JIM CHALMERS:
I’m conscious of the hour, but I didn’t want to interrupt the Governor across town, so I’m sorry about popping up at 5:00 pm. The decision taken by the independent Reserve Bank Board today, was not a surprise. Interest rates were kept on hold as expected. This means that by the next time the Reserve Bank Board meets, it will be about 9 months since we’ve seen an interest rate hike. Holding rates means a little bit more certainty for businesses and for Australians who are already under substantial pressure. People are already under the pump and I think this decision to hold rates will be seen in that light.
The rate rises which are already in the system, are already hammering the economy. We saw that in the National Accounts for March. We saw that in discretionary spending and the savings rates, and in other ways as well. The interest rate rises which are already in the system are already hammering the economy and we’ve seen that in the data. Now inflation is higher than we would like, but it’s been moderating substantially since its peaks in 2022 and it’s clear that our policies are helping. We’ve already seen our cost‑of‑living relief take some of the edge off inflation in our economy, and we expect that to continue from next month when our cost‑of‑living help from the most recent Budget begins to roll out.
It’s also clear that our responsible economic management means we are doing our bit to fight inflation in our economy. We have turned 2 big Liberal deficits into 2 Labor surpluses, and the Governor of the Reserve Bank has said before the parliament that those 2 surpluses are helping the Reserve Bank in our fight against inflation.
Our strategy is the right one. Our strategy is about rolling out cost‑of‑living help and fighting inflation and repairing the budget without smashing the economy. Our objective here is to make sure that we can get on top of this inflation challenge, we can get the budget in much better nick without smashing an economy which is already soft. So, today’s decision is not a surprise. It is completely as people were expecting. I think for a lot of people and a lot of businesses who are already under enough pressure, it will be seen as a welcome reprieve. We know that the fight against inflation is ongoing and we are doing our bit in the Budget, getting the budget in better nick, rolling out cost‑of‑living help in the most responsible way, at the same time as we deal with all of these pressures that people are confronting in our economy. I’ll take a couple of questions. Millie.
JOURNALIST:
Treasurer, Millie Muroi from the Sydney Morning Herald. Michele Bullock today said the narrow path is getting narrower. Does that concern you at all?
CHALMERS:
No, that’s consistent with some of the comments that I’ve made in recent days, including a speech here in Sydney. It is a narrow runway, and we are looking for a soft landing. A soft landing is all about maintaining unemployment with a 4 in front of it. It’s about inflation moderating, it’s about the economy continuing to grow, and it’s about getting the budget in much better nick without smashing the economy. That’s what a soft landing on a narrow runway looks like. And our view on this is consistent with the view that the Governor expressed today.
JOURNALIST:
And I guess on unemployment. The unemployment rate is fairly low at 4 per cent. But a bunch of other measures, including underemployment, jobs reported to the ATO payroll service, and hours worked are all falling. Will the government have to step in with, for example, more income support or other support measures if the jobs market worsens in the RBA’s bid to get inflation down?
CHALMERS:
Well, our jobs market’s been a remarkable source of resilience in our economy. More than 800,000 jobs, well over 800,000 jobs created on our watch, a record for a first term government of either political persuasion. And still to have unemployment in the very low fours I think is a good thing. It means that we enter this period of economic weakness and uncertainty from a position of genuine economic strength. Having said that, clearly the labour market has been softening as well. We see that in some of the hours worked and ads – indicators that you refer to – and in other ways as well. Our objective here is to get on top of inflation without smashing jobs and without smashing the economy. And the fact that unemployment is around 4 per cent is a very welcome part of our armoury as we enter this period of economic weakness
I’ve just been asked to touch on 2 other issues, if I can just touch on them. The first one is being asked about the Governor’s and the statement’s commentary around future movements in rates. Obviously, any future movements in interest rates are decisions for the independent Reserve Bank and its Board. It’s not unusual for the Reserve Bank Board to leave its options open. But when it comes to a future interest rate hike, that is not what the market is currently expecting.
The second issue is around the role of the Budget. I don’t tell the Governor how to do her job and the Governor doesn’t tell me how to do my job. We are focused on responsible economic management, which is all about budget repair, cost‑of‑living help, fighting inflation without smashing the economy. But I want to make it clear, and I think it was in response to Millie’s question earlier on with the Reserve Bank Governor. When the Reserve Bank Governor was asked about the role of the Budget and whether it was expansionary or contractionary, she said I don’t think it’s very helpful to think about the budgets in isolation. She said the conversation of the Board today wasn’t specifically on the budgets. And she says, I don’t think you can do that when it comes to judging budgets in isolation.
Obviously, budgets are an important way for us to respond to pressures in the economy. But budgets aren’t the only determinant of inflation obviously, or future movements in interest rates as well. And I think that the Governor has made that really clear. The points that the Governor made today in the press conference were entirely consistent with very similar points that she made before the parliament in the Estimates process not that long ago, in the last week or two.
I will continue to focus on doing our job. We take responsibility for managing the economy in the most responsible way. That means turning Liberal deficits into Labor surpluses. It means paying down Liberal debt. It means rolling out this cost-of-living relief in the most responsible way and fighting inflation without smashing the economy. Thanks very much.