7:30 03/05/22

03 May 2022

SUBJECTS: RBA interest rates decision; Labor’s Economic Plan; Federal election.




SUBJECTS: RBA interest rates decision; Labor’s Economic Plan; Federal election.


LEIGH SALES, HOST: The man who wants Josh Frydenberg’s job is the Shadow Treasurer Jim Chalmers, thank you for being with us.

JIM CHALMERS, SHADOW TREASURER: Hi Leigh, thanks for the opportunity.

SALES: Interest rates have been historically low, unprecedented, for quite a long time, the Reserve Bank Governor today described them as at emergency settings. Isn't it the case that they were always going to go up regardless of who's managing the economy or how they're managing it?

CHALMERS: We've been responsible and reasonable about that for some time, Leigh. We understand the causes of this interest rate rise, but the Reserve Bank Governor made it clear in his statement today that some of the issues that are at play here - which are pushing inflation up much higher than what the Treasury or the Reserve Bank or the Government foresaw - is that there are domestic capacity constraints here. What we've said is we don't judge Scott Morrison for not taking responsibility for all of it, we judge him for not taking responsibility for any of it. There are places and ways that government can make a difference here, including growing the economy without adding to these inflationary pressures, providing longer term cost of living relief, getting real wages moving again, and making sure that we have something to show for this Budget which is heaving with a trillion dollars in Liberal debt - and that's what our Economic Plan is all about.

SALES: Well, on the point about embracing policies that don't cause inflation, let me give you a quote today from the former Reserve Bank Governor Bernie Fraser. He was criticising campaign promises to spend more money. “I don't think either side, no matter who gets back into power, really knows what's coming. They're more focused on winning, rather than what's good for the economy and what's good for the community”.

CHALMERS: I've got a mountain of respect for Bernie, I don't agree with everything he says. I think the important thing to take out of Bernie's contribution is that what really matters here is the quality of the spending in the Budget...

SALES: And he said there that both sides have got a problem there.

CHALMERS: Our investments are all about growing the economy without adding to these inflationary pressures. Just take two examples. We've got skill shortages running rampant in this economy, we've got a policy for fee-free TAFE places. We've got an issue here with the size of our workforce, particularly our skilled workforce, we've got a policy to reform child care so more people can work more and earn more if they want to. So those are the sorts of investments we need in the context of an economy where inflation is out of control. What we saw today in the Governor's statement was he says that inflation isn't just higher now, but it will rise further. He also said that economic growth next year will be a measly 2 per cent in their expectation. That should be a wake-up call for the Government. Unfortunately, we've got a Prime Minister who takes credit when things are good, but takes none of the responsibility when times are tough. He's got an excuse for everything, but a plan for nothing.

SALES: But if it's going to be a wake-up call for the Government, you could be the government in a few weeks’ time. Isn't going to be a wake-up call for you too? If you're going into this environment where it's given that inflation is going to get worse, interest rates are going to keep rising, aren't you going to have to recalibrate your spending? I get what you're saying about having a quality spend and so forth, but all spending does put money into the economy.

CHALMERS: Our economic plan, which I released last week with Katy Gallagher, is all about these defining challenges in the economy: runaway inflation, falling real wages, not having enough to show for all this debt in the Budget. So our Economic Plan is very carefully, very specifically, very deliberately designed to deal with these challenges. The choice at the election is between our Economic Plan, which will strengthen the economy in a high inflation environment and deliver a better future, versus a Government which has vacated the field. They spent all their time today, all their time in recent times, pretending that they have absolutely nothing to do with the economy. They take credit when times are good, they don't take responsibility when times are tough, and this scare campaign that Scott Morrison started in November last year about petrol prices and interest rates has blown up in his face. That's why his economic credibility, which was already in tatters before today, is now completely and utterly shredded.

SALES: Well, Phil Lowe in his statement this afternoon at his press conference also made it clear that overall this decision has been taken because of the economy's strength, because the economy is unexpectedly stronger than they thought it would be. Doesn’t the Government deserve some credit for that?

CHALMERS: We want the economy to recover as strongly as it can but what he also pointed to were the domestic issues here when it comes to the capacity of the economy, which have been left unattended for too long. There's partly a story about an economic recovery, obviously there are some international issues at play, but as the Reserve Bank Governor rightly pointed out there are issues in our domestic economy around the capacity of our economy. They've been left unattended, our Economic Plan will deal with them, the Government will continue to look for excuses to ignore them.

SALES: Only about a third of Australian households have mortgages. There are many people in the community who live off their savings and would be pretty happy to see an interest rate rise.

CHALMERS: But there's still, I think 3.4 million households, who have got mortgages. So that's not a small number. But yes, the silver lining in an interest rate rise is for people who live off their savings. The usual rule of thumb is for every $20,000 you've got saved, for an interest rate rise of this magnitude, it's about $50 a year. So it's not a massive amount of money, but it's better than nothing. That's the silver lining, but overwhelmingly the decision taken today will make life harder for millions of Australian families. We have a full-blown cost of living crisis in this country. We've got skyrocketing inflation, falling real wages, and now interest rate rises are part of the pain on Scott Morrison's watch.

SALES: Are you accepting of the fact that if you become the government, what you're going to be getting is further interest rate rises under your watch, no matter what you do?

CHALMERS: The Reserve Bank's made it clear that there'll be more interest rate rises, and so we're realistic about that. Clearly, whoever wakes up as the Treasurer on the 22nd of May will inherit a situation of rising interest rates, high and rising inflation, weak growth next year, falling real wages and a trillion dollars in debt. That is the inheritance, that is the sum total of this Government's legacy after almost a decade in office.

SALES: Jim Chalmers, thanks for your time tonight.

CHALMERS: Thanks very much, Leigh.