RAFAEL EPSTEIN:
Stephen Jones is part of Anthony Albanese’s finance team. He is the Assistant Treasurer and Minister for Financial Services. Good afternoon. I’ll just double check – have we got you there Stephen Jones?
STEPHEN JONES:
Good afternoon, Raf. Good to be with you.
EPSTEIN:
We’ve got you. Excellent. Everyone can hear you. Are you relieved they didn’t go up as much as many people expected?
JONES:
Not as – well, obviously a smaller rise than most people were expecting and the markets were factoring in. So that’s good. But let’s not take anything away – this is going to be a sting for households who are going to see their mortgage rates go up in the following months. So, you know, we absolutely understand that this is going to hurt people who’ve got a mortgage to pay off. There’s no doubt about that. And small business who have got business loans, it will flow on to them as well.
EPSTEIN:
Are they doing too much, the Reserve Bank? Do they need to sit back a bit?
JONES:
The Reserve Bank is an independent body. It’s not for me to sit here and throw bombs at them from the sideline. The most important thing for the government to do is ensure that we’re not adding to inflationary pressures. And we understand the mission that the Reserve Bank has got. Nothing hurts low‑income households more than seeing the price of everything go up and up and up. Nothing would devastate household budget more than seeing inflation get out of control, as it has in many of the other countries that we like to compare ourselves with. So we’ve got to stay the course. It hurts. But the alternative is not doing nothing; the alternative is seeing inflation out of control, and that’s not a future the Albanese Government wants to contemplate.
EPSTEIN:
You’ve got Budget at the end of this month. You keep on mentioning inflation. Doesn’t sound like there’s going to be anything there to sort of maybe ease people’s bills because you don’t want to fuel inflation. Is that correct? There’ll be no extra goodies?
JONES:
It will be a disciplined Budget, Raf, and that’s what we’ve got to do. I think Australians understand that you can’t drive a car with one foot on the brake and one foot on the accelerator; you’ll blow the engine up that way. And we don’t want to blow the engine of the economy up. We want to ensure that we do the responsible thing so that, you know, early next year we can see the economy turn around and we can have Australians, you know, household budget starting to be restored. We’re committed to doing the things that we’ve promised to do and we want to follow through on those promises. But we’ve got to be very careful with this Budget that we manage the situation that we’re presented with.
EPSTEIN:
That expression you used is you can’t drive a car with one foot on the accelerator and the other on the brake. Isn’t that exactly what the stage 3 tax cuts are? Shovelling money out the door while interest rates are high? Isn’t that exactly what you’re doing?
JONES:
They’re a few years down the track yet, Raf. And if we’re still fighting inflation the way we are today, then, you know, we might have a different conversation. But right now, we’re doing everything we can to ensure that inflation gets turned around, and we have every expectation that we’ll be able to turn it around in the first half of next year with the measures that are being put in place – the monetary policy by the Reserve Bank and disciplined fiscal policy by the Albanese Government.
EPSTEIN:
Is there going to be any change to those stage three tax cuts announced in this Budget?
JONES:
Our priority for this Budget is implementing the policies we took to the last election, and in the taxation area it’s ensuring that multinationals pay their fair share. They’ll be the propositions that we’re working on. And Expenditure Review Committees, we had hours of meetings today, tomorrow, the next day. We’re going through the fine detail of the promises we took to the last election. And in the tax area I can tell you it’s our commitment is around international multinational taxation.
EPSTEIN:
That wasn’t a no. I’ll just ask that question precisely again. And I get it, right? Sometimes you need to leave yourself wiggle room because you haven’t made every decision, but I will ask that question again: will there be any change to the stage three tax cuts in this Budget?
JONES:
We’re not planning and it is not our plan to make any changes to the stage three tax cuts. We took a promise to the last election and it’s very important that we keep faith with the Australian people. This is really – it’s going to be a really tough Budget, Raf, and, you know, the next two Budgets we’re sort of walking on a high wire and it’s important that we keep faith with the Australian people. Of course, we’ve got an eye to what’s gone on in the UK. Of course, we’re looking at that. It’s incredibly real.
EPSTEIN:
That’s the ultimate lesson, isn’t it? That tax cuts could be a mistake?
JONES:
It’s a real‑life experiment and we’re watching very, very closely to ensure that we aren’t repeating the same mistakes that are going on in other countries around the world. But let me be clear: the things that we’ve got on the notice paper at the moment, the things we’re planning at the moment, are around our international multinational taxation proposals.
EPSTEIN:
Will the inflation forecast four years from now, that will be updated in October, won’t it? We will have a forecast from Treasury of what the inflation figure will be in two years’ time when those tax cuts come in. We’ll have an inflation forecast, won’t we, at the end of the month?
JONES:
Look, we’re getting monthly inflation forecasts. And, of course, all of the numbers that we’ve put together in our Budgets, inflation and inflation projections, are a key input. So you’re –
EPSTEIN:
Because you’re going to get all these questions again, won’t you?
JONES:
Yeah, that’s right. Look, expectations around wage growth, expectations around inflated costs of every input into the Budget, you have to have an – you have to be looking at inflation and costs, inflation, as you’re putting a budget together. We are hoping and working around a plan that sees the independent Reserve Bank’s monetary policy being effective in bringing down those inflationary pressures so that we can turn it around in the first half of next year. We think we can do it if we stay the course.
EPSTEIN:
Stephen Jones is the Assistant Treasurer, Minister for Financial Services, so he and others in the Albanese Budget are preparing to deliver – sorry, in the Albanese team with preparing to deliver their own Budget. We did have a Budget in May, but, of course, that was under the Coalition Government. So this is the reorganisation of priorities after the election result in May. Stephen Jones, if I can just read this text to you: “does government spending influence inflation, especially with this all election promises in Victoria? Should the state government reign it in? I’ve stopped my kids’ swimming lessons and maths tutoring.” That’s signed PT saying, “I don’t have much fat left to cut.” Do you think, Stephen Jones, that state government spending – and there’s big promises on both sides – does state government spending influence inflation?
JONES:
Look, all government spending influences inflation and household spending influences inflation. Like, when you’ve got supply constraints in the economy, whether it’s labour, whether it’s products in the supply chain, we’ve got supply shortages right across the economy. If we’re pumping more and more money into an economy with supply constraints in it, there’s only one thing that is going to happen – and that is inflation, the price of everything is going to go up.
EPSTEIN:
But we need those health services, right? So how do we – how do you spend the money – how do our State Governments spend money on health services without adding to my bills through inflation?
JONES:
So the trick, therefore, is to ensure that the places where you are putting money you’re not adding to inflationary pressures. So, you know, we’ve got to be really mindful about where we’re putting money and ensuring that you get a productivity dividend from the money that we’re spending. So if it’s money spent on infrastructure and we can get that money away without blowing up costs in the construction sector, then that’s a good investment because you have something at the end of it. You’ve got a piece of economic infrastructure at the end of it. So all of our – yes, across the aggregate level of spending matters but also the quality of the spending matters. So that if it’s directed towards productive investment and it’s directed toward areas where there aren’t capacity constraints, then you’ve got a bit more head room than you might have in other areas.
EPSTEIN:
I just want to nail down the stage 3 tax cuts. I am going to move on soon. We are going to have a chat to the state Health Minister Mary‑Anne Thomas. You’ll know we’ve got an election. But just on the stage 3 tax cuts, if I can ask what the inflation is going to be like in a few years’ time. When these tax cuts were waved through the parliament, inflation was under 2 per cent. Do you have any expectation that inflation two years from now will be under 2 per cent?
JONES:
Look, if we’ve got inflation continuing to run closer to 7 per cent as opposed to 2 per cent then we’ve got a much bigger problem, Raf. So that’s why all of our efforts at the moment are directed at ensuring that we don’t make a bad situation worse. I’m not going to today try and predict what inflation is going to look like in 2023‑24. I’m focused on the near term and how we can ensure that we bring it down off the highs of 7 per cent over the next six months, and I think that’s what Australians expect us to be focused on.
EPSTEIN:
Thanks for your time. Appreciate it.
JONES:
Good to with be you.