Jim Chalmers:
Today the Reserve Bank lifted the cash rate to 4.35 per cent. Australians were already paying a hefty price for this war in the Middle East and this decision will make things harder for people.
Just because this was a decision that was widely expected and broadly anticipated it won’t make it any easier for millions of Australians with a mortgage.
I intend to be pretty brief today, given the Reserve Bank Governor will have an opportunity shortly to talk you through the Board’s deliberations and its thinking in coming to this decision.
We have an inflation challenge in our economy, which is made worse by the war in the Middle East. We know that some of the costs and consequences of this conflict on the other side of the world, that Australians are paying more, particularly for fuel in that most recent inflation data, but those price pressures are expected to be felt more broadly across our economy as well.
When it comes to petrol in the month of March, you can see that petrol was the primary driver of that higher inflation figure that we saw in March. And that’s why, since then, we’ve cut the fuel excise. Our petrol tax cut is all about recognising the substantial pressures that motorists are under because of this war in the Middle East, and so we’re acting in a responsible way and a temporary way to take some of the edge off those higher fuel prices that people would otherwise be confronting.
Now, when it comes to the broader inflationary pressures in our economy, this is why a responsible budget is so important next week. The Budget will be handed down one week from today, and it will be a really responsible budget. We will save more than we spend. We will bank all of the upward revisions to revenue, and that’s because we recognise that even though the budget is not the primary driver of prices in our economy or these interest rate decisions, we intend to play a helpful role, not a harmful role, in the fight against inflation.
We know that there are inflationary pressures in our economy. We know that they are made worse by the war in the Middle East. We know that the end of that war and the recovery in the global economy is very uncertain, as the Reserve Bank has pointed out in their statement as well.
Now, the Reserve Bank’s statement, it’s important to recognise, does not point to public spending as a factor in their decision to increase interest rates today. And I think that’s really important. To those people who are pretending that the government’s budget is the sole driver of prices in our economy or interest rate decisions, they weren’t saying that last year when interest rates were cut 3 times. And so I think that’s an important bit of perspective, as is the statement today, which does not reference public spending as a factor in the Reserve Bank’s decision to lift interest rates today.
As I said, the budget will play a helpful role in the fight against inflation. We all want to see inflation come down in our economy. We know what’s driving it in the near term – the war in the Middle East. We know that there are some broader inflationary pressures which popped up when the private sector recovered quicker than was anticipated in the second half of last year.
We take these inflationary pressures really seriously. We know that Australians are under substantial pressure. We know that the war in the Middle East is making that harder, and that’s why we will provide cost‑of‑living relief in the form of that fuel tax cut, which is rolling out right now and funded in the budget, and it’s also why the budget will be responsible.
And one example of the very responsible approach that we’re taking to this budget is the changes that Chris Bowen and I announced today when it comes to support for electric vehicles. Electric vehicles are a really important part of our efforts to get transport costs down for families and to get emissions down in our economy. We are big supporters of EVs, and we’re very pleased to see the kind of take‑up that we have seen when it comes to EVs in our local communities, particularly in outer suburbs like those that I represent, that Chris Bowen represents. The take‑up has been a very good development.
This is all about making sure that we can continue to afford the still generous incentives that will be in the tax system for EVs. This change is all about certainty and sustainability, and it’s a good example, I think, of some of the difficult decisions that we are taking to make sure that we continue to repair the budget if we can and where we can in the context of these inflationary pressures, which are turbocharged by what we’re seeing on the other side of the world.
To finish where I began, we know that Australians are paying a hefty price for this war in the Middle East. We know that this inflation is a substantial challenge, and we will help to address it in the budget. And we know that today’s decision makes things more difficult for a lot of people.
Journalist:
Treasurer, just on inflation and the budget, how do you ensure that this tax rebate we read about today doesn’t contribute to inflation? And do you get frustrated when you see the Victorian budget today with the Premier pouring another $18 billion of spending into the economy? How much is that going to undo the efforts you’re making at a federal level?
Chalmers:
I mean, I haven’t paid a lot of attention to the Victorian budget yet. I’ll be briefed on it in due course, but I think you’d understand, Phil, that my focus today and for the next – for the foreseeable future is the Budget that we are putting together that we will release in a week from now.
Obviously a lot of the aggregate figures that we see reported from time to time combine Commonwealth and state spending, and so it matters. The state budget position obviously matters. But not my primary focus right now for reasons that I hope you understand.
When it comes to the first part of your question, I mean, there’s always a lot of speculation about budget measures in the weeks leading up to budgets. That speculation is not always right. And I don’t intend to add to that specific speculation today except to say that we are already cutting taxes. We cut taxes already. We are cutting taxes again in July. We’re cutting taxes again the July after that. We’ve got a tax cut in the form of the standard deduction. We’ve got a tax cut in the form of the 32 cents a litre relief at the bowser.
This is a government which cuts taxes, and we are enthusiastic about that because we have seen it as an important way to provide cost‑of‑living relief for people who need it. But beyond that, people will have to wait for the Budget in a week’s time.
Journalist:
Treasurer, you’ve said you see fuel as the driving force behind the inflation and the war in Iran as the driving factor behind the rise in fuel. Do you see Donald Trump as being to blame for this rate rise?
Chalmers:
Well, first of all, I’m pointing to the facts of the Australian Bureau of Statistics release of last week. What we saw in the month of March was overwhelmingly a story of higher petrol prices before our fuel tax cut kicked in and before we saw some of this welcome moderation at the bowser, at least in petrol, if not as much as we would like to see in diesel. And so the inflation that we saw in the month of March was a story about higher petrol prices. Higher petrol prices are all about the war in the Middle East. I think any objective observer would conclude that.
Now, when it comes to decisions taken in Washington DC or, indeed, in Tehran, Australians are hostage to those decisions taken about the conduct of this war and the end of this war. I think that’s self‑evident. From an economic point of view, from the point of view of a lot of Australians battling with these cost‑of‑living pressures, this war in the Middle East can’t come soon enough, and we’ve said that in different ways in recent times.
Now, obviously, I’m not going to get into, you know, a kind of a rolling critique of the conduct of the war. But my job is to manage the Australian economy, and the Australian economy is getting absolutely pummelled by this war in the Middle East, and Australians are paying the price for that, and we’re seeing that again today with this interest rate decision.
Journalist:
Bill Shorten has reflected that at least one of the reasons he failed to sell negative gearing and capital gains tax changes in 2019 was because he did not deliver all that revenue or promise to deliver all that revenue back into tax cuts. He thinks that would have been a holistic way to garner more community support. Is – what would you make of his observation, and do you think that a one‑off rebate would be insufficient trade‑off for imposing some new tax reform?
Chalmers:
Well, a couple of things about that. I mean, first of all, I think be careful about the assumptions that you’re making in your question. More broadly, I’ve got a lot of time for Bill. Good friend of Bill’s, big supporter of Bill’s, but I’m not going to engage in re‑running 3 elections ago. You know, my job is to make the right decisions for the right reasons in 2026, not to re‑run the election of 2019. And so I take seriously the views that Bill expresses from time to time. He’s entitled to his opinion. He obviously had a front row seat in that 2019 election, but my job is to look forward, not back.
Journalist:
Thanks, Treasurer. You’ve said that you’ve shown Michele Bullock an outline of the Budget. Given that this is a budget that’s moving around a lot, can you just talk us through how detailed was that able to be? And also, you’ve said that there’s a net save across the 4 years of the forward estimates. Does that also apply to this year, when the inflation pressures are most acute?
Chalmers:
Well, first of all, you’ll see all the numbers on Budget night. It’s not long to wait now, only another week. But when you look at the budget position, I think you will conclude that this is a very, very responsible budget. Our approach to savings, whether it’s the EV discount, the NDIS or other ways that we’ve indicated to you already, plus some additional savings, you’ll see that this is a very responsible budget which saves substantial money in order to fund our priorities and deal with some of these pressures and improve the bottom line.
Now, when it comes to the discussions between myself and the Governor of the Reserve Bank, you’d understand why they are necessarily private discussions. But I’ve spoken to her on multiple occasions in the course of the last few weeks. You’d expect that to be the case. I’ve run her through all of my budgets, and Phil Lowe before her. And that’s what I’ve done on this occasion. Again, we provide a bit of detail so that the governor can think through some of the same sorts of issues that we are thinking through. Beyond that, I think it would be impolite of me or indiscreet of me to run through the back and forth of all of those discussions.
Journalist:
The RBA is forecasting for next month, under the worst possible conditions inflation to rise to more than 5 per cent. Is that what Treasury is forecasting in line with what [indistinct]?
Chalmers:
You’ll see our forecasts in a week from now. But we’ve made it clear, and we’ve been very upfront in saying that the Treasury’s forecasts will also show a lift in inflation because of the conflict in the Middle East and a slowing of growth because of these developments as well. The Reserve Bank’s forecasts are not always completely identical to the Treasury’s forecasts, but to the extent that they show higher inflation and slower growth, then that will be a fairly familiar story.
We have not hit print on the Budget yet. There are good reasons that we have been working on this Budget deeper into the cycle than is always the case. But the story which is told by the inflation forecast today by the Reserve Bank will be fairly consistent if not identical to the forecasts that we release on Tuesday night.
Journalist:
Your Labor colleague Ed Husic has today hit out at WA’s GST share. He said that it’s a terrible deal and dysfunctional. Do you share those views? Are you tempted to make changes there or could you rule out any changes to WA’s GST share?
Chalmers:
Well, they’re not my views. Ed’s entitled to his view, but I don’t share those views that he has apparently expressed. I haven’t seen that interview, but I’ve seen a summary of it. It’s not consistent with the way that I think about this. I’m a huge supporter of WA and making sure that WA receives a fair share of the GST. I’ve expressed that view on both sides of the country – on the east coast, on the west coast and everywhere in between. There are important reasons why WA needs and deserves and will get from this government a fair share of the GST, and so to the extent that Ed does not share that view, then our views are not consistent.
Thanks very much.