Jim Chalmers:
Really pleased with the monthly inflation numbers out today. What they show is that headline inflation has fallen substantially, underlying inflation has fallen substantially and inflation is now at the bottom of the Reserve Bank’s target range in what is now a sustained way. It’s very pleasing to see the progress that Australians have made together when it comes to the fight against inflation.
Headline inflation was 2.1 per cent through the year, down from 2.4 per cent. Trimmed mean inflation was 2.4 per cent, down from 2.8 per cent. Services inflation came down, with some welcome developments in areas like insurance and rent as well.
This is the lowest that inflation has been for years. It’s the lowest headline inflation since the beginning of 2021. It’s the lowest underlying inflation since the end of 2021. And also means for the first time since these monthly records have been kept that we have seen 6 consecutive months now of inflation within the Reserve Bank’s target range.
This means that the progress we’re making together on inflation is substantial and it means that it’s sustained. And these are very welcome developments. These numbers today are very encouraging because they illustrate the progress that Australians have made together when it comes to getting on top of this inflation challenge that we have had in our economy for some time now.
We know that people are still under pressure, and that’s why from next Tuesday a whole raft of new cost‑of‑living measures will be rolled out. Minimum wages go up on Tuesday. We’ll see longer paid parental leave and pay the super guarantee on it. The super guarantee goes up to 12 per cent. There are new incentives for apprentice builders. There are a range of cost‑of‑living measures which come in from Tuesday which recognise that even with this very substantial and sustained progress on inflation that people are still under pressure, and the government is doing what it can to responsibly help people doing it tough.
This is more important than ever, that we’ve made this progress on inflation and we’re helping with the cost of living in an environment of extreme global economic uncertainty. It is a source of considerable pride as Australians that we’ve made this progress on inflation at the same time we’ve kept unemployment low, we’ve got real wages growing again, we’ve kept the economy ticking over. And that combination of economic outcomes in Australia is rare around the world and it’s rare compared to our history.
Unlike other countries, we’ve been able to achieve this progress on inflation without paying for it with substantially higher unemployment. In fact, under this government we’ve seen the lowest average unemployment of any government in the last half century.
So we’re very encouraged by these numbers that we’re seeing today. We know that the monthly data jumps around a bit. We know it’s more volatile than the quarterly data. But to have headline inflation at 2.1, underlying inflation at 2.4, the lowest we’ve seen in 4 years on both fronts, the first time we’ve had 6 consecutive months of inflation within the Reserve Bank’s target range, those are very, very welcome developments. And all Australians deserve to share in the credit for that. We know there’s more work to do.
When it comes to this progress in the fight against inflation what it means is that we can focus even more substantially on some of the bigger, longer term structural challenges in our economy. Whether it’s making our economy more productive, making our budget more sustainable or making ourselves more resilient in the face of all of this global economic uncertainty.
This substantial and sustained progress on inflation means that we can focus even more substantially on some of those bigger, longer term structural challenges in the economy. That’s my focus, and it’s also the focus of the Economic Reform Roundtable that I’ll be convening in Canberra in August because that gives us the best opportunity to work out the next steps.
We’ve already got a substantial economic reform agenda. We’ve already made a lot of very welcome and encouraging progress together, but the best way to determine the next steps in our economy and when it comes to economic reform is to do that together. And that’s what the Economic Reform Roundtable is all about.
Before I take your questions, I wanted to update you on a very productive conversation I had with US Treasury Secretary Scott Bessent at around 8 am this morning. This was a very positive discussion, a very productive discussion. We were able to cover a whole range of issues. The critical minerals market around the world, some of the challenging tax issues including some issues before the US Congress and also, of course, I made our case once again when it comes to trade and tariffs and these escalating trade tensions around the world.
The global economic environment is very uncertain, very unpredictable and very volatile. The conflict in the Middle East is part of the story but not the whole story. Eastern Europe, the slow down or a weakness in the Chinese economy but also the implications for global demand and global inflation from these escalating trade tensions – these are all the very difficult issues that we are trying to navigate together.
The Australian economy is better prepared and better placed than most economies around the world to deal with this global economic uncertainty, but we’re not immune from it. And that’s why it’s so important that we continue to engage.
Today was my third conversation with Scott Bessent, the second since he was appointed US Treasury Secretary. I’m very grateful for the time that we were able to spend together on the phone today talking about critical minerals, international tax and also trade and tariffs at the same time.
The reason why the international tax issues are so important and so front of mind is because I know that there’s a lot of concern amongst our Australian institutional investors – super funds, the Future Fund and other institutions – when it comes to section 899 of the proposed so‑called Big Beautiful Bill in the US. I’ve engaged a lot with Australian investors over the course of the last couple of weeks on their concerns. I was able to represent them and raise their concerns directly with US Treasury Secretary Bessent. And I know that the Treasury Secretary is very focused on these issues as well. We hope that they can be resolved.
We do not want to see our investors and our funds unfairly treated or disadvantaged when it comes to developments out of the US Congress. And once again, I’m very grateful to Scott Bessent for hearing me out and for also undertaking to make what progress he can to try and resolve these issues. I’m confident he understands these issues. They’ve been raised with him directly. I was able to raise them directly with him as well, and we hope for some good developments on this front in the coming days. If not the coming days, then certainly the coming weeks.
Happy to take some questions.
Journalist:
On inflation, have you won the war yet, or are you still fighting that one?
Chalmers:
I’m reluctant to say it’s mission accomplished, but we are certainly making more progress than was expected. These numbers today are much better than what economists expected for the monthly inflation data. We’re making this progress together quicker and we’re further along the path than economists were anticipating today, and that’s a very good thing. We will update our Treasury forecasts in the usual way as we learn more about these monthly figures and also the quarterly figures as well.
We’ve made a hell of a lot of progress in the fight against inflation together as Australians. We don’t say mission accomplished because we know that people are still doing it tough. That’s why there’s all kinds of cost‑of‑living help rolling out from Tuesday the 1st of July. But very pleasing, very encouraging to see this very substantial and now quite sustained progress in the fight against inflation.
Journalist:
Treasurer, just a question on defence spending, NATO has agreed to increase defence spending to 5 per cent. How will Australia respond to match our key allies’ boost in spending?
Chalmers:
First of all, it’s not unusual for our partners and friends around the world to express or have a preference for us to spend more on defence. We are actually already very substantially increasing our investment in defence. We’ve found room in tight budgets for an extra $11 billion over the forward estimates and around $57.5 billion over the course of the next decade. So to take defence spending from around 2 per cent of our economy to 2.3 per cent by the start of the next decade represents a very substantial increase in our own defence spending.
We understand the challenges in the global national security environment. That’s why we’re increasing our spending.
Now obviously we’ve seen the announcements out of Europe. We’re obviously tracking those developments very closely. Richard Marles will do a characteristically great job representing our interests at the NATO summit, but we are already dramatically increasing our investment in defence. That’s warranted and that’s why we’re doing it.
Journalist:
What’s your plan now to create more economic growth now?
Chalmers:
We’ve got a substantial agenda when it comes to making our economy more productive and to make it more resilient. We’re already rolling out a lot of competition policy reform. We’ve got the Future Made in Australia agenda which is all about maximising the benefits of a global economy which is changing and where the change is accelerating in areas like energy, the changing nature of our industrial base. And so we have a plan for growth. But what we want to do is we want to build consensus around the next steps, and that’s what the Economic Reform Roundtable is all about.
We start from a pretty solid foundation. There’s no major advanced economy that has inflation in the low 2s at the same time as we’ve got unemployment in the low 4s and we’ve had 3 years of continuous economic growth. We want to see the private sector play a bigger and bigger role as growth gathers pace in our economy. We’ve got some reforms underway, but we know that we need to do more and we think the best way to work out what to do next is to do that together, and that’s what the Economic Reform Roundtable is all about.
Journalist:
Are you still planning to end energy rebates in December?
Chalmers:
That’s the plan. And from Tuesday we’ll be extending those energy bill rebates for a further 6 months. So Australians will be receiving another $150 in bill relief in the second half of this year. We said when we extended those energy bill rebates in the most recent Budget that they are not designed to go on forever. Obviously we keep them under constant review. We’ve extended them a couple of times, and that’s because one of the secrets to our success – whether it’s getting on top of inflation, providing cost‑of‑living help, keeping the economy ticking over, keeping unemployment low – is we keep all of these settings under review. We do what we can from budget to budget to provide help where that can be done in a responsible and affordable way. The most responsible and affordable way for us to continue to help people with their electricity bills was to extend it for 6 months, another $150 in relief.
And that’s one of a whole range of initiatives which will roll out from next Tuesday. The minimum wage goes up. Superannuation goes up. Paid parental leave is longer. We’re paying the super guarantee on paid parental leave. There’s incentives for construction apprentices. There’s relief on student debt. The family payments go up with the indexation. There are a whole range of things which change from 1 July, which is next Tuesday. And that’s because we recognise even though we’ve made a lot of progress on inflation, a lot of people are still under pressure and we’re helping where we responsibly can.
Journalist:
Just on defence again, in the South China Sea, Australia and the UK have just completed some exercises. Can you tell us what prompted that?
Chalmers:
It’s not unusual for there to be movement in our region, whether it’s defence exercises or in other ways. That’s been a pretty persistent feature of our region for a little while now. And, really the thing that we recognise is that the international environment is becoming more complex. The national security environment is becoming more complex. It’s one of the reasons why we’re increasing our investment in defence.
Journalist:
Just back to volatile global oil prices, what are you doing to stop servos from price gouging?
Chalmers:
So I’ve asked the ACCC to use their powers and their resources to make sure that service stations aren’t taking advantage of people as we’ve seen this quite substantial volatility in the global oil price. At the start of the year, the global barrel price was about $82, by the start of this month closer to $62. It went all the way up to almost $80, now back to the high $60s. So we’ve seen some really volatile oil prices. And I’ve asked the ACCC, our consumer watchdog, to ensure that Australian motorists aren’t being taken advantage of. We don’t want to see service stations treat people like mugs. We want to see the petrol prices reflect developments in the market. And so we’ve asked the ACCC to use their powers and their resources to ensure that’s the case.
Journalist:
Treasurer, just one from Canberra, the ACT government has announced it will hit residents with a $250 health tax. Do you agree with it, and would you encourage other states to do the same?
Chalmers:
I’m very focused on my own Budget and on the national economy. And what I’ve tried to do, whether it’s the budgets in Queensland yesterday, New South Wales yesterday, the ACT, is I try not to engage in the running commentary on state and territory budgets. We’ve all got difficult decisions to make, to make our budgets more sustainable and to fund the critical services that the people we represent rely on. And so it’s not for me to kind of engage in commentary about all of that, whether it’s New South Wales, Queensland or the ACT. They’re doing the best job they can in making it all add up. And that’s what we’re seeing in the ACT.
Journalist:
And just on Donald Trump’s f‑bomb – I know you spoke earlier today – but how surprised were you by the strength of the language?
Chalmers:
I’m not going to quibble with the language that President Trump used because I think it reflects the gravity of the situation in the Middle East and it reflects the importance of both sides sticking to this ceasefire that has been negotiated. The stakes are really high in the Middle East, big consequences and implications for the global economy. We need to see this ceasefire implemented properly and stuck to and I think the President’s language just reflected the magnitude and the importance of this ceasefire.
I think it would be unusual as Australians for people to quibble with that kind of language. The President chooses his own words, and I think on this particular occasion that blunt speak just recognises how important it is that this ceasefire be adhered to, and it recognises that the stakes are very high in the Middle East right now.
Thanks very much.