JIM CHALMERS:
Thanks for coming today. I wanted to update you on three developments overnight and this morning - the IMF report card on Australia, the US Fed decision on interest rates and the Reserve Bank decision on the five dollar note.
The International Monetary Fund has provided a glowing endorsement of the Albanese Government's economic plan and our October Budget. As part of its annual assessment of Australia, the IMF has praised the economic policies of the Albanese Government. And this independent assessment backs our reforms to paid parental leave, our changes to make early childhood education cheaper and provide more university and fee‑free TAFE places for more people. And it rightly identifies these policies as key when it comes to boosting labour supply to deal with these critical jobs and critical skills and labour shortages in our economy - absolutely critical to what we are trying to do to fill these labour shortages and skills shortages in our economy. That combination of training and early childhood education will be game‑changers when it comes to beginning to deal with this legacy of not having enough skilled workers for the jobs that the economy is creating. The IMF also welcomes our plans and our policies to promote cleaner, cheaper, more reliable energy in particular, it says that the Safeguard Mechanism will efficiently reduce emissions in our economy. It also, really importantly, endorses the spending restraint in the October Budget. It says that that is helping them make sure that we're not adding to the inflationary pressures in our economy, and we're not making the work of the independent Reserve Bank harder. So the IMF has presented a glowing endorsement on our economic plan and our October Budget. The IMF has very specifically backed in our policies on early childhood education skills and universities and training, on climate change and energy, and our spending restraint in the Budget. Something like 99 per cent of the upward revisions to revenue in the October Budget returned to the budget over the next couple of years, and 92 per cent over the forward estimates. The IMF has rightly backed in our spending restraint and our responsible economic management, and our broader economic plan and economic policies as well. And that glowing endorsement is obviously very, very welcome and important.
The second issue I wanted to talk about was obviously overnight, the US Federal Reserve has increased its benchmark interest rate by a quarter of a percentage point. This is the smallest increase since the start of the tightening cycle that began in March last year. But the market in the US is still anticipating and pricing in further US rate increases in the months ahead, as the Fed continues its efforts to tame inflation. This is one of the key risks to the global economy in 2023 - the impact of higher interest rates on the US economy and around the world as well. This is one of the pressures that we have coming at us from around the world, but obviously when it comes to inflation it's felt most acutely around the kitchen tables of this country as well. So we will watch closely developments when it comes to interest rate decisions in the US. There was an interest rate increase a few hours ago announced by Chairman Powell in the US. This is one of the things in the global economy we’re watching most closely: the impact and the trajectory of interest rates in the US.
Obviously our own Reserve Bank meets on Tuesday as well. I don't go anywhere near pre‑empting or second guessing its decisions. It takes its decisions completely independently of government but the market is obviously expecting a further increase in rates here as well at some stage. We know how tough this can be for Australians. We know that these interest rate rises which began before the election are putting pressure on people. We know that there is a level of anxiety about a fifth of mortgages going from lower fixed rates to higher variable rates. That is one of the risks on our own economy in 2023 as well. When we've got inflation where it's at, when we've got interest rates having risen eight times over the last eight meetings of the Reserve Bank, the Government's highest economic priority is dealing with this inflation challenge in our economy. That's why we're providing the responsible cost‑of‑living relief where we can afford to do that, and where it doesn't add to the inflation challenge in our economy. We're providing that cost‑of‑living relief in a most responsible way. That's what happened in October and there'll be more to come in May as well. We've got a lot coming at us from around the world, but we've got a lot going for us here in Australia - low unemployment, the beginnings of wages growth, good prices for our exports. We are optimistic about our economy and our future, but we are realistic about the impact of rising interest rates in the US, the war in Ukraine, the near term difficulties in China before the Chinese economy recovers - hopefully stronger - so we're realistic about those challenges as well.
The final issue I wanted to touch on before I take a few of your questions is that the Reserve Bank has decided to make the next five dollar banknote feature a design honouring the culture and history of First Australians. We support this decision from the Reserve Bank. We were consulted on this decision. It is a decision for the RBA to take but the Governor consulted me in reaching this decision. I think this is the right decision come to for the right reasons. I welcome the decision taken by the independent Reserve Bank to ensure that the new five dollar note recognises and celebrates the culture and history and heritage of Indigenous Australians. It's important to remember a couple of things. The change won't happen for a fair while yet, there's actually plenty of time to consider and consult on the design that best honours First Australians. Also, it's important to remember that the monarch will continue to be on our coins as the Government has made clear. And so this decision taken independently by the Reserve Bank in consultation with the Government is an opportunity to strike a good balance here. The monarch will still be on the coins but the five dollar note will say more about our history and our heritage and our country, and I see that as a good thing. Over to you.
JOURNALIST:
Back to the IMF, they've laid out some pretty bold plans for tax reforms, scaling back stage three tax cuts, touching on housing tax concessions for capital gains, what's your plan to use tax reform to support growth? Where are you starting?
CHALMERS:
The point that the IMF is making is that when we've got these pressures on the budget, whether it's the cost of servicing the debt we inherited, whether it's the NDIS, defence, aged care or health, we need to make sure that we've got the tax system that can sustain the funding that we want to see in our areas of national priority. And that's the Government's view as well, and that's why we began in the October Budget with multinational tax reform - we've always seen that or for some time we've seen that as the best place to start, in addition to some measures on compliance. We recognise when the budget is under as much pressure as it is now there is a role for spending restraint, which the IMF endorsed, there is a role for savings, and we made billions of dollars of savings in October. And if there are avenues for responsible tax reform into the future, like what we're doing in multinationals, then obviously those opportunities and avenues should be explored.
JOURNALIST:
Will you take the IMF's advice to [inaudible] stage three tax cuts?
CHALMERS:
That's not our intention, our policy hasn't changed on the stage three tax cuts. Obviously, I'm aware and follow closely the constituency calling for those tax cuts to be rewritten or dumped. Those calls have been around for some time and the IMF has made a contribution to that as well. We listen respectfully, when those kinds of suggestions are made to us but the Government's approach to the stage three tax cuts hasn't changed. We've got other priorities in the Budget, you'll see them in May.
JOURNALIST:
I might ask you about your essay published on Monday. It talks about a new sustainable finance architecture, which could include a new taxonomy labelling the impact of different investments. This could be expanded to include natural resources and biodiversity goals to help investors align their choices. Businesses already adopted ambitious climate targets under pressure from climate‑focused investors. Why do you think we need another layer of bureaucracy when companies are already being held to account?
CHALMERS:
It's not another layer of bureaucracy, I want to make that clear. This is about better designed and better informed markets. I spend a lot of time in the boardrooms of this country speaking with big investors, including big institutional investors, and they want to see some clarity and some consistency when it comes to disclosure. Not just the climate risks in our business sector, but also the ways that businesses are grabbing the opportunities of changing sources of energy. And so this proposal that we announced last year, not in the essay, is to make clear and consistent some of the work that some businesses are doing already, to adopt international best practice, so that when investors are weighing up different destinations for their capital, they can more easily compare the climate risks, opportunities and plans of different parts of the economy. So this is led by the private sector, it's led by big institutional investors. They have asked very clearly for more clarity and consistency and that's what we'll be providing. I met yesterday with representatives of around $20 trillion in capital in Sydney and they are enthusiastic backers of what we are proposing here. We put out a consultation paper last year on this, and we're still consulting until the middle of February, I think from memory. And this is part of our efforts to get cleaner and cheaper, more reliable, increasingly renewable energy into the system. This is something the investor community is very, very interested in and it's consistent with some of the themes that I set out in the essay.
JOURNALIST:
The IMF also suggests a lift to JobSeeker and the tightening of the NDIS. What do you think of those?
CHALMERS:
I think clearly, when it comes to the NDIS, we want to make sure that it's sustainable so that we are providing decent levels of service and care to Australians with a disability - that is a top priority. And obviously, Minister Shorten and I, and Minister Gallagher have been in discussions about how we make sure that we can afford to fund the NDIS. The fastest growing area of spending in the Commonwealth Budget is the interest costs on the debt we inherited. The second fastest is the NDIS, and so clearly we need to focus on that. The Minister has set up a process - a review process - and this question is part of the thinking that he's doing. We created the NDIS, we believe in it, we think it has an absolutely central role to play, not just in the care economy, but in our society more broadly. And in order to make it succeed and work, we've got to make sure that it's affordable.
JOURNALIST:
Just on the five dollar note, has there been any discussions about who might feature on the note?
CHALMERS:
The proposal from the Reserve Bank is that the five dollar note would contain a First Nations design rather than a person - a design. And they intend to consult broadly and widely over a period of time to choose that design. This is a decision that they've taken, but I was consulted on it and I said that the Government wouldn't have a problem with them going down this path. I think this is an opportunity to strike a good balance between the monarch on the coins, and the First Nations design on the fiver. I think it's the right decision taken for the right reasons and I welcome it.
JOURNALIST:
Is this a push to become a republic so we don't have to change the notes again in the future?
CHALMERS:
It's an important opportunity to recognise on the five dollar note more of our Indigenous heritage and history and culture, going back tens of thousands of years. And it's no secret that I would like to see Australia become a republic but this is a simpler, nearer‑term change, which says we've got an opportunity here to recognise the monarch on our coins, recognise First Australians on the five dollar note, and I think that strikes a good balance.
JOURNALIST:
Coming back to your thesis, there is this broader idea about what's happening in the private sector [inaudible]?
CHALMERS:
I think it shouldn't be beyond us as a country to line up the goals we have for our economy and the goals we have for our society, and I don't think that's an especially controversial idea. And the way we do that is we better design and better inform our markets. We have a better working relationship between the public sector and the private sector, recognising the private sector has an absolutely central wealth‑creating, jobs‑creating role in our community. And as we modernise our economy by broadening and deepening our industrial base, increasingly that will be powered by cleaner and cheaper energy. And I think if we can do all of these things - strengthen our economy and strengthen our economic institutions, we can strengthen our society and our democracy at the same time. So some of the specific ideas which come from that: when it comes to better informed and better designed markets, disclosure of climate risks so investors can make better informed decisions in our markets; when it comes to housing, the Housing Accord, which tries to say we've got this massive opportunity with trillions of dollars in superannuation funds, why don't we get the big institutional investors, the state and territory governments, the building industry into the room and work out how we build a million homes over five years, and make them affordable so that people can live near where the jobs are being created. So there are a lot of opportunities for us to modernise our economy, to recognise the central role of the private sector, but to make sure that our national objectives, our national economic objectives and what we want for our society, are in concert with each other and not colliding with each other - and that's the basis of what I wrote.
JOURNALIST:
What are your expectations of next week's meeting between the Trade Minister and his Chinese counterpart? Can we expect a quick breakthrough on export limits?
CHALMERS:
I'll leave you with Minister Farrell when it comes to the specifics of that meeting. But more broadly, we are realistic about our ability to manage what has been a very complex relationship for some time, we believe we give ourselves a greater chance of resolving our differences if we engage. Our goal is to try and stabilise the relationship between Australia and China but we do that with a dose of realism. A lot of these differences that governments of both political persuasions have been trying to manage have been long standing or building for some time. But we think these trade restrictions should come off. We've made that view publicly and privately, and that would be good for our employers and our exporters in particular. It would be good for Australia to see those restrictions lifted. I don't want to pre‑empt or front run the meeting that Don Farrell will be having with his counterpart, but clearly that's one of our priorities. We're realistic about quick wins but we're pleased with the level of engagement that we've had over the last six or eight months or so because we do want to stabilise the relationship. We do want our region to be peaceful and prosperous and secure and stable, and we think we give ourselves the best chance to do that if we engage with people in good faith.
JOURNALIST:
There was a person arrested in the AFP’s crackdown on a massive Chinese Australian money laundering scheme in Sydney, and they entered the country on the significant investment visa. Are there any policy loopholes, particularly in migration, that the Government needs to address in the wake of this operation?
CHALMERS:
I'm reluctant to comment on the specifics of that case. I don't want to obviously prejudice any further steps that might be being taken there. But when it comes to our migration system, we've had the view for a long time that the pandemic and its aftermath is a good opportunity for us to look right across the migration system to make sure that we've got the settings right - that they're in the national interest. My colleagues, Clare O'Neil and Andrew Giles, are doing that. They've got a review of our migration settings, which I've been trying to play a helpful role in, and you'll see that before long. I'm reluctant to wade into the specifics of that case.
JOURNALIST:
Just back on the IMF, would you consider changes to capital gains tax treatment of the family home? The IMF said comprehensive medium‑term tax reforms was needed to meet higher structural spending. Isn't that the IMF saying - given the Government’s spending commitments, it needs to raise more tax?
CHALMERS:
On the specific question, that's not something that we've been working up or considering. On the broader question about the sustainability of our tax base, obviously when you want to fund these big - either unavoidable or desirable pressures on the budget - then you need to find a way to pay for them and that will be a combination typically of spending restraint, savings in the budget and responsible tax changes. We've indicated our priorities when it comes to tax - multinationals are our priority and compliance with the existing tax laws as well. That is in accord with what the IMF is saying. We want to make the budget more sustainable. We inherited a budget in substantial structural deficit with all kinds of wasteful spending. We've begun to deal with that but that is an ongoing task. We value as a government the ability to provide good health care, to provide good disability care, and that costs money, and we need to make sure that we've got the tax base to sustain that.
JOURNALIST:
On that same note, the tax concessions for superannuation are worth nearly $53 billion a year - that's more than the NDIS. We’re waiting for the purpose of super. Do you have any other plans to tap into the cash that is there before then? We've seen Stephen Jones say this week, he’s standing by increasing the transfer balance cap by 200k [inaudible]
CHALMERS:
We come at this in a similar way to the way I answered your colleague’s question about the NDIS a moment ago. We created superannuation, and we believe in it. One of the reasons why we want to legislate the objective is because we want to clarify and lock that down so that that guides the decisions of future governments, and part of making superannuation the best version of itself is making sure that it can be sustainable. We've made that point for some time. You want to make sure that all of the various concessions are sustainable in this area, but in other areas as well. When it comes to the NDIS, when it comes to superannuation - tomorrow, the premiers and chief ministers will be meeting with the Prime Minister when it comes to health funding. We want to provide a decent level of care for Australians in the health system and in disability care and in other ways, and that means you've got to make the budget as sustainable as possible. Our priority has been spending restraint and winding back some of the wasteful spending of our predecessors, but tax reform has a role as well and that's why we're doing multinationals.
JOURNALIST:
Do you agree pharmacists should have the ability to prescribe medications to help alleviate the pressure on general practitioners?
CHALMERS:
I'm happy to leave that to Minister Butler. Thanks very much.