JIM CHALMERS:
These are very encouraging numbers, but we know that Australians are still under pressure, which is why Labor’s cost‑of‑living tax cut for middle Australia is so important. These numbers show we are making more welcome and encouraging progress in the fight against inflation, but it’s not mission accomplished yet because we know people are still under the pump.
One of the most encouraging elements of these new figures today is the fact that government policies are so clearly helping to put downward pressure on inflation. So this is more welcome and more encouraging progress, but not mission accomplished because people are still under pressure, and that’s why we want to give a bigger tax cut for middle Australia from the 1st of July. Every Australian taxpayer will get a tax cut, but for 84 per cent of Australians, it’s a bigger tax cut to help deal with cost‑of‑living pressures, which are still there, despite this really welcome and encouraging data that we are receiving today.
Now, as you know, the Consumer Price Index further moderated to 4.1 per cent in the year to the December quarter 2023, and that was down from 5.4 per cent in the September quarter. The monthly CPI, which bounces around a bit more and can be a bit more volatile, moderated further to 3.4 per cent in the 12 months to December 2023, which was down from 4.3 per cent in November.
Inflation is now at its lowest level in two years. Monthly inflation has a ‘three’ in front of it for the first time since December 2021. As I said, the monthly numbers do bounce around a bit, but we’re now seeing in the monthly figures almost half the 6.1 per cent recorded in May 2022 at the time of the election. So inflation has come off really substantially since its peaks in 2022, but we need it to moderate further and even faster because we know that people are still under pressure.
It is worth noting that today’s figures are better than the market expected. Annual inflation moderated 1.3 percentage points in the December quarter. That’s the fastest pace of moderation since annual inflation peaked at 7.8 per cent in the December quarter of 2022. Inflation increased 0.6 per cent in the quarter, less than a third of the quarterly peak reported in the March quarter 2022 before the election.
So these are all of the ways that we know that we’re making welcome and encouraging progress in this fight against inflation but the reason the tax cuts are so important is because people still need relief from these cost‑of‑living pressures.
As I said before, one of the especially encouraging parts of the story told today by the Australian Bureau of Stats is that our cost‑of‑living plan, even before we get to our cost‑of‑living tax cuts for middle Australia, is helping to directly reduce inflation in our economy. Our cost‑of‑living policies took half of a percentage point off inflation through the year to December quarter 2023. In the year to that quarter, electricity prices rose 6.9 per cent. That would have been 18.9 per cent without our energy plan.
In the year to the December quarter ’23, rents rose 7.3 per cent and that’s still too high, but they would have risen by 8.9 per cent without the biggest increase to rent assistance in 30 years which we budgeted for in the May Budget. In the year to the December quarter childcare prices fell 7.2 per cent. They would have gone up by 13 per cent without our plan for cheaper early childhood education.
Obviously other factors that supported the moderation in annual headline inflation were moderating goods prices. We saw price falls recorded for furnishings and clothing and footwear. On top of this, as you know, we intend to provide a tax cut for every Australian taxpayer but a bigger tax cut for middle Australia to help with cost‑of‑living pressures which are still in our economy.
Despite the challenges and the pressures coming at us from around the world and from around the country, whether it’s global economic uncertainty or heavy weather, whether it is this inflation challenge, and the impact of recent interest rate rises, we do face the period ahead from the position of genuine economic strength. If you think about 2024, what we’re seeing here is; inflation is slowing, real wages are growing, and from the 1st of July we will see tax cuts flowing.
We’ve had two consecutive quarters of real wage growth. We’re seeing welcome and encouraging moderation in inflation, and from the 1st of July every Australian taxpayer will get a tax cut, but 84 per cent of Australians will get a bigger tax cut to deal with the cost‑of‑living pressures that we still see in our economy.
This is not mission accomplished, but it’s welcome and it’s really encouraging progress, and it shows why Labor’s responsible economic management, including our cost‑of‑living tax cut for middle Australia, has been and will be so important.
Happy to take some questions.
JOURNALIST:
[Indistinct]
CHALMERS:
Well, I don’t make predictions or pre‑empt decisions taken independently by the Reserve Bank. They will weigh up all of the data in the economy and come to a decision independently before long. My job is to make sure that we’re getting the Budget in better nick, that we’re providing meaningful cost‑of‑living help and that we are recognising and acknowledging and understanding and doing something about the cost‑of‑living pressures which are still in the economy despite this welcome and encouraging progress in the fight against inflation.
It is really clear now, really beyond doubt, that Labor’s cost‑of‑living plan is helping. Our responsible economic management is helping as well and because of those things and because we understand the pressures that people are still under, the tax cut from 1 July will be another way that we support the workers and families, the women and young people, the steelworkers, and early educators of this country.
JOURNALIST:
[Indistinct] expansive cost‑of‑living relief [indistinct]?
CHALMERS:
I think responsible economic management is as important now as ever and what we’ve been able to do is to provide tens of billions of dollars in cost‑of‑living relief already at the same time we delivered the first surplus in 15 years, with another one in prospect. We found a revenue‑neutral way to provide more than $100 billion in tax cuts but in a way that does a much better job of recognising the pressures that people are confronting in middle Australia.
So what we’ve been able to do – and one of the reasons why we’re so encouraged by the progress that has been made so far – is we’ve been able to combine relief and reform. More relief for middle Australia and a better reform for our economy and we’re seeing some of the fruits of that effort in today’s welcome news.
JOURNALIST:
Will you support the BCA’s call for a tax summit?
CHALMERS:
I engage regularly with the BCA, the other peak groups and with the unions as well and community groups about the future direction of economic policy. I welcome, genuinely welcome, the views that people have put whether it is the business community, whether it’s the union movement, whether it is the crossbench colleagues in the Parliament, including the Teal Members of Parliament who have made, I think, welcome contributions to this tax debate.
What I would say about our approach to tax is we’ve got a better set of tax cuts that we’ll be putting to the Parliament; we’re putting our PRRT changes to the Parliament; we’re putting our changes to superannuation tax concessions to the Parliament; we’ve got multinational tax reform; we’re doing better on compliance. So really there is a very broad and ambitious tax reform agenda already underway. Obviously, we listen in respectful ways to those who put other ideas to us about tax, including for summits and other ways to engage. This government tries to be as collaborative and consultative and engaging as it can be, whether it’s in that form or another form.
We’ve got a broad and ambitious tax reform agenda underway. We need to legislate that and in the interim we welcome the suggestions that are made to us in good faith.
JOURNALIST:
[Indistinct] tax summit [indistinct]?
CHALMERS:
I think in the here and now we’ve got a tax reform agenda which is right for the economic conditions that we face. I think, unfortunately, some of the commentary around our proposed tax changes pretends – wrongly – that it’s only tax reform if it disproportionately benefits the people on the highest incomes. There’s more than one way to return bracket creep. There’s more than one way to reform the tax system, and we have found a far superior way – more relief for middle Australia, better reform for the economy, and that’s what we’ve put forward. It comes hand in hand with some of the other measures that we’re trying to legislate in the Parliament.
JOURNALIST:
[Indistinct] local issue: [indistinct] down the road [indistinct] Budget. The [indistinct] Premier this morning has been calling for infrastructure funding for Victoria, even though there’s been a Federal Labor government for some time and also education funding. Would you consider that? And potentially even taking the suggestion of the Chamber of Commerce here in Victoria that’s called for a Commonwealth bailout for Victoria’s debt to help them [indistinct]? Would the Commonwealth ever bail Victoria out of the debt?
CHALMERS:
Well, I think there’s two parts to your question. On the first part of your question, you know, we are big and enthusiastic investors in Victoria. The Victorian economy is an absolutely crucial part of the national economy. I work closely with Treasurer Pallas where I can to make sure that we are advancing our shared objectives.
When it comes to the position of the Victorian Budget, I think it’s worth recognising that all of our budgets are under pressure. The Victorian Budget is and the national Budget is. We’ve made some good progress when the comes to budget repair – first surplus in 15 years and another one in prospect – but there is still a lot of pressure on the Commonwealth Budget, as there is on the Victorian budget.
So we’ll work together with Tim where we can to try and get the best outcomes for the people that we both represent. We need to do that recognising that there’s not just pressure on one level of government’s budgets; there’s pressure on all of our budgets. We need to be responsible and realistic about that.
JOURNALIST:
[Indistinct] Commonwealth bailout, like the Chamber of Commerce, has asked?
CHALMERS:
We wouldn’t be considering it in those terms but, as I said, whether it’s that last National Cabinet meeting where we substantially topped up investment in health, whether it’s the work that we did together to extend the GST no‑worse‑off guarantee, I think Tim Pallas is a terrific advocate for the people of Victoria and for their economy. We have engaged over the last year and a half or so, and some of that engagement has borne really substantial fruit, including health funding, GST no‑worse‑off, we work together on all these sorts of issues, and so that’s how we’ll continue to go about it.
JOURNALIST:
Just quickly one from my colleagues at Channel 7 in Canberra, they just want to ask [indistinct] costs are soaring [indistinct] health insurance, does the system need reform?
CHALMERS:
One of our highest priorities is trying to address out‑of‑pocket health costs in the health system and the primary way you do that is by investing billions of dollars in Medicare. We are seeing, again, in that area, that that investment is bearing fruit. We know that people are under pressure and we know that out‑of‑pocket health costs can often be a big part of the story. That’s why we’re making medicines cheaper both ways. It’s why we’re investing in bulk billing and Medicare and those are our priorities when it comes to getting the cost of health care down.
I might just take yourself and then at the back and then we’re done.
JOURNALIST:
[Indistinct] are you concerned about relations [indistinct]?
CHALMERS:
Obviously I saw those reports, and they are concerning. We take those reports very seriously. In the first instance, that’s a matter for Minister O’Neil to look into, and she may have more to say about that at some future point.
JOURNALIST:
Will you at least [indistinct]?
CHALMERS:
Again, I’ll leave it in the very capable hands of Minister O’Neil.
JOURNALIST:
The government recently directed the ACCC to undertake a supermarkets inquiry.
CHALMERS:
Yeah.
JOURNALIST:
Amid great fanfare. Do you think that the ACCC has the resources to do it? Are you planning to give the ACCC additional resources to do that?
CHALMERS:
I am, and part of what the Prime Minister announced at the Press Club was making sure that the ACCC has the powers to get a fair go for families and farmers. But I also acknowledge that that requires some resourcing as well. I hope to say more about that really quite soon because we want to get those powers up and running. We want more transparency, we want more competition, if that requires a little bit of extra funding for the wonderful people at the ACCC, then I’m prepared to provide it.
Thanks very much, everyone. Thank you.