JIM CHALMERS:
I wanted to cover off primarily on the National Accounts released in the last hour or so, but I also wanted to touch on issues with the Commonwealth Bank and I wanted to say something about the crypto guidance that’s been released by ASIC today as well.
Today’s National Accounts confirm that growth in the Australian economy continues to be positive, but it’s weak. Our economy is still growing but very slowly. It’s weighed down by interest rates and cost‑of‑living pressures and global economic uncertainty as well.
Growth at just 0.3 per cent in the quarter and 0.8 per cent through the year is below historical averages and it’s below market expectations as well. Today’s release shows that growth is below what most economists expected, demonstrating that demand in our economy is weaker, not stronger, than they forecast.
The most encouraging aspect and the most important aspect of today’s National Accounts is what it says about real incomes growth. The most important and the most encouraging aspect of the data is the growth in real incomes, and this growth in real incomes reflects the progress that we’re making when it comes to moderating inflation but also solid wages growth and, very importantly, the government’s cost‑of‑living tax cuts.
At the intersection of those 3 things – moderating inflation, tax cuts and wages growth – that is why we are seeing real incomes per capita growing in today’s National Accounts. That’s very welcome and it’s very, very important as well.
On a per capita basis real gross disposable incomes rose 0.2 per cent in the quarter. Remembering when we came to office that measure was falling by 1.6 per cent.
Our policies are designed to ensure that Australians earn more and keep more of what they earn. We’ve still got more work to do obviously in that regard, but this data shows that we are making very welcome and very encouraging progress.
Australians would be much worse off and growth in our economy would be even weaker without our responsible and balanced approach to the budget and without our cost‑of‑living support. What the government has done is maintain a primary focus on fighting inflation at the same time as we don’t ignore these very substantial risks to growth in our economy.
If you take the inflation measure into today’s data, it reflects again the very substantial progress that we are making. The National Accounts measure of prices moderated to be now half of its peak at 3.6 per cent. That’s the lowest in almost 3 years, and that moderation in inflation contributed .3 of a percentage point to real income per capita growth in the quarter. So that’s the inflation part of the story.
The growth in real incomes was also driven by solid wages growth. This comes from the government’s support for wage rises and continuing jobs growth which has seen the compensation of employees measure grow 1.4 per cent in the quarter and 5.4 per cent higher through the year. This growth in compensation of employees contributed 1.1 percentage points to real income per capita growth.
If you think about average growth in compensation of employees, that is about 60 per cent stronger than what we saw under our predecessors. The rise in employee compensation has seen the labour share of income rise to 53.5 per cent, that’s up from 49.3 per cent at the time of the election, and that’s a very good development as well.
Then the third element of this is the tax cuts. What you see in today’s data is that the government’s tax cuts drove a $3.4 billion fall in income tax payable in the quarter. Income taxes fell 3.8 per cent in the quarter, and that contributed 0.8 of a percentage point to real income per capita growth.
You can see in those 3 measures – of inflation, wages and tax cuts – that we are seeing Australians earning more and keeping more of what they earn. That is very, very important in the context of an economy where growth has been especially weak.
In the data we see that new public final demand contributed 0.6 of a percentage point to growth in the quarter. We need to remember that most of this is state spending, and that the biggest component of Commonwealth spending is defence spending.
I see that our political opponents making comments about this today are very, very strange to be describing defence spending as some kind of sugar coating in the economy. If our political opponents are planning big cuts to defence spending, they should say so. In the absence of that, they should concede today that the biggest part of the Commonwealth’s part of new public final demand is defence sending, and that most of the new public final demand is coming from the states.
This is playing an important role in our economy. This spending – defence spending, state spending as well as our cost‑of‑living help and our investments in the NDIS and aged care – are an important part of the story when it comes to any growth that there is in the economy at the moment.
But the big explanation of the softness in the broader economy comes from weak consumption. Household consumption has barely moved for the better part of 2024. It didn’t grow in this quarter and only grew by 0.4 per cent through the year, and we know that’s because households are under pressure. We see that in discretionary consumption falling 1.1 per cent through the year, and this is unsurprising given interest costs from the interest rate rises which began before the 2022 election.
If you look at restraint in household spending and the increase in real incomes helped by our tax cuts, that explains why Australians are starting to rebuild their savings a little bit – not a lot, a little bit – in their household budgets. That’s why we saw the household savings ratio rise to 3.2 per cent from that very low 2.4 per cent that we saw in the quarter before.
In addition to what’s happening with real disposable incomes, the other helpful developments and hopeful developments are coming from investment in housing and also components of business investment more broadly. These are 2 perennial challenges that we’ve had in our economy for some time, and there are some good developments when it comes to housing and when it comes to business investment in these numbers.
Dwelling investment grew 1.2 per cent in the quarter. The level of investment in new homes grew 1.7 per cent in the quarter, to be now 6.8 per cent higher than at the time of the election. That’s a good thing as well.
Non‑mining business investment continues to grow. It’s now actually at a record high, and that reflects investment in new opportunities like data centres and the clean energy transformation. Overall, business investment fell in the quarter, but that’s because of the completion of some big mining projects. The non‑mining story when it comes to business investment is very encouraging.
If you look at the impact of global uncertainty and particularly weakness in the Chinese economy, you can see that in the falling exports for iron ore and met coal in the quarter. Overall net exports made a very small contribution to growth in the quarter. A big chunk of this was from inventories, but we can see the impact of a weaker Chinese economy and that global economic uncertainty in some of those elements of the export data.
If you take a step back from these developments and the very specific, very granular elements of them, you can see that the soft landing that we have been planning for and preparing for is on track.
The economy is still growing, inflation is in the band, we’ve got unemployment in the low 4s, more than a million new jobs have been created, and we’ve also made some very substantial progress in the budget with those 2 surpluses, $150 billion less debt, and all of the progress that we’ve made on the structural side of the budget too when it comes to the NDIS and aged care.
Don’t forget over the last 18 months around three‑quarters of OECD economies have had a negative quarter of growth – at least one. A number of them have had more than one negative quarter of growth. The Australian economy has continued to grow each quarter. We acknowledge that that growth is soft. We acknowledge that that growth is weak, and we know why that’s the case. It is weighed down very substantially by the interest rate rises which began before the election, combined with those cost‑of‑living pressures weighing on household budgets and the global economic uncertainty as well.
We know that even with the progress that we’ve made in the national data that doesn’t always perfectly translate to how people are feeling and faring in the economy more broadly. That’s why it’s so important that the defining feature of this government is responsible economic management, fighting inflation and rolling out cost‑of‑living help without ignoring the very substantial risks to growth.
There is enough in this data today to encourage us that the series of fine balances that we’ve been striking – fighting inflation primarily without ignoring the risks to growth – this is one of the reasons why the economy continues to tick over, even as it ticks over relatively slowly, compared to history and compared to what many economists have forecast.
The other thing that’s important to remember is if our political opponents were in charge the economy would be weaker and household budgets would be under more pressure. We know these are the risks of the Coalition because we know their record. They don’t support cost‑of‑living help. They think there should be $315 billion pulled out of the economy at the worst possible time. That is a recipe for recession and it’s a recipe for more pressure for households.
The biggest risk to our economy and to household budgets is a Coalition government. We know that because we are now into the final part of a 3‑year term and the Coalition still doesn’t have any costed, credible or coherent economic policies. They won’t come clean on the impact of their $315 billion in cuts. They won’t fess up that they did not support at any point cost‑of‑living help which is such an important part of getting incomes growing again in our economy, particularly when it comes to those tax cuts which they called for an election over.
We know that had we not changed the tax cuts in the way that we did almost 12 months ago and if they hadn’t come in in July, the economy would be weaker and people would be under more pressure. That’s one of the most telling conclusions from today’s data.
Before I take your questions, I wanted to touch on 2 other issues: the first one is crypto.
ASIC has put out some guidance on crypto and digital assets. That’s very welcome that they’ve provided that guidance. I know from interacting with this sector that there is a hunger for more guidance and more information about the approach of the regulators to what I consider to be a really important part of our economy, an emerging part of our economy.
Our government takes the crypto industry very seriously and we know that blockchain and digital assets present big opportunities for investors, for our economy, for our financial sector and also for innovation. We know that millions of Australians are using or investing in digital assets every year, and we want to make sure that they can do that as safely and securely as they can at the same time as we encourage innovation.
Harnessing data and the digital economy, whether it’s in the financial sector or more broadly, is a really key part of our productivity agenda, and we see digital assets playing a very big role in that regard.
The final point to touch on before I take your questions is around the withdrawal fees flagged by the Commonwealth Bank. Late this morning I spoke to the CEO of the Commonwealth Bank, Matt Comyn, about the decision announced yesterday by the Commonwealth Bank. As you know, we considered the changes flagged yesterday to be unacceptable. We made our views very clear in the course of the day yesterday. The changes that were flagged and that were announced are not acceptable or appropriate.
The Commonwealth Bank has released a statement in the last few minutes which make it very clear that they accept that those changes were not acceptable or appropriate. They will have another look at those changes to make sure that people aren’t worse off. We are talking in lots of instances about some of the most vulnerable people in the banking system.
I welcome their change of heart. I welcomed the opportunity to have a discussion with the CEO Matt Comyn this morning about these issues. I welcome the fact that they’ve put out a statement. I welcome the fact that they’re having another look at this because, frankly, the changes that were flagged yesterday were not acceptable. We’re pleased to see that the Commonwealth Bank agrees with that now. We want to make sure that, as they revisit this decision in welcome ways and they reconsider this decision, people aren’t worse off.
People are doing it tough enough as it is. They didn’t need this at Christmas or at any other time. So it’s a good thing that the Commonwealth Bank is having another look at it. We made our position very, very clear, and we’re pleased to see that position reflected in the statement released in the last few minutes by the bank itself.
Happy to take some questions.
JOURNALIST:
Treasurer, the economy is likely to miss the RBA’s 1.5 per cent growth forecast at the end of 2024. What would have happened to growth figures if federal and state spending had not been at record highs?
CHALMERS:
Without the contribution from public final demand, the economy would have gone backwards, and that’s been a common feature of the National Accounts this year. It’s not the first time that would have been the case, as I understand it. It certainly would have been the case in the September quarter were it not for public final demand.
Most of that public final demand contribution comes from the states, and from the Commonwealth point of view the biggest component is defence, and it’s playing a helpful role.
Our view is that we would rather be part of a soft landing in our economy than to clean up after a hard landing.
Our political opponents and our critics would rather the economy crash and that we try and clean up after it. That’s never been our position. We’ve always been planning for and preparing for a soft landing in our economy. That means that public final demand is playing a helpful role for the time being.
We acknowledge that as growth recovers in our economy the best kind of growth is private sector‑led growth. But when the economy is especially weak, when there’s a need for cost‑of‑living relief and investment in defence and investment in the NDIS, it is playing a helpful role.
We’d rather a soft landing. That’s what we’ve been planning and preparing for. That’s what this looks like. That is much better in our view than cleaning up after a hand landing.
JOURNALIST:
How long can government spending keep the economy out of recession?
CHALMERS:
We’ve made it very clear that the medium‑term future of growth in our economy needs to be private sector led. A big part of our productivity agenda, a big part of our investment agenda, some of the changes I’ve been discussing with the big institutional investors, with the state and territory treasurers, has been all about how we don’t replace private growth and private investment with public investment, but how we attract more private investment into our economy. That’s our objective.
For the time being growth is especially weak and public final demand is playing a helpful role, but we don’t expect that to be a permanent feature of the Australian economy going forward.
JOURNALIST:
Treasurer, this is a very disappointing set of numbers. As you enter an election year, what would you say to voters who are looking for signs of economic activity and growth and to businesses as well who are not investing? And, secondly, do you regret making some of the choices about relief to consumers in the fact that it’s pushed up inflation in the way the RBA is unlikely to cut rates, because that’s a big issue?
CHALMERS:
I don’t agree that it has, respectfully. If you look at the data prepared and provided by the ABS, it makes it very clear that whether it’s our energy bill rebates, our rent assistance, our changes to early childhood education, that’s pushing down inflation rather than pushing inflation up. That’s been a deliberate part of the design of our cost of living –
JOURNALIST:
Headline inflation, not underlying inflation.
CHALMERS:
Even underlying inflation has been moderating very substantially.
Respectfully, I’ve heard this analysis a few times over the course of the last 12 months or so, and what it ignores is that underlying inflation has come off very substantially. So has non‑tradeable inflation. So have a number of elements of our aggregate inflation.
We acknowledge that headline is not the only way to measure inflation. Underlying, trimmed mean, stripping out the volatile items, non‑tradeable, there are a whole range of useful ways of measuring inflation. On all of those fronts we’re seeing very welcome and encouraging progress. In the most recent updates to the Reserve Bank’s forecast for inflation, they pushed those forecasts down, as you would have followed very closely.
In terms of revisiting the decisions that we’ve taken. The decisions that we’ve taken in the Budget have been vindicated by the fact that growth in our economy has been especially weak. Growth in these figures today is much weaker than what private sector or public sector economists were anticipating.
That to me gives us encouragement that we have, when it comes to final demand and when it comes to cost‑of‑living help, we’ve struck the appropriate balance. We’ve got a lot of free advice to have slash and burn budgets and radical austerity. That would have been a recipe for recession.
As I explained to your colleague a moment ago, I’d rather avoid a hard landing than clean up after one. We’re seeing elements of a soft landing here, and that gives us encouragement that, acknowledging people are still doing it tough and growth is still weak in the economy, if we’d made the sorts of decisions urged on us by our opponents and our critics, growth would be weaker, and people would be getting less help and they’d be worse off.
JOURNALIST:
On CBUS, the report that APRA ordered about failings around how much money was spent, is Wayne Swan’s position as chairman tenable?
CHALMERS:
I’m not going to get into commentary about the chair of CBUS. I’ve made it very clear on a number of occasions now that I consider the revelations from CBUS to be very concerning. I’ve expressed my support for the regulators as they go about doing their important work. And I’ve made the point on a number of occasions now that where that involves a legal process then it would be unhelpful for any treasurer of the day to engage in a running commentary on that.
CBUS has themselves expressed via their CEO and their chair that they know that some of these developments are unacceptable. They’ve indicated that they will work closely with the reviewers and with the regulators to make sure that the issues and problems which have been uncovered, which are substantial, and which are concerning, that they are appropriately dealt with. I’ve made that point on a number of occasions now, and I make it again today.
JOURNALIST:
Treasurer, just looking at the GDP per hours worked, how do you explain 2 negative quarters of productivity growth? Is that to do with labour shortages or are businesses groups right when they say IR reforms are sending productivity backwards? And also, on that conversation with the Comm Bank CEO, how would you describe the nature of that?
CHALMERS:
First of all on productivity, the point that’s made about industrial relations completely and absolutely ignores the fact that we’ve had a productivity challenge in our economy for a couple of decades now. Not just a couple of months, not just a couple of years, we’ve had a productivity challenge for a couple of decades. It will take us some time to turn it around.
When it comes to productivity, we don’t believe that the answer is making people work longer for less. We believe the answer is in investing in people and their ability to adapt and adopt technological change.
What I’ve tried to do in my work with the Productivity Commission and more broadly, including the Productivity Fund to incentivise state reform is we’ve tried to broaden out the conversation on productivity beyond the old chestnut of industrial relations.
If industrial relations was the answer, then we would have seen a flourishing in productivity under previous Coalition governments, and we didn’t see that. The weakest decade for productivity growth in our economy since World War II was the 10 years to 2020. So it’s a longstanding problem that will take some time to turn around.
When you look at today’s quarterly data on productivity, when productivity ticked up on a couple of occasions in the life of our government, we didn’t get carried away because it’s a long‑term structural issue we’re trying to address. Similarly, we don’t get too carried away when we see it tick down again. We know we’ve got a challenge. We know we’ve got a problem. We’re addressing it in a much broader way than this problem has traditionally been attacked. We’re confident that we’ll make progress on productivity, but it won’t be overnight.
JOURNALIST:
On the Comm Bank CEO, how would you describe the nature of that conversation? Would the government have been in a position to actually do anything if they hadn’t backed down?
CHALMERS:
That won’t be necessary obviously now, and so I’m not prepared to speculate on a hypothetical situation that doesn’t exist. I’ve got a good close working relationship with the CEOs of this country, including the banking CEOs. I try to engage with them in a constructive way. I made it clear, we have made it clear publicly, that we didn’t think these changes were acceptable or appropriate.
The statement that went out today acknowledges that as well in a welcome way. If a bank like the Commonwealth Bank gets something wrong and they take steps to make that right, then that is better than leaving a suboptimal arrangement in place.
The conversation between myself and the CEO of the Commonwealth Bank was constructive. I work with them on a whole range of issues, including this one, and I’m pleased to see the statement that’s gone out in the last few minutes after we had that conversation.
JOURNALIST:
What would be acceptable for a fee for that sort of thing? The bank says there is a cost. Cash is declining. What would you accept?
CHALMERS:
They’ve said they’ll do the work now, and they want to make sure that people aren’t worse off, and that’s our interest as well.
People are doing it tough enough as it is without in imposition of extra costs. That’s why the Commonwealth Bank has had this change of heart and that’s why they’re having another look at it.
If you go through the statement that was issued a little while ago, you’ll see that their expectation is that the vast majority of these customers won’t be worse off, and if there is a portion of these customers at risk of being worse off then they will address that.
One of the things that makes that so important, as I said before, is that these are often the most vulnerable customers, whether they’re older customers or other customers. We want to make sure that the Commonwealth Bank does the right thing by them, and that’s the commitment that the bank has made today.
JOURNALIST:
Why did Australia change its position on the votes on Israel at the UN General Assembly, and on that the Opposition says you’ve abandoned key allies in the US and Israel in voting this way and sold out the Jewish community. Do you agree with that?
CHALMERS:
Of course I don’t agree with that. As usual, Peter Dutton is playing divisive politics with a very sensitive issue.
Our position that we took in the United Nations reflects our view that the best peaceful outcome here is a two‑state solution. The positions that we took at the United Nations reflect that.
I would recommend to you the statement of explanation that has been published by Australia in relation to this. It sets out our reasons for the positions that we have taken. I don’t have anything more to add beyond that. That is partly because my focus, as you would expect of the Treasurer, has been on the National Accounts and putting the finishing touches on the mid‑year Budget update.
JOURNALIST:
What do you say to Australians who have seen their living standards plummet as the Albanese government presides over the weakest economic growth outside COVID since the 1990s recession?
CHALMERS:
For me the most encouraging element of the numbers which came out this morning were the numbers that go to real household disposable income because at the intersection of wages growth, moderating inflation and tax cuts, we see the beginnings of a recovery in living standards which were falling substantially when we came to office.
Unfortunately when you read a lot of the commentary, recent commentary, about living standards, it completely ignores the fact that living standards were falling substantially when we came to office.
We have been working our tails off to try to turn that around. The tax cuts are an important part of that. Our approach to wages is an important part of that. Our fight against inflation is an important part of that. These numbers show that we’re making some progress.
More broadly I’d say to Australians we know that you’re under very substantial pressure. That is the reason why we’re rolling out cost‑of‑living help. It’s the reason why we changed the tax cuts. It’s the reason why we’re fighting inflation as our primary objective without ignoring risks to jobs and growth in the economy.
When we came to office people were already going backwards very substantially. We’ve been working to turn that around. We’ve made some progress but we don’t pretend that when we see these welcome developments in the national data that people automatically feel better or are faring better in communities right around Australia.
People are still under pressure. That’s why the cost‑of‑living help is so important. That’s why Peter Dutton and the Liberals and Nationals pose such a risk to household budgets. They don’t support cost‑of‑living help. They want to pull $315 billion out of the economy at the worst time and send it backwards.
That’s why the biggest risk – the biggest risk by far – to household budgets and to the economy more broadly is a Coalition government.
JOURNALIST:
Treasurer, as a fellow Workers’ Union member, do you back Paul Farrow’s intervention calling on Tanya Plibersek to end the uncertainty for salmon workers in Tasmania? And just a small follow‑on with the UN vote and with Ed Husic’s comments about fast tracking statehood for Palestine, did you support Labor’s formal recognition of Palestinian statehood before the election or after the election?
CHALMERS:
First of all, I haven’t seen all of Ed’s comments, and so I’m reluctant to weigh in on them. I haven’t read them in full.
On the issues in Tasmania around the salmon industry, we’re big supporters of aquaculture and the industry more broadly. We’re big supporters of Tasmania.
The obligations that the Environment Minister has is to weigh up the science and make sure that she can make the best, most rational decision about it. But we’ve made it very clear on a number of occasions, we are big supporters of Tassie and its industries, big supporters of aquaculture and fishing, fisheries, and we want to make sure we get to a sensible outcome here.
Paul Farrow is a terrific friend of mine, a very important union leader in our national economy, someone I have a lot of time for and spend a lot of time with. But these decisions are made in the usual way by environment ministers weighing up all of the various considerations.
JOURNALIST:
Treasurer, just again on the UN vote, I just wanted you to speak to what impact you think this may have on US relations given it does mark a split with the closest ally we have?
CHALMERS:
I hear sometimes that our opponents and critics want to pick and choose when it comes to the US relationship. Sometimes they say we’re too close, sometimes they say we’re not close enough.
We take these positions in the United Nations based on our best assessment of what’s necessary and what’s most consistent with our objective, which is peace in the Middle East and an enduring two‑state solution as a contribution to that.
Obviously we work very closely with our American friends, as we work closely with the heaps of countries that have voted the same way that we have in the United Nations over the last 24 hours or so.
Thanks very much.