room. I think it’s well known and well established that I’m a big supporter of the education sector. It is a big earner for Australia, it’s a really important sector, and I think I’ve made that point on earlier occasions as well.
So, yes, I am a big supporter of the sector and one of the ways that you support the sector is to make sure that it’s robust and to make sure that the students that we are attracting here to study with all of the advantages that that brings, not just financial, that they’re genuine students and that we’re getting maximum value for money out of that really important part of the economy. I haven’t seen the comments that they’ve made today, I think it’s unsurprising that they would like the intake to be higher, I think that’s understood and acknowledged in a respectful way. But what we’re doing – and I pay tribute to my colleagues for this – what we’re doing is we’re managing in a responsible, methodical way, recognising the big economic opportunity, but also the pressure on the system.
JOURNALIST:
There have been a lot of issues with the cash and transit system and Armaguard, the future of Armaguard Security. We know that there is some planning being done about contingencies of what might happen if they fall over. How far is the government willing to intervene if it needs to, to ensure that cash can still get to regional communities. Are you willing to leverage Australia Post or other institutions to make sure cash can still get around the country?
CHALMERS:
We’re committed to cash. We want to make sure that communities right around Australia can have access to cash. For some months now, we’ve been engaged with the private providers, the Reserve Bank, the ABA and others. We’ve had a range of meetings and discussions. Primarily those groups that I’ve mentioned are trying to find a solution. But we’re involved, we’re being consulted and we’ve got a view. And our view is we need to make sure that cash is available in communities right around Australia, and not just in some communities. I’m pretty confident that there is sufficient understanding and goodwill that these issues can be overcome, these challenges can be overcome, but I don’t want to pretend that they’re not significant. We have been dealing for some months with this challenge.
JOURNALIST:
And you’ve been speaking to Australia Post?
JIM CHALMERS:
I’ve been speaking to all of the players, including Australia Post, about this. I’ve spoken to the banks individually and collectively. I’ve met with the Governor about it, I’ve met with the payments board about it. I’ve met on multiple occasions with the private providers. We say to the Australian community that we are committed to cash being available right around our country. The various players are engaged in an important discussion about making sure that’s the case and we’re involved in that discussion.
JOURNALIST:
Treasurer, did your colleague Ed Husic give you a heads‑up before he floated the idea of cutting company tax? Or is that something you rule out in a potential future term?
CHALMERS:
Look, I think I’ve addressed this in the parliament, this issue that you’re asking me about now. It’s not unusual for people to talk about longer term issues in our economy. The point that I would make in the most recent budget is there is substantial tax reform. And that’s about incentivising production in the industries which will power our future and make us an indispensable part of the net zero transformation. I work really closely with Ed and his department, and his colleagues, to ensure that some of the things that he cares most about were front and centre in the Budget. One of the most important elements of the Budget was the Future Made in Australia agenda, of which Ed is an integral part. It’s his portfolio in lots of ways. And so I’m really proud of the work that we’re able to do together to deliver those tax changes and to deliver the broader agenda as well.
JOURNALIST:
Off the back of some of the comments made by the Reserve Bank Governor in Senate estimates, do you think that boomers who have potentially paid off their house are doing it as tough as, say, young families who are mortgaged to their eyeballs or renting?
CHALMERS:
I think these cost‑of‑living pressures hit different, whether it’s in generational terms, geographical terms, the pressures on people will be felt differently depending on their means, depending on their geography, depending on their generation. And one of the things that I’m proudest of in this year, which we saw budgeted for in the Budget and will come in in a few week’s time, is one of the primary motivations for recasting the tax cuts was to get a fairer go for younger people. We know if you’ve got a mortgage, you’re being hit by higher interest rates. We know if you’re a young person that the rental market can be especially tough. And these are the sorts of motivations for the really substantial cost‑of‑living help which is on its way, and will be here before long. But part of that is recognising the intergenerational differences and challenges that people confront, making sure that our cost‑of‑living help is delivered in more than one way.
JOURNALIST:
One of the things still hurting household budgets notwithstanding generous government subsidies, is childcare fees. Could I please get your view on the prospects of moving to a flat fee model where parents pay the same amount per child per day as a sort of second term Labor agenda?
CHALMERS:
I think we’ve made it really clear over recent years, not just recent months or weeks, that we want to make as much progress as we can when it comes to early childhood education. I am personally and the government is enthusiastically supportive of the early childhood education and care sector. There are so many advantages to getting that right, economic and social. I see that in my own community and in communities right around Australia. And so, we are focused on bedding down the billions of dollars of investment that we’ve already announced. We’ve provisioned, as you know, for a pay rise for people working in the sector, doing one of the most important jobs in the country. And we’ve said that we’ve got an open mind to further changes in the future but recognising the fairly substantial fiscal constraints and fiscal pressures that we’ve got at the same time. Thanks very much, everybody.