JIM CHALMERS:
It’s been a very productive, very fruitful couple of days here in Washington DC, almost 30 engagements over less than 2 days. The central message from my discussions here is that there’s a lot of volatility and a lot of vulnerability in the global economy right now.
A really significant source of the global economic uncertainty is conflict in the Middle East and ongoing conflict in Ukraine as well. What happens in the Middle East has economic consequences for middle Australia. That is very clear. Even though we are confident that we’ve made substantial progress collectively and also in Australia, getting on top of this inflation challenge, which has been a central feature of our economies for the last couple of years, there are good reasons to be cautious as well.
The biggest risk to the progress that we’ve made together since the depths of COVID is conflict. Conflict in the Middle East, conflict in the Ukraine, casting a dark shadow over the global economy right now. That has been a central feature of the discussions that we have had in recent days.
There is always a premium on responsible economic management, always a premium on engaging with colleagues and counterparts, but especially when the global economic environment is as uncertain as it is right now.
We know that we can be confident, but also cautious about these global conditions that we confront. We’re confident that when it comes to global inflation, the worst is behind us. But we are cautious because of the risks of escalating tensions in the Middle East, because of the global economic uncertainty that we all feel in different ways in our own economies at home.
From an Australian point of view, we’ve made really substantial progress. Inflation has halved in our economy. Real wages are growing again. A million jobs have been created for the first time in a parliamentary term in our history. Every taxpayer is getting a tax cut, but at the same time, we’ve been able to deliver 2 consecutive surpluses for the first time in almost 2 decades. That means much less debt and much less interest on that debt as well.
One of the key recommendations from the IMF here for countries around the world is that rebuilding their budgets means rebuilding their buffers against this global economic uncertainty. And there, Australia has made a lot of progress, which is envied by a number of our friends from around the world.
One of the key conclusions from the IMF in their reports released in the last week is that Australia has gone from the 14th strongest budget in 2021 under our predecessors to a top 3 budget in this year.
That’s because we’ve gone about managing the budget and the economy in the most responsible way that we can. We’ve gone from 14th in the world to a podium finish. That is a powerful demonstration of that responsible economic management that has been the key to delivering 2 surpluses for the first time in a couple of decades.
Those 2 surpluses are really important too when it comes to the fight against inflation. We know that that fight against inflation is not over yet, but the peak is now a couple of years behind us. We will know more about inflation in Australia on Wednesday when the new inflation data is released, quarterly inflation and monthly data is released. We obviously don’t want to pre‑empt those numbers − economists expect something either side of 3 per cent. That means that inflation has halved on our watch if the numbers come out, as most economists expect. We’ll see what the numbers say on Wednesday.
But we have made really quite considerable progress in the fight against inflation, and we’ve been able to do that at the same time as we preserve the gains that we’ve made in the labour market and keep the economy growing as well. We shouldn’t forget that most of the OECD has had a negative quarter of growth in the last year. Some have had more than one negative quarter of growth. Australia has avoided that situation. That’s because we’ve struck a really effective balance between fighting inflation as our primary concern without ignoring the risks to growth, preserving the gains that we’ve made in the jobs market, providing cost‑of‑living relief in the most responsible way that we can. Over to you.
JOURNALIST:
To what extent did you discuss the pending outcome of the upcoming US election, what that might mean for those conflicts you were talking about, and what the thinking is in the global economic minds about what could change them?
CHALMERS:
The major issues on people’s minds here are escalation in the Middle East and the ongoing war in Ukraine. Softer growth in the Chinese economy is a big feature of the discussions here as well and a big factor in our own thinking. But in addition to that, there is a lot of discussion about the political uncertainty here in the United States.
We’re less than a fortnight now from the US election. Obviously, the outcome of that appears to be pretty evenly poised. And so there is a lot of attention being paid to the uncertainty in the politics of the US and what that might mean for future policies coming out of this town with relevance for all of us around the world.
JOURNALIST:
Just in terms of the outcome of the presidential election, if there’s a Trump victory, of course there’s the distinct possibility of a uniform 10 per cent or maybe 20 per cent tariff on all imports into the US so that could be very concerning for Australia, of course. My question to you is, to what extent is that actually legal or possible, given that we have a free trade agreement with the United States?
CHALMERS:
First of all, I don’t want to pre‑empt policy outcomes from either of the presidential candidates. Obviously, we’re aware of and cognisant of comments that former President Trump has made about tariffs, just as we follow closely the pronouncements made by Vice President Harris on the campaign trail as well.
Like any responsible government, we go through different scenarios, and we work through what they might mean for Australia but we don’t engage in a running commentary on that. We have said more broadly, we’ve said consistently for some time that Australia is a big beneficiary of open markets. We are a big beneficiary of trade, and we want that to continue. But we say that without engaging in the robust policy and political debate which is a central feature of this country a couple of weeks from an election.
JOURNALIST:
Have you met with anyone from the Trump or Harris campaigns?
CHALMERS:
I have met with Scott Bessent, who is a key economic adviser to former President Trump. I also met with Lael Brainard, who is a central player in the Biden White House. And so we’ve tried to make sure that we are in contact with and in discussions with major players from both sides of politics.
I think that’s what Australians would expect from us. I think Australians know that we don’t have a say in who the Americans choose to lead them. That’s obviously appropriate. We don’t engage in the domestic politics of another country. We play the cards that we are dealt.
What we’ve shown in the past and what we will show in the future is no matter who the Americans choose to lead them, Australia will work around the clock to have a good, effective, productive relationship with them, managing any issues that might arise.
JOURNALIST:
You mentioned earlier that Australia had rocketed up some fiscal league table from 14th to third or something like that. So, I presume that’s partly because the rest of the world is just doing such an appalling job with its budget management. And the IMF has been warning about explosive debt cards, et cetera, et cetera. The US is at debt levels like World War II, and of course, it’s not in a world war. So, how concerned are you that other governments around the world aren’t actually taking this seriously? And there could be a financial crisis caused by governments in the next few years.
CHALMERS:
People understand the seriousness of it. If you think about the reports from the IMF and others, which are discussed at great length at these gatherings, there is a concern about the serviceability and the management not just of the American budget position, but a lot of budgets around the world.
That’s why Australia stands out. Australians should be proud of what we’ve been able to achieve together over the last couple of years. This is, in nominal terms, the biggest budget improvement in a parliamentary term in our history. We have been able to deliver together a couple of surpluses, and that hasn’t happened for almost 2 decades now.
A lot of countries around the world are looking at what we’ve been able to achieve. And I think they understand that our budget position is partly because of the strength of our exports, it’s partly about the strength of our labour market, but it’s also because we’ve taken decisions to save about $80 billion. It’s also about the spending restraint that we’ve shown. These are the sorts of things that the world watches closely in other countries, including Australia.
We have been a stunning success compared to the budgets of other countries. We were 14th in 2021. Now we’re in the top 3. That’s a demonstration of the responsible way that we’re managing the budget.
JOURNALIST:
Just on the question of inflation that you mentioned earlier, you’ve obviously noted in the US how poisonous an issue that has been for the Democrats, the ruling party, if you like, and probably if they lose, that’s going to be the main reason why they lose. So, given that your attitude back home seems to be that you’d like the Reserve Bank not to be so aggressive in reducing inflation with interest rates, and so aren’t you worried, though, that when the federal election rolls around next year, if inflation is still high, that you’ll suffer the same fate as the Democrats may well suffer here?
CHALMERS:
I’ll leave the political analysis to you. You live here and work here and that’s your job.
I don’t give free advice to the independent central bank about decisions that they take or don’t take about the future trajectory of interest rates in Australia. I think that’s appropriate.
I focus on what I’m responsible for and that is helping in the fight against inflation. The Governor of the Reserve Bank has said herself that our 2 surpluses are helping in the fight against inflation.
We’ve also made sure that when we roll out cost‑of‑living relief, we do it in the most responsible way that we can. And I believe if you take the right economic decisions for the right economic reasons, the politics will take care of itself.
JOURNALIST:
It doesn’t take a genius to observe that inflation is a major issue for voters, regardless of how an economy looks on paper. Surely you must be taking something away from the experience here of how voters react to the kind of cost‑of‑living increases that they’ve experienced.
CHALMERS:
We notice it, we understand it. We follow the politics of the US and other countries pretty closely. There are important differences too. Australia’s budget position is much stronger, for example. We’ve been able to take a series of responsible decisions to make sure that that’s the case.
We know that people are hurting here in the US, people are hurting at home in Australia. And that’s where our cost‑of‑living relief is so important. That’s why our responsible economic management is so important. It’s why fighting inflation is still our number one priority.
Even as we go about fighting inflation, we’re not ignoring the risks to growth and we’re trying to make sure that we maintain the gains that we’ve made in the labour market over the last couple of years. We’ve had faster jobs growth than any major advanced economy and we’ve been able to do at the same time as inflation has moderated very substantially from its peaks in 2022.
That combination of outcomes is a good one. We know we’ve got further to travel when it comes to inflation. Inflation is still higher than we would like, but the trajectory has been very welcome and very encouraging.
JOURNALIST:
Is it fair to say, though, that the reason the Australian budget is in such good shape, or at least there are these surpluses, is because there’s been such a massive increase in income taxes as a share of GDP when you’ve had all this inflation and the brackets haven’t been changed by anywhere near enough to compensate. And so how sustainable is that large increase in income tax?
And just an anecdote, I’ve lived here a few years, I’ve talked to some American friends sometimes, so, you know, why don’t you go work in Australia? And sometimes the conversation gets to what’s the top marginal tax rate? What’s the marginal tax rate that I would pay? And then I have to explain to them it’s US$0.47 at US$120,000 a year, which is extraordinarily high by global standard, I’m sure you know that. So, how sustainable both is the budget from income tax and also that top rate to attract talent to Australia?
CHALMERS:
First of all, I’d say to your mates that Australia’s a wonderful place and they should come join us. And there are lots of reasons that they should do that.
Secondly, when it comes to the improvement in the budget, it has a number of sources. We have understood and recognised that the quality and price we get for our exports is a factor here. The fact that our labour market has been really quite strong is a factor here as well, a big factor.
But we’ve also found $80 billion in savings. The last Budget under our predecessors found $0 in savings. We found $80 billion, attributable to Katy Gallagher and her colleagues. Now, we’ve shown remarkable spending restraint when it comes to upward revisions to revenue, we bank almost all of them. And without doing those things, we wouldn’t have had those 2 surpluses. It’s important that that’s recognised.
JOURNALIST:
Are you concerned that inflation is just a spur in the side of any incumbent government, regardless of how they handle the budget?
CHALMERS:
We’re concerned about inflation because of its impact on people, not because of its impact on the politics of the day. We know that people are under pressure. That’s why every taxpayer is getting a tax cut, every household’s getting energy bill relief, there’s cheaper medicines, cheaper early childhood education, rent assistance, fee free TAFE, getting wages moving again.
That’s because our primary motivation has been to do what we responsibly can to take some of the edge out of these cost‑of‑living pressures, because we understand and acknowledge people are doing it tough. But more than acknowledging, we’re doing something about it, that’s our primary motivation. Get on top of inflation and deal with the cost of living where we can do that in a responsible way. That’s been our highest priority over the course of the last couple of years and it remains so for the time being.
JOURNALIST:
Just one last one?
CHALMERS:
Yeah.
JOURNALIST:
It’s fairly clear, looking around the Western world, that fast population, fast immigration growth, rather has been fairly unpopular. I think that’s becoming the case in Australia. Is it fair that governments of both persuasions of Australia over time have relied too much on immigration to boost GDP?
CHALMERS:
Immigration has been a really important part of the story of Australian economic success, but not the only part of that story.
We manage the immigration settings in a responsible way. We recognise that there’s a role for responsible levels of migration and we’re pleased to see that net overseas migration, which spiked after COVID, has been easing. It’s already peaked and it’s on its way down.
We would prefer to deal with the issues around migration in a responsible and in a rational way. From time to time it can be intentionally politicised and weaponised by people, including by our political opponents. I think that’s unfortunate. We will maintain the migration settings in the most responsible and rational way that we can. We’ll do that with an eye to the economics of it rather than the politics of it.
JOURNALIST:
And just quickly, Queenslanders are waking up today to head to the polls. What do you think is going to happen there today?
CHALMERS:
First of all, I say to every Queenslander, get behind a great Labor government led by Steven Miles.
There is a really clear choice in this election and it’s a choice between Steven Miles and his Labor government focused on the cost of living, or David Crisafulli and his opposition, which will be all about savage cuts.
Most of us Queenslanders see what happened under Campbell Newman as a horrible period in our state’s history. David Crisafulli sees it as some kind of golden era. He is Campbell Newman 2.0 and Queenslanders should be very scared of that because he has said he’s made billions of dollars in commitments, he said he won’t raise taxes and he’ll still balance the budget. And that can only mean one thing, which is savage secret cuts similar to what we saw under Campbell Newman.
Campbell Newman and David Crisafulli were joined at the hip last time. David Crisafulli has an agenda which is very much like Campbell Newman’s last time the LNP were in office.
I also want to say this about Steven Miles. Steven Miles is an extraordinarily authentic leader of our state and I am so proud of the campaign that he has run. It is one of the best campaigns I’ve seen in my political lifetime. And that’s because he’s a real person who cares about real communities and how people are faring. 50 cent fares, help with electricity bills, cheaper registration. This is all about understanding the main game is the cost of living.
And so, to every Queenslander going to the polls today, vote Labor for help with cost of living or vote for David Crisafulli if you want savage and secret cuts the likes of which we saw under Campbell Newman.
Thanks very much.