JIM CHALMERS:
Thanks very much everybody for coming out at relatively short notice. I need to be a little bit briefer than usual. I said earlier in the week that we would spend some of this week trying to get a handle on the impacts of the recent flooding on the Budget and that when I had a sense of that, a preliminary estimate of that, then I'd make those estimates known and that's what I intend to do today.
Australians are there for each other when times are tough and the Budget on Tuesday night will show that the Albanese Government is there for them as well. We are most focused on the human costs of these natural disasters but it will have implications for the cost‑of‑living, for the economy and for the Budget as well. It is too early for us to put a very precise price tag on the flooding that we're seeing through such large swathes of Australia but we do know that there will be consequences for the economy and for the Budget and what we're trying to do at this late stage ‑ putting the finishing touches on the Budget ‑ is to include some of those preliminary assessments of the likely impacts in the numbers that are released on Tuesday night.
The preliminary sense from the Treasury is that we think that the floods that we're seeing right now ‑ and remembering they've got a way to play out yet, unfortunately ‑ but our current assessment, or the Treasury's current assessment is that these floods will detract around a quarter of a percentage point from GDP growth in the December quarter that will be recovered in their estimation in the subsequent two quarters after that. It will add in their estimation 0.1 percentage points to inflation in the December quarter 2022 and again in the March quarter 2023. They expect that the floods will cause fruit and vegetable prices, for example, to be eight per cent higher than otherwise over the next two quarters ‑ the last quarter of this calendar year, the first quarter of next calendar year and that's based on the impact of previous flooding on some of our prime agricultural land. We need to remember here that we are talking about some of the best producing land in the world, producing a lot of groceries for domestic consumption but also for export. What's happening here to these areas is particularly cruel I think, given how close many of these farms were to producing what was expected to be a bumper crop.
I also wanted to advise you that I've put $3 billion in the Contingency Reserve for additional Commonwealth spending for disaster response, remembering that already, about one and a half billion, or almost one and a half billion dollars has been spent on payments to those who were impacted by previous floods and disasters. The additional money in the Contingency Reserve will go towards government payments and other kinds of support. We don't know yet whether that $3 billion will be sufficient but we consider it prudent, responsible to put some of that money into the Contingency Reserve on the expectation that the government bill for what we're seeing in these flood affected communities will be substantial. As I said, this is just an initial estimate, the costs could be even more significant but responding to natural disasters and building resilience in our economy will be absolutely central features of the Budget that I hand down next Tuesday night. We'll put a premium on what's right and what's responsible and we certainly won't be turning our back on Australians doing it tough in flood‑affected communities. I'll take a handful of questions and then I've got to get going.
JOURNALIST:
Treasurer, in light of this, does this change your thinking about cost‑of‑living support in the Budget in terms of the ability to put a bit into the Contingency Reserve that might help people? You're talking about an eight per cent increase in vegetable prices, you're talking about a time when fuel prices are coming right back up again. Is this altering your thinking in that sense?
CHALMERS:
The primary focus when it comes to cash payments will be Australians in the flood‑affected communities themselves. My colleague, Murray Watt, who's doing a characteristically terrific job in making sure that we get that money flowing as soon as possible, that's our first priority. There will be broader cost‑of‑living relief in the Budget as well but we need to be very, very careful that any cost‑of‑living relief that we provide in the Budget doesn't push up inflation further when Australians are already under the pump.
CHALMERS:
I've tried to explain over the course of the last few weeks, the difficult balancing act of trying to ensure that we provide that cost‑of‑living relief in responsible ways, that has an economic dividend and isn't counterproductive when it comes to the considerations of the independent Reserve Bank. That remains our approach to providing that cost‑of‑living relief ‑ it will be there in the Budget, but it will be responsible and all of our efforts are responding to what is the primary influence on the Budget, which is high and rising inflation.
JOURNALIST:
Treasurer, the 0.1 per cent increase to inflation predicted over the December and March quarters as a result of the floods. What does that do for the overall inflation peak of seven and three quarters of a per cent? Can we expect that to be higher now? Will it be eight?
CHALMERS:
One of the things that you need to remember when it comes to that inflation peak, and I hope to say more about that, in the course of the next day or two, is that there are swings and roundabouts in the inflation number. The big, ongoing contributor to inflation, increasingly, will be the impact of these natural disasters and the impact of higher electricity prices. But in the broader sense, what we're seeing in the economy when it comes to inflation, is that some things are coming off quicker than what was anticipated earlier in the year, and petrol is one of those, so swings and roundabouts in the inflation figure. And these natural disasters will have a big impact on inflation, but that needs to be balanced out, and netted out against some of the other pressures ‑ including petrol ‑ which has come off a bit faster than what was anticipated when we last forecast the inflation number in the middle of the year.
JOURNALIST:
On the reef funding ‑ as part of funding, how much has the Government clawed back from the controversial Great Barrier Reef Foundation?
CHALMERS:
We'll make all of those numbers clear in the Budget on Tuesday night, and my colleague Tanya Plibersek as well, but we're very proud of the investments that we're making in the Great Barrier Reef. I think Australians right around the country value and cherish and treasure one of the great natural wonders of the world, and the Budget will reflect our efforts to invest properly in protecting the reef against the impact of dangerous climate change.
JOURNALIST:
Treasurer, overnight Liz Truss resigned as Prime Minister, in large part due to her then Chancellor's mini‑budget. Feeling any pressure about what you might be presenting and what it might flow to? How do you think markets will respond to your Budget on Tuesday night?
CHALMERS:
I think every friend of the UK wants to see some stability there. We don't comment on the domestic politics or internal machinations of parties in countries with which we have a great relationship and a great friendship. I'm sure on a personal level, it's very difficult for Liz Truss. And when it comes to economic policies in the most recent times, I think it is a sign of the times, frankly, in the UK, that I've only been the Treasurer here for five months and I've already had four UK counterparts. I think it's in everybody's interests, not least of which the UK's, that there is a semblance of order and stability in the UK. And when it comes to economic policy, one of the big lessons from the UK ‑ again being careful about domestic policies and politics of another country ‑ but the markets have punished the kind of jerky movements in economic policy. One of the reasons why what's happening in the UK is relevant to us, is because in uncertain times in the global economy, there's a premium on what is solid and sensible and suited to the times. And I don't think it's any secret that when you get your monetary policy and your fiscal policy so substantially out of whack that the market judges you for it. And that's not to be critical of them, I think that's an objective assessment of what's happened there. And so the lesson for us is we do what's right and responsible, solid, sensible, suited to the times. Because the stakes are relatively high at a time when the global economy is a pretty uncertain place. And so a premium for us is on getting that balance right. I think we've got things pretty nicely lined up between fiscal policy and monetary policy in the document I release on Tuesday night, and I hope the market thinks the same.
JOURNALIST:
Employers are concerned that multi‑employer bargaining hasn't been limited to low paid workers, is that the Government's intention, to get wages moving across the economy and across supply chains, not just for the lowest paid?
CHALMERS:
We've made no secret of our intention to try and get wages moving across the economy, but beginning with the lowest paid. And one of the first acts of this Government ‑ indeed the first thing I put through the Cabinet with Tony Burke ‑ was our submission to the Fair Work Commission around the minimum wage, and we were pleased with the outcome there. We're going through a similar process when it comes to aged care workers in the care economy. We've had almost a decade now of stagnant wages. That's because that was a deliberate design feature of our predecessors' economic policy. We take a different approach. We think we need to get wages moving again. Our policies reflect that, we need to get wages moving again, strongly, but in a sustainable way, as well. And a big part of our thinking, as we put the finishing touches on the Budget, is that wages are about cost of living too. And for too long, stagnant wages have made it harder for Australians to keep up with the rising cost of living, and that situation can't endure.
JOURNALIST:
Are you satisfied with how the Greens have handled Senator Lidia Thorpe and her undisclosed relationship?
CHALMERS:
Look, I think those revelations are really concerning. And I think we need to hear more, frankly, from Adam Bandt about what has happened here. Australians have got a right to expect that the parliamentary oversight mechanisms through the committees, and the oversight of our legal system is based on the most appropriate disclosures. And the absence of that here is troubling. And so I think we need to hear more from Adam Bandt, about what he knew when, and what he did about it. Beyond that, I hope you understand it hasn't been a big focus for me the last few days.
JOURNALIST:
On that eight per cent increase in fruit and veg prices, Treasurer, that's going to be quite a hit for families already feeling the pinch in a supermarket. Is that just for the December quarter? How long will that take, do you think, to filter through? And is there anything you can do, particularly in this Budget, to give relief to families in terms of prices they're paying in supermarkets?
CHALMERS:
The harshest impact of what we're seeing in these flood‑affected communities will be felt over the December quarter and the March quarter. And so those percentage increases I referred to, are really about the last quarter of this year and the first quarter of next year. We know that these natural disasters have come at the worst possible time for farmers and for Australians who are already under the pump. The Budget will provide responsible cost‑of‑living relief in childcare, in medicines, in the cost of education, paid parental leave, and in other ways. We've done that carefully timed, carefully targeted, we've done it in a responsible way. The primary influence on this Budget is the inflation challenge and what it means for the cost of living. And so every main element of the Budget that I hand down next week, will be guided in one way or another by this inflation challenge. It's guided our approach to the cost of living. It's guided our approach to targeted investments in a stronger more resilient economy. And it's guided our approach to the savings made necessary in the Budget. The Budget has got a trillion dollars in debt and deficits as far as the eye can see. We've got a temporary and very, very welcome improvement in tax revenues in the near term, as a consequence of relatively strong commodity prices. That improvement does not make up for the big structural persistent pressures on the Budget in areas like the interest bill, on the trillion dollars of debt we inherited, the NDIS and some of the other big areas of Commonwealth Government spending. When you've got all this uncertainty around the world, the best response is a responsible Budget at home and that's what people can expect to see on Tuesday night. Thanks very much.