E&OE TRANSCRIPT
TV INTERVIEW
ABC AFTERNOON BRIEFING
WEDNESDAY, 4 MARCH 2020

SUBJECTS: National Accounts; Impact of Coronavirus on the economy; Scott Morrison’s failure to provide economic leadership; Stimulus; Newstart; Deeming rates; Panic buying; Well-being Budget.

PATRICIA KARVELAS, ABC AFTERNOON BRIEFING: I'm joined now by Jim Chalmers, welcome. The National Accounts for December show the economy grew by 0.5 per cent to be 2.2 per cent up over the year. That is much better than expected. Do you concede these numbers are better than what was widely expected?

JIM CHALMERS, SHADOW TREASURER: Two things about that, Patricia. Growth in the last quarter of the year was slower than the quarter before that so I don't think there's much to celebrate. There is quite a lot in the numbers which were released today which trouble us. On expectations it's not really relevant how an outcome differs from what some economists were predicting. The truth is some economists were predicting a worse number and some were predicting a better number. What really matters is the substance of the data that is released. What the data showed today is that the economy finished the year slowing, which means we are entering a difficult period of the Coronavirus and its fallout from a position of economic weakness rather than strength.

KARVELAS: But it did grow by 0.5 per cent so doesn't that undermine the argument that you have been making that the economy was softening before the bushfires and Coronavirus hit when in fact the economy was still growing?

CHALMERS: The test isn't whether the economy is growing, Patricia. That would be a test that is almost always met. It doesn't mean that that growth is strong enough -

KARVELAS: I just want to interrupt there. It isn't necessarily always met. It has been growing for a number of years but -

CHALMERS: I said it's almost always met, Patricia -

KARVELAS: But clearly there have been pressures on the economy and that was going on last year, right?

CHALMERS: The point I'm making is that 0.5 per cent is not a good outcome by anybody's measure. It is well below average, well below trend, well below what the Prime Minister and Treasurer inherited when they took over. The test isn't whether the economy is growing or not, the test is whether it is growing fast enough to create good jobs and opportunities for our people. That's the main point. No matter what the expectations might have been from some economists or what spin the Government puts on it today by no objective measure is slowing growth in the December quarter a good outcome. By no measure is business investment going backwards for the third consecutive quarter a good outcome. Wages and consumption were weak. What this shows is that the economy was weak before the Coronavirus hit and weaker than it should be because the Government hasn't had a plan to deal with this weakness for too long.

KARVELAS: But doesn't that demonstrate the economy is more resilient than Labor has been arguing?

CHALMERS: Of course not. We have got serious challenges in the economy. All of these numbers and indicators that I just ran through that are going backwards. For some time we have had a issue with business investment, with household debt, and with productivity. Wages growth has been stagnant, economic growth has slowed once again and we have a big problem with underemployment, almost 2 million Australians can't find a job or can't find the hours they need at work. In the Budget net debt has more than doubled under the Liberals. Right across the board there are very big concerns. The issues that we have been raising have unfortunately been borne out in the numbers which were released today.

KARVELAS: There are growing concerns that Coronavirus could drive the country into recession by the middle of the year. Do you think we are heading towards a recession?

CHALMERS: It remains to be seen. I don't like to make those kind of predictions. As we have said for some time, the Coronavirus and the impact of the travel ban will have a substantial impact on the economy. Most people expect the March quarter to be substantially weaker and it remains to be seen how long the impact of this Coronavirus hangs around in our economy. The broad expectation from the government, from us and from the economic community is that the economy is substantially weak right now, we just don't know how weak and for how long it will persist.

KARVELAS: Do you think it is possible that Australia could move to a recession by the middle of the year?

CHALMERS: I think it is likely that there is a substantial weakness in this quarter, and I don't want to make a prediction about the quarter after that. All of those eventualities are possible but I don't want to get into the business of predicting recessions. Others credible people are doing that but that is not my job. My job is to point out where the Government could be doing better and that is what I have been focused on.

KARVELAS: Sure, on the things it can control but on Coronavirus and bushfires do you think the Government can control those sorts of things?

CHALMERS: The bushfires and the Coronavirus don't explain or excuse on their own the weakness that has been in the economy for some time. The bushfires over the summer and the Coronavirus more recently don't explain the fact that we have had business investment at its weakest level since the early 90s recession, for example.

KARVELAS: Sure, but don't you accept that they make things significantly harder and tip the economy into this recession risk? That wouldn't have happened without them.

CHALMERS: I've said repeatedly that they will exacerbate some of the long-standing weakness we've got in the economy. I've been very upfront about that. The impact of the Coronavirus will be substantial. We don't yet know how substantial but of course it will
exacerbate the problems that we've got in the economy. But it is not the whole explanation for the challenges that have been in the economy for some years now.

KARVELAS: Economist Chris Richardson said he would like to see the Coronavirus stimulus package in the range of between $2 billion to $4 billion. Do you think it should be that sort of figure?

CHALMERS: It depends where it is spent Patricia. There is an obvious need for stimulus. We have been saying that for some time. There are two kinds of stimulus; there's the direct response for the industries that are most impacted by the Coronavirus. I have spent some time with them in the last couple of weeks in North Queensland and Far North Queensland. I've spent time with the education, aquaculture, retail, hospitality, and tourism sectors. They have a substantial need for assistance but more broadly we need a plan to deal with those other weaknesses that have been long-standing. That why we have been saying whether it is Newstart, something in the tax system, a wages policy or energy policy, all of these things are really important. The most important point I have made today is that these numbers that we got today show that our economic challenges didn't appear with the Coronavirus and they won't just disappear when it does. We have got some long-standing challenges as well and they can't continue to be neglected.

KARVELAS: Where you think the emphasis should be? The Government is looking at stimulus but you have put forward a range of ideas before. Do you think something like a Newstart increase should be a priority at this stage?

CHALMERS: There is a scope to increase Newstart in a responsible and measured way. That would be good from a social justice point of view but also good for the economy because every dollar would find its way into the shops and businesses of this country. That is one option that they should be considering. The Government's language has changed a lot over the last few days about stimulus. Not that long ago they were saying it was unnecessary, then that there might be a need and now they are saying they will make an announcement. We will see what they announce. we will look at it in good faith. If it is good we will support it. If it is insufficient then we will make those points as well.

KARVELAS: The Government says it is working on a targeted and scalable series of measures to keep Australians in business in business and Australians in jobs. What is the test? What are you looking for to provide your support to this? What are the things you'll be looking for?

CHALMERS: It needs to be fast enough to make a difference when the economy is at its weakest. It needs to be of a sufficient magnitude to make a difference and needs to be in the right areas.

KARVELAS: Just let me interrupt. I'm not trying to be rude but in terms of magnitude give me some detail on what magnitude you think it should be?

CHALMERS: It is just one of the factors, Patricia. I'm not going to put a number on it. I know that you would like me to but I'm not going to say it should be X billion or Y billion. It needs to be substantial but it depends where it is spent. It is one of the issues that we will be looking at and I think the broader point is that Australians are justifiably concerned about the impact of the Coronavirus so we will do our best to be responsible. We'll find agreement with the Government where we can but where we need to disagree we will do that too. We will have a look at what they announce, whether it is in the next few days or the next few weeks and we will make our views known at that time.

KARVELAS: Treasurer Josh Frydenberg says the Government is having another look at the deeming rate for pensioners. Is that something you welcome?

CHALMERS: Absolutely. Linda Burney has been a real warrior for this, standing up for pensioners in the system. For too long now Josh Frydenberg has propped up his Budget by refusing to adjust the deeming rate in a meaningful way. It is long overdue. We have got interest rates at 0.5 per cent, the lowest they have ever been but one of the deeming rates is at 3 per cent. It is unrealistic and it means he has been propping up his Budget on the back of short-changing pensioners which needs to stop. They can make a responsible adjustment and they should do that as soon as possible. Linda Burney is right, for too long people have been dudded.

KARVELAS: On a few things very briefly before I let you go, what do you make of the panic buying we are seeing, particularly for toilet paper?

CHALMERS: I can understand that people are really concerned. They see the news about the Coronavirus around the world and they are worried. It is important that they maintain a sense of calm and a sense of perspective. I think the Chief Medical Officer said it best when he said that that is probably not the best response to the news that we're getting about the Coronavirus. I can understand that people are worried and why they are worried, but it is important that they are calm. I saw a report about an incident in Western Sydney in a shopping centre which is really disappointing. People need to remember that we're all in this together and we need to exercise calm, be respectful to each other and make good decisions based on good sound medical advice.

KARVELAS: Do you think the Prime Minister has contributed to this panic?

CHALMERS: I don't want to make that accusation, Patricia. I don't think he has been especially effective at leading Australia through this, the bushfires or the economic downturn -

KARVELAS: Okay - on this, why don't you think he's been effective on this one?

CHALMERS: I think he has been playing catch-up. It has been clear sometime that the Government has needed to do something about businesses affected by Coronavirus and now we get this catch-up language they might do something soon. There has been an absence of economic leadership. He is a Prime Minister who goes missing. He is fundamentally a marketing guy, not a leader. We see that at times like this. In the same breath it is important that we do what we can to support the efforts of the medical profession and the Government when they follow the advice of the medical profession. Their advice is that they should not be panic buying and people need to be calm.

KARVELAS: Very briefly, on something Josh Frydenberg did in the Parliament where he mocked your Well-being Budget. I know it has been described as casual racism. He's talked about you going to an ashram and there was colour to the language that was used. Do you think it's casual racism or anti-Hindu?

CHALMERS: I think if the community is concerned then his responsibility is to engage with them. I saw that he had issued some kind of apology. It's for the community to determine whether that is sufficient. I think there is another issue at play which is that the Treasurer wants to dismiss issues like mental health, environmental sustainability and intergenerational disadvantage. I think those things are important even if he wants to dismiss them. And if he wants to talk about traditional measures of the economy - which I want to maintain - then he should answer for the fact that on his watch growth has slowed, underemployment is rising and wages have been stagnant.

KARVELAS: Jim Chalmers, thanks for coming in.

CHALMERS: Thanks Patricia.

ENDS