JIM CHALMERS:
Today’s National Accounts for the June quarter show that our economy is barely growing. Growth in the June quarter was 0.2 per cent and just 1 per cent through the year, this is consistent with the market’s expectation for growth in our economy. This is the weakest growth since 2020. This is the inevitable consequence of global economic uncertainty, persistent but moderating inflation and higher interest rates.
What we’re seeing here is weakness in the household’s part of the economy and private investment being offset by the contribution coming from exports and public final demand. The main story in these figures is consumption. Consumption went backwards and discretionary spending fell substantially. And to get your head around that, in through‑the‑year terms we saw around the same growth in the year as we usually see in a single quarter when it comes to consumption. And that gives you a sense here of consumption going backwards but particularly discretionary spending, which has fallen really quite substantially.
The other key takeouts that you would have seen in the data, really household incomes grew, services exports made a very useful contribution, dwellings and new business investments were flat, and productivity continues to be a challenge in our economy, and has been for some decades.
At a time when two‑thirds of the OECD have seen their economy go backwards at least one quarter, we haven’t done that, and so in that context, in the context of a really difficult global economic environment, any growth in our economy is welcome growth.
This is an economy being buffeted by global uncertainty, price pressures and higher interest rates. We’ve got a lot going for us, but we know that people are under substantial pressure. Almost a million jobs have been created on our watch, inflation has halved from its peak in the year that we were elected, real incomes are growing, tax cuts are rolling out and we’re helping with the cost of living. But we know, and we see in this data, that people are still doing it tough, and that’s why the cost of living remains our highest priority – helping people with cost of living is the highest priority of the Albanese Labor government.
Now, without government spending or without government spending growth, there’d be no growth in the economy at all and the main contributors to that are health spending. Public final demand growth in annualised average growth terms is still lower at 3.3 per cent than the 4.7 per cent we saw under our predecessors, but it’s making a really vital contribution here.
Let me make that clear again: without government spending, without growth in government spending, there’d be no growth in our economy at all. That is primarily health spending. Public final demand growth is still lower than what we saw under our predecessors, but it’s making a useful contribution when it comes to the June quarter.
Now, this justifies the way that we’ve managed the economy responsibly – fighting inflation as our primary concern but doing that without slashing and burning in a budget in an economy which is already weak and when people are already doing it tough. This vindicates the approach that we took in the Budget and it, frankly, torpedoes a lot of the free advice that we got at budget time to cut harder and harsher. That would have been a recipe for a much weaker economy, we know that from the June quarter data that you have before you now.
We will continue to manage the economy in the most responsible way that we can, maintaining a primary focus on inflation but rolling out cost‑of‑living relief in the most responsible way. We’ve delivered 2 surpluses already and we’re making sure that as we fight inflation we do that in a way that doesn’t smash people or weaken an economy which is already very soft and subdued.
These figures today are soft and subdued. They are what we expected and what the market expected. But we know people are doing it tough. We know growth in our economy is soft and subdued, and that’s why our responsible economic management and striking all of the right balances is so important.
Happy to take some questions. We’ll go Shane and then Michael.
JOURNALIST:
Do you think this is the worst it will be? Do you think that there’ll be a pick up in the last 6 months of the year as the tax cuts and cost‑of‑living handouts get spent?
CHALMERS:
The Treasury forecasts anticipate a pretty modest pick up in growth in the financial year that we’re in now. So obviously the data that we get today is for the end of last financial year. We now know that growth in the economy through the year was 1 per cent. Treasury expects growth to pick up in this financial year but modestly and there’s nothing in these figures which change our expectation for that.
I think the most important takeout from today’s figures is around consumption. But we also see the weakness in household budgets when it comes to household savings, consumption, as I said, discretionary spending and mortgage interest costs – so people are under a lot of pressure. This is precisely why we’re rolling out substantial and meaningful cost‑of‑living help, but in the most responsible way – the tax cuts, the energy bill relief, cheaper medicines, cheaper early childhood education, helping with rent and getting wages moving again. This is all part of our efforts to ease the pressures which are so obvious in the data that we get today.
We’ll go Michael and then we’ll go Cam and then Tom.
JOURNALIST:
Treasurer, do you accept that the RBA’s efforts to cool or smash the economy are actually a necessary thing it needs to do to get on top of inflation?
CHALMERS:
Well, we’ve got the same objective as the Reserve Bank, which is to get on top of inflation, we’ve got slightly different responsibilities and our interests and our objectives are aligned when it comes to seeing inflation moderate further and faster. And what we see in the data today, particularly as it relates to consumption but in other areas as well, is you can see the impact of those higher interest rates working the way through the economy. The Reserve Bank Governor has her job to do when it comes to monetary policy, I have my job to do and my responsibilities. And what you’ll see here is really why it’s so important that we’ve maintained that primary focus on inflation but we’ve rolled out cost‑of‑living relief, we’ve got the budget in better nick, and we’ve done all of that cognisant of the balance of risks in our economy.
And you’ll recall, Michael, and others will recall in this room and on other occasions, for the bulk of this year we’ve been talking about the balance of risks in the economy. And at budget time in particular we said and we meant we’ve maintained this primary focus on inflation but we need to be focused on the fact that the economy is soft and I think the data that we get today has vindicated that approach.
Cameron then Tom.
JOURNALIST:
Treasurer, the Reserve Bank and the chief economist there has said in recent weeks that the economy was running a bit hot, in its view. Do these numbers just say that that is wrong? Is that a misreading of the economy by the Reserve Bank?
CHALMERS:
Well, as you know I’m not interested in kind of passing or second‑guessing the commentary made by the Reserve Bank and its officials. I said at the time that I think it’s hard to justify from the data a view that says the economy is running too hot. I think if you look at the weakest growth since 2020, the fact that consumption has gone backwards, particularly discretionary spending, you look at the household savings ratio and other measures in the data today, I think it’s hard to sustain that view. But I’ve been very deliberate to avoid kind of second‑guessing the judgments or the commentary made by the independent Reserve Bank. I think it’s a good thing, frankly, that Governor Bullock, Sarah and others make their thinking public. I think that’s a good thing when it comes to the public debate about the trajectory of our economy.
JOURNALIST:
You mentioned household incomes are falling, but as the RBA has pointed out a couple of times, household wealth in some cases is increasing. A lot of talk about government spending, would it have been more responsible if the cost‑of‑living support had been targeted rather than universal.
CHALMERS:
Well, some of the cost‑of‑living help is targeted and some of its universal. That’s deliberate. A tax cut for every taxpayer, energy bill relief for every household are very deliberate because it recognises that cost‑of‑living pressures are being felt right up and down the income scale. But we changed the tax cuts, as you know, so that there was more help for people on lower and middle incomes, again, that’s deliberate. Some of the assistance is targeted. This month there’ll be an increase in Commonwealth Rent Assistance, that’s the second time I’ve done that, and I’m proud of that, that’s targeted relief for people doing it tough. Cheaper medicines obviously has a bigger impact on people who rely on – who visit the chemist more frequently. 2.6 million, I think, from memory, people on awards get a pay rise, that’s targeted too. So a deliberate combination – I think the right combination – of cost‑of‑living help; some of it targeted, some of it broad, which recognises, as we see again today, that cost‑of‑living pressures are still acute. They would be worse without the cost‑of‑living help that we’re rolling out in a substantial and meaningful, deliberately broad and deliberately targeted way and in a responsible way.
We’ll go Ben and then Ron and then we’ll go up the back.
JOURNALIST:
Treasurer, some of the comments you made on the weekend ahead of the GDP numbers were interpreted as, you know, attacking the Reserve Bank for smashing the economy on interest rates. Was that your intention in those comments, or do you think they’ve been misinterpreted?
CHALMERS:
Of course it wasn’t my intention. I think all of you know privately and publicly, I have a great deal of respect for the work of the Reserve Bank. I’m trying to make it more independent with my Reserve Bank reforms, not less independent. And I work really well and really closely with Governor Bullock. And as I said before, we’ve got the same objective. And as Governor Bullock and I have both said on multiple occasions now, we’ve got different responsibilities. I don’t tell Governor Bullock how to do her job; Governor Bullock doesn’t tell me how to do my job, but we compare notes regularly. And she knows my view that there’s weakness in the economy and that households are under substantial pressure.
And I think the comments that I made on Sunday – and I know that they’ve attracted a lot of attention, I get that – but the comments that I made on Sunday were just a statement of fact. They’ve been borne out once again in the National Accounts. If you look at the way that our economy is slowing, if you look at the particular pressures in our economy, it’s a combination of global economic uncertainty, persistent but moderating inflation and higher interest rates. And I don’t think that’s an especially controversial point to make.
Ron and then I think I said Anna and then we’ll go Charles and then we’ll go Clare.
JOURNALIST:
Treasurer, just on the reforms to the Reserve Bank board, are you able to give us an update on where those negotiations are up to? Are you willing to give a little bit to get these through?
CHALMERS:
I am and I have. So the ball is currently in the Shadow Treasurer’s court. I’ve made it quite clear, as you know, that we’ve given really quite substantial ground when it comes to the Reserve Bank reforms and again that’s deliberate, because I want to make sure they’re bipartisan. I think these are really important reforms. And all of my efforts for some time – and some of you have been covering this for years – all of my efforts have been trying to reach a bipartisan consensus. Angus Taylor, to his credit, has raised with me privately and also indicated publicly there are about half a dozen issues where he’s got either a different view to the RBA review or a different view to what we proposed or where there’s been a line ball, 50/50 call where he’s got a preference, and on every single one of those I’ve accommodated his preference. There hasn’t been anything that he has raised where I haven’t tried to accommodate his view. And that’s because I want to land it. I’d like to legislate it this year, I’d like it to start at the start of next year. I’d like it not to be of an election campaign. And I’d like it to be an agreement between the 2 major governing parties in the Senate.
Anna.
JOURNALIST:
Treasurer, living standards have fallen for the last 18 months while you’ve been in government. So how much responsibility do you take for economic management that has led to this outcome?
CHALMERS:
I take responsibility for the government’s economic plan, the government’s economic management. I’ve made that clear every single time that I’m asked. And obviously one of the major concerns that we have that we’re dealing with is the fact that incomes and cost‑of‑living pressures have been a big part of the worries that people have around the country. And I take responsibility for rolling out this cost‑of‑living relief, delivering these couple of surpluses, trying to balance all the risks in the economy.
I take responsibility for my part in the fight against inflation. And one of the government’s defining objectives is to make it easier for people to earn more and keep more of what they earn. Wages are moving again more substantially than they were under our predecessors, there’s a tax cut for every taxpayer. Those things are important, but we don’t pretend that every single challenge in the budget or in the economy and especially in household budgets has been addressed, but we are helping. And we’re doing that in a substantial, meaningful but responsible way.
Charles and then Clare.
JOURNALIST:
Treasurer, the slowest yearly growth outside the pandemic since the early 90s, and yet unemployment is at 4.2. What would the economy, the society, look like if that unemployment rate rose?
CHALMERS:
This question, I think, goes to really one of the most important motivations we have, which is to get on top of inflation without smashing the labour market. And the unemployment rate has come up from the middle 3s to 4.2 over the course of the last 13 months or so. But under this government almost a million new jobs have been created, and that’s obviously a very good thing, a source of strength in our economy. It’s a record – no government has ever seen the creation of as many jobs as we’re seeing under this first term Albanese Labor government. And I think the labour market is really one of the most important areas that we need to be focused on. What we’ve shown is we can fight inflation, the economy can continue to grow, albeit weakly, we can keep the labour market in relatively good nick, and we can balance all of the risks that are in the economy, including in the labour market.
JOURNALIST:
Treasurer, you said it wasn’t your intention to criticise the RBA with your remarks on Sunday, but the comments have been described as ill‑advised. We’ve had economists comparing you with the worst Treasurer since Jim Cairns. What’s your response to those kinds of criticisms?
CHALMERS:
I like to focus on the objective observers. And there will be all sorts of things said and written about treasurers, not just myself. But I like to focus on the objective commentary, the objective economists because I get real value out of that. I’m not someone that tries to shy away from feedback. I like that some of the issues that we’re grappling with today are a big part of the national conversation, that’s a good thing. And I’ve always tried to be upfront, I’ve always tried to be pretty blunt about our economic challenges.
And I see what I said on Sunday night – first of all, it wasn’t new, I’ve been saying the same thing really since June I think, for some months. But also I think I owe it to Australians to speak plainly about the challenges that are in our economy. It’s one of the reasons I like being here with you to have this opportunity to try and inform people of how we’re seeing the challenges in the economy and, more importantly, what we’re doing about it. I just see what I said earlier in the week as a statement of fact. It’s been borne out in the figures that we’ve received today, that the ABS has released today. Interest rates are having an impact on household budgets and slowing the economy, I think that’s self‑evident, and not especially controversial.
We’ll come over this way, so we’ll go all the way from over Dom and then Mark and then we’ll come back through Jacob.
JOURNALIST:
Treasurer, GDP per hour worked was down another 0.8 per cent in the June quarter. Is this worrying, and what does it mean for inflation? And just on – as an aside, do you feel like you and some other ministers got thrown under the bus when it came to the Census question being reflipped on the Prime Minister’s return?
CHALMERS:
Well, in reverse order, absolutely not. I don’t feel like that at all. In terms of your question about productivity, productivity is a longstanding challenge in our economy, and in recent quarters we’ve seen little tick ups and little tick downs, which doesn’t change our fundamental view that we’ve got a productivity problem in our economy, and that’s why we’ve got a big focus on adapting and adopting technology and human capital and the energy transformation. One of the big reasons why GDP per hour worked, why we saw the outcome that you’ve just referenced in your question is because of the hours part of the equation, not just the rest of the equation. But we acknowledge, we’re upfront, we’ve got a productivity challenge in our economy. That didn’t just arrive in May of 2022; it’s been longstanding and it will take us a while to turn around.
Mark and then Jacob.
JOURNALIST:
Treasurer, just on the question of the balance between anti‑inflation and pro‑growth policies, I think you said that without government spending there would have been no growth, but isn’t it a fact that without government spending we would be in recession and that that’s the important factor at the moment? Is this an argument for more government spending for you to look at now a greater emphasis on pro‑growth without affecting inflation, if that’s possible?
CHALMERS:
First of all, I think I’ve flagged really since the Budget – in fact shortly before the Budget – that I thought that the balance of risks in our economy were shifting. And a lot of you, to your credit, wrote that and engaged with that, and I appreciate that. Because what we’ve really seen in the economy, what we anticipated in the Budget, was that we would need to maintain a primary focus on inflation, and we have. But as growth is soft and subdued and we care about some of the issues in the labour market that Charles asked about a moment ago, then we need to balance those risks and we need to get it right.
And you’ll recall, Mark, we got a lot of free advice at budget time, people wanted us to cut harder and harsher. People were putting to me all kinds of ideas which represented in my view a version of kind of scorched earth austerity, slash and burn in the Budget. And we now know that would have been diabolical when it comes to growth in our economy. But we need to strike the right balance, and we are. It should never be some kind of free‑for‑all of public spending, and it’s not.
I remind you again of those numbers I used before – a lot of this conversation is about public final demand. For us in annualised average growth terms, public final demand is 3.3, it’s making an important contribution. It averaged 4.7 under our predecessors, and if you take COVID out – just the period pre COVID – it was 4.2. So what I’m telling you there and what I’m demonstrating there and what the numbers show is that we’ve been really responsible, really restrained, but we haven’t overdone it. And that we see in the figures today has been a really important, warranted approach that we have taken.
We’ve delivered 2 surpluses, we’ve found almost $80 billion in savings, we’ve banked almost all the upward revisions to revenues – these are things which were not a familiar part of budgets before we arrived. And so it’s been responsible, it’s been restrained, but it’s recognised that there’s a balance to strike.
We’re going to go Jacob, Michelle, Jack and then behind Jack and then we’ll see how we’re going, Paul, to come back to you.
JOURNALIST:
Charles mentioned the comparison to 1991, which brings to mind a situation that happened back then in the recession. Just to slightly mangle your political hero’s words, is this the consumer recession that we have to have?
CHALMERS:
I don’t see it in those terms, and I wouldn’t describe it in those terms, respectfully. What we’re seeing is that the consumer is under really extreme pressure, we knew that before today, but this has been confirmed today. Consumption going backwards, discretionary spending going down substantially, household savings being really low. These are all the signs of an economy where people are under really substantial pressure, and that’s why our cost‑of‑living help is so important.
JOURNALIST:
Well, just taking up the cost‑of‑living argument, you’ve emphasised what’s been rolled out. But have you reached the end of the line here, or would you be willing to look at more cost‑of‑living measures if the numbers suggest that’s needed? And would you take the occasion of the budget review at the end of the year to do that or a budget early next year pre‑election?
CHALMERS:
What we try and do is in every budget update but more substantially in every budget we try to take the economic conditions into consideration. We try and manage the near‑term pressures at the same time as we invest in the future. And what we see in these figures today and what we saw in the Budget in May was a budget that was really carefully calibrated for the conditions that we confront. And I think it’s been vindicated in the numbers that you have before you now.
And so you should expect us to take a similar approach in the MYEFO but more substantially in the Budget next year because I think one of the reasons why we have broadly got things right – some of these judgments right – is because we’ve been prepared to consider new initiatives where the economic circumstances warrant that and where the budget can afford it.
JOURNALIST:
And you see that as a pre‑election budget?
CHALMERS:
Yeah.
JOURNALIST:
Treasurer, general government consumption, that’s now at a record high, it’s at 22.5 per cent. Just following on from Riles’ question, do you expect that to peak or do you expect that level of spending to be baked into the budget [indistinct].
CHALMERS:
First of all, in terms of that comparison, that historical comparison, what we need to remember is during COVID a lot of those payments which were made weren’t captured in government consumption or public final demand. I think, from memory, JobKeeper and some of the others, so I’ve seen that – I’m not sure if it was Michael or somebody else has written that fact that you reference in your question. We need to be a little bit careful with that comparison because of what’s not captured during COVID and what’s captured now. I think the best way to think about it is that annualised average growth figure I gave you before – 3.3 under us, 4.7 under our predecessors, if you want to strip out COVID out of that, then 4.2 before COVID.
I said I’d go there and then we’ll come back to Paul, if everyone’s all right with that.
JOURNALIST:
Treasurer, how much longer do you think public spending can prop up economic growth?
CHALMERS:
It’s not something I’m prepared to pre‑empt. It’s made a really important contribution here, and I guess it’s a bit similar to Michelle’s question a moment ago. We’ll make sure that our public spending recognises and reflects the economic conditions. We have shown much more spending restraint than our predecessors by a number of measures. We have turned those 2 big Liberal deficits into 2 big Labor surpluses, and we’ll be able to release to you the final budget outcome this month which shows what we were able to achieve in the last financial year. And so you should expect us to continue to show restraint, to continue to be responsible, but to do that in the context of an economy which is quite weak and especially weak once you take public final demand out of it.
I’m going to go to Jade and then to you, Paul, sorry.
JOURNALIST:
Thanks, Treasurer. Today it’s been revealed that the federal government is going to fund several priority primary care centres in Victoria following a request from the government there whose budget is obviously under strain. What else is the Victorian Government asking that you stump up cash for?
CHALMERS:
Look, I’m not aware of any other specific asks. Obviously there’s a national cabinet meeting soon and you know that the priority there is family and domestic violence, and that’s as it should be. You know that we’re in negotiations with the states and territories on health, on education, the NDIS, on a whole range of issues. And it’s not unusual – and I say this respectfully – it’s not unusual for state governments to ask federal governments for more money, that’s a story as old as federation. And we do what we can to help. We recognise that we represent the people of Victoria, just as they do. And we want the best outcomes in the health system and otherwise for them, and we’ll keep working closely with them to make sure that that’s the case.
We might finish up on Paul.
JOURNALIST:
Again on the Census, could I please ask: who was the decision‑maker or ultimately responsibility for telling the ABS that the government wouldn’t be doing the gender and sexuality questions? And, secondly, now that the dispute is about whether the gender and intersex characteristics questions are too complicated and too confusing, why not just release those so we can judge those for ourselves?
CHALMERS:
A couple of things about that. Obviously I’m not going to get into the internal processes around that. In terms of who takes responsibility, I think we take collective responsibility, and I take my share of the responsibility for the disappointment, frankly, that was felt in parts of our community. I take my share of the responsibility for that, but I’m not prepared to go into the various kind of internal discussions that have been had about it over the course of the last little while.
The Census is in 2026. We know that we need to do the work in advance. I’m confident that we’ll get it right. And I’m confident that getting it right means being as inclusive as we can be when it comes to the Census. To be really clear about that, I say to members of the Australian community who were disappointed about the public discussion around this last week, I take my share of the responsibility for that, and we take collective responsibility for getting it right in the future, and I’m confident that we will.
Thanks very much.