4BC Drive 03/05/22

03 May 2022

SUBJECT: RBA Interest Rates decision.



SUBJECT: RBA Interest Rates decision.
SCOTT EMERSON, HOST: We're joined now by the Shadow Treasurer Jim Chalmers. Jim, good to have you back on 4BC.

JIM CHALMERS, SHADOW TREASURER: Thanks for having me on your show again, Scott.

EMERSON: Jim, isn't the reality that even if Labor wins the election on May 21st, as the Reserve Bank Governor has just said, we're facing a series of interest rate rise - irrespective of whether it's Scott Morrison or Anthony Albanese as Prime Minister?

CHALMERS: The Reserve Bank has made it pretty clear that interest rates are rising, and that will make life even tougher for a lot of Australians who are already being punished by Scott Morrison's cost of living crisis. The Reserve Bank have flagged very clearly, before today, that rates are rising.

The difference between the Morrison Government and the Labor Opposition is that we think that there are aspects of this challenge that the Government should be taking responsibility for. Our concern is that when things go well in the economy Scott Morrison takes all the credit, but when times are tough he takes none of the responsibility.

The truth is, we've been reasonable and responsible about the causes of this interest rate rise today, but we've also said that there are areas where the Government can make a meaningful difference.

That's why the economic plan that we released is all about growing the economy without adding to these inflationary pressures. It's all about easing the cost of living pressure on working families in particular. It's all about getting real wages growing again. And it's also about trying to get some economic benefit from this Budget which is absolutely heaving with a trillion dollars in LNP debt.

EMERSON: Well, let's talk about what Labor would have done differently in the lead up to today if you had been in office. Because, clearly, the Government wanted to pump prime the economy to get us through COVID. Are you saying Labor wouldn't have done that?

CHALMERS: I think that there was a lot of wasteful spending in that. Clearly, the direction of it was right, and we were supportive of leaning into the challenge. We've made comments throughout that sometimes there was money being wasted - for example, at the same time as they were saying they couldn't afford to support small businesses that still needed a bit of JobKeeper help, they were spraying around tens of billions of dollars on businesses who didn't need it. So, we made that point and that's turned out to be 100 per cent right. There's been other ways, including $5.5 billion on submarines that will never be built, sports rorts, carpark rorts…

EMERSON: Yes, but Jim Chalmers, that money being spent on subs - all that money hasn't even been spent yet. It doesn't factor into the economy and what's been happening.

CHALMERS: The point I'm making Scott, is you asked me what I would do differently. In the main, we tried to be as supportive as we could during the worst of the pandemic, but I think any objective observer would say that some of that money was wasted. That's simply the point that I'm making. But the other point…

EMERSON: I want to pick up on this Jim Chalmers, because you're saying this money has been spent, but wasn't the Labor Party arguing for some of the money being spent to help people out in COVID - in terms of JobKeeper, JobSeeker and all that money - you wanted to keep extending it. Now, if that money had been extended, wouldn't that have added to inflationary pressure, driving up interest rates even faster?

CHALMERS: No, this is a point that I just made, Scott. There were some small businesses in places like Cairns, but not just Cairns, that still needed a bit of help beyond that March cut off and the Government said they couldn't afford to do that at the same time as they wasted at least $20 billion on businesses whose profits were already rising. We made that point at the time it turned out to be true.

The other point about what needed to be done differently, is today we heard Josh Frydenberg and Scott Morrison say that it is all international factors which are creating this problem. But the Reserve Bank Governor himself, in the statement that he released today, said that increasingly there are domestic factors at play. In the economic jargon, they talk about capacity constraints. What that really means, is we don't have the capacity to grow the economy without adding to these inflationary pressures. That goes to things like skills. We have a big policy on skills. It goes to things like child care, so that people can work more and earn more if they want to, and we've got a big policy on child care. So there are a range of policy differences at play here, and we've got a set of policies about growing the economy without adding to inflation. The other mob don't have a plan, they have a plan to get them through the election but not a plan to deal with some of these big defining challenges that the Reserve Bank Governor was talking about.

EMERSON: We've seen an increase by 25 basis points today and Philip Lowe has said, look, there's more increases to come. And he’s even flagged the possibility of interest rates getting up to 2.5 per cent - that's under the current policies you're talking about. So, give me a number that if Labor is in power from May the 21st, what's the maximum interest rate we're likely to see under an Albanese Government in its first term of office?

CHALMERS: I think you know Scott, that no government and opposition makes predictions about the independent Reserve Bank. Nobody has ever done that, nobody will ever do that. I think you know that. The important numbers today in the statement that was released by the Reserve Bank Governor, is he says inflation is going to get even higher. He also said - and this was one of the troubling aspects that probably won't get the attention it deserves - but he also said that on the Government's current policy settings the economy will only grow 2 per cent next year, which is well below average or well below trend today. Our side is taking them seriously, the other side isn't.

EMERSON: Alright, Jim Chalmers, appreciate you joining us here on 4BC Drive this afternoon.

CHALMERS: All the best Scott, thanks for that.