ABC BRISBANE DRIVE
MONDAY, 10 AUGUST 2020
SUBJECTS: Reserve Bank forecasts; Unemployment and the economy; Australian dollar; Economic support measures in other countries; Superannuation; Limiting the spread of the Virus in South East Queensland.
STEVE AUSTIN, HOST: Jim Chalmers, good to speak with you once again.
JIM CHALMERS, SHADOW TREASURER: Good afternoon, Steve.
AUSTIN: I know it's not household reading, but what stood out to you in the RBA's statement on Friday?
CHALMERS: You're probably right that it's not household reading, Steve, but there were a couple of really interesting points in there. The main point of the statement that the Reserve Bank put out was to try and prepare the country really for the fact that they think the economy is going to be weaker for longer. They think that unemployment is going to be a big challenge for longer. By their reckoning something like almost 400,000 extra Australians will lose their job between now and Christmas, concentrated in the areas that the Government's excluded from JobKeeper for obvious reasons. That's the pointiest end of the problem, but not the whole problem. I think the other really interesting discussion is something that animates me, I think we've spoken about it before; the thing that keeps me up most at night about this crisis are the consequences if a lot of people become unemployed and then long-term unemployed. I'm worried about the intergenerational disadvantage that comes from that. This is our first recession in three decades so a lot of people may not have experienced one, but the key defining feature of a recession is that we lose a whole generation of people at either end of the labour market, older workers and younger workers. We need to do whatever we can to try and avoid that.
AUSTIN: Okay, let's just come back a little bit. This recession isn't market failure as such. This was a deliberate government shutdown of the nation's economy so that intensive care units in hospitals won't be overwhelmed by the virus. In other words, they shut down supply side and demand side. You know what that means. They shut down the economy deliberately so that intensive care units will be saved. How much money should we keep on borrowing for this? There's lots of discussion in the papers, Jim Chalmers, about how much money we're spending and borrowing, and at what point this stops. There's a number of thinkers saying, how much longer do we do this for, or do we start shifting our policy and saying okay we're just going to have to live with the Coronavirus and open the economy back up again?
CHALMERS: First of all, on your observation about supply and demand, the way I try to think about it when the Government's pushing these payments out the door, for the right reasons I should say, at the same time as they've closed big parts of the economy down is that it's like having one foot on the brake and one foot on the accelerator at the same time in the economy. That's what makes this crisis diabolical, really. It's a really complex crisis in the economy that governments at all levels are trying to manage. You asked about how much the Government can spend. I think the priority is supporting people, and supporting their jobs as well. You need to look for the most productive, cost effective, intelligent ways to do that. Things like wage subsidies are really important. Things like payments to families are really important -
AUSTIN: How long can this go on for though, Jim Chalmers? Next year? Halfway through next year? All the way to the end of next year? Endlessly borrowing money while we shut down the economy because we've got a virus that is very deadly in certain circumstances that are unpredictable?
CHALMERS: Unpredictability is the key I think. It depends on the key uncertainties which are when and whether there's a vaccine at some point, and when and whether we have big subsequent outbreaks like we're seeing in Victoria at the moment. Those are the unknowns. Those are the things that will determine to a large extent what happens in the economy. But the answer to your question I think is if there's weakness in the economy for a long time, if we're trying to prevent that long-term unemployment, and if we're trying to prevent all of that social dislocation and intergenerational disadvantage then we need to do what's necessary. That doesn't mean it's a free for all. It means we've got to find the most cost effective ways to support people and their jobs. Every cent of this is borrowed money, as you rightly point out. It's got to do the job -
AUSTIN: And someone's going to have to pay back that money. That money's got to be paid back by the taxpayers of Australia, hasn't it?
CHALMERS: It will be some combination of three things. Ideally we can get the economy galloping again. That will help to get that debt down as a proportion of the economy. That's the first preference I think of all sides. At some future point, governments will have to contemplate tax changes or spending changes to try and get on top of this. But the key here is that governments, particularly I think conservative governments around the world, have to resist the temptation to flick the switch to austerity too soon because that would probably cruel the recovery before it gathers pace. We need to be really smart about it -
AUSTIN: It's not austerity, Jim Chalmers. They're handing out free money to people who aren't working. That's not austerity.
CHALMERS: No, but there's a lot of pressure on governments to unwind that quicker than the economic circumstances would demand is the point that I'm making.
AUSTIN: Yeah, okay.
CHALMERS: Even in the current Government there are characters on the backbench who think that JobKeeper shouldn't have been extended, that JobSeeker shouldn't have been increased, all of these sorts of things. I guess the point I'm making is that how much support goes into the economy should depend on how the economy is traveling. That relies on a couple of big things like vaccines, outbreaks, and the like, but our priority should be to prevent this spike in unemployment becoming long-term unemployment and disadvantage.
AUSTIN: The Reserve Bank in the statement you referred to on Friday, according to a business journalist that I read today, used the words "uncertain" or "uncertainty" 49 times.
CHALMERS: Yeah. It used to be "unprecedented". Remember, you couldn't read three paragraphs without reading "unprecedented" three times? Now it's become "uncertainty". There is an element of truth to that, but there are some things that we do know, and that is that unemployment will be higher for longer than we'd like. The responsibility is to try and do something about that.
AUSTIN: The US has pumped in total $20 trillion into their economy. There's still a couple of trillion that haven't been spent yet, or borrowed yet apparently. But $20 trillion into their economy. I can't even imagine - I can't even write that down. It seems to be eroding the strength of the US dollar. Will such a similar thing happen to the Australian dollar?
CHALMERS: If all countries act in unison then the relativities between the currencies mean there won't be massive shifts in the currencies. Our currency is a bit higher than it was six or 12 months ago because the American dollar's been weaker. Overall, nobody I've read is expecting big jerky movements in the currency.
AUSTIN: Is there a country in the world at the moment that's getting the balance right as far as Labor is concerned? Balancing economic activity with public health measures around the Coronavirus? Is there a country where you say, look Australia you should be doing what they're doing there?
CHALMERS: I think charitably, Steve, almost every country is in all sorts of strife. Nobody's hit the perfect balance. For example, in the UK some of the initiatives that they took earlier than other countries were heralded around the world as really smart things to do, but we just found out in the last 24-48 hours that their economy in this quarter shrunk by 21 per cent, which is the biggest of anyone -
CHALMERS: 21 per cent in one quarter. The Americans lost almost 10 per cent of their output over the same period. Nobody's really got a perfect handle on it. There's elements of what we've done here which have been successful on the health front and on the economic front, but nobody's really nailed it yet. That's why a lot of people, including the Reserve Bank, have been saying that things might be difficult for longer than we first thought.
AUSTIN: Jim Chalmers is my guest. He's the Labor member for Rankin, an electorate on the south side of Brisbane here federally. He's also the Shadow Treasury spokesperson for the ALP. Paul Keating spoke last week indicating his great displeasure - and I'm being gentle - about the Government allowing early access to superannuation. He just said it was ratting the future, and he said it meant that younger people were carrying the can for future generations more so than they should. What's your take on Paul Keating's observations about early access to super? Both tranches have gone out now, $32 billion in total I believe.
CHALMERS: Yeah and heading towards $42 billion by the end of the year. Almost 600,000 Australians, largely young Australians, now have no super whatsoever. I think Paul Keating's bang-on. This is a debacle. It's being rorted. There's fraud in it. The Government's not even checking if people are in hardship before they access their super. It has diabolical consequences for people's retirement income. If you're 25 years old and you take out two sets of ten grand, you're probably going to be about $100,000 worse off at retirement. That's just diabolical in intergenerational terms. It's bad for people's retirement incomes. I think Paul's bang-on.
AUSTIN: Listeners were telling me last week that they were putting the money into paying down their house mortgage, and buying cars.
CHALMERS: There's heaps of that. There are heaps of those stories Steve, and worse than that as well. I think that's a consequence of the Government just not checking that people are in hardship. You just have to tick a box basically on a form to say you're in dire straits and need to access your super but nobody ever checks. That's why the numbers are so much bigger than the Government anticipated. The other thing is, my colleague Stephen Jones -
AUSTIN: Well should the tax office go after those people now, by the way? I mean because they can audit them now, can't they? The tax office could knock on the door of Jim Chalmers and Steve Austin and say, you said you were in hardship, you're clearly not in hardship, how do you plead?
CHALMERS: The Government hasn't made that a priority for the tax office from the beginning. From the beginning there should have been some sense that if this was genuinely about hardship then people had to be in hardship. There's no checking whatsoever -
AUSTIN: So it's a de facto stimulus at young people's expense?
CHALMERS: Yeah, and the other point that Paul made was that that $32 billion in super that people took out of their own retirement incomes was bigger at that point than the $30 billion that had gone out the door in JobKeeper. It is a big part of it. I don't think it's been a good development. We warned about it at the start and that's what's happening. My fear is, Steve, and this is a political point, but my fear is that the Government does not really believe super, they're always looking for ways to undermine it, and they're using this crisis as an excuse to do that.
AUSTIN: My guest is Labor's Jim Chalmers. Finally, Jim Chalmers, I think when I spoke to you this morning privately you may have been looking after kids. I'm not quite sure. You might have been doing Mr Mum. I'm not quite sure how much you've been out and about in the electorate. Is there any sense of relief? What's the feeling in your electorate today knowing that there is not a Coronavirus hotspot in Logan as was feared by the Chief Health Officer of Queensland?
CHALMERS: There's a little bit of that, Steve, but I think people are, in a good way, going to be pretty vigilant still. Nobody imagines for a moment that we're out of the woods here. I think there's a lot of appreciation for the efforts of Annastacia Palaszczuk, the Premier. A lot of people are keen to tell me that. She's been right and resolute, and that's protected people and their jobs here, so that's a good thing. I don't think anybody's popping champagne corks about the next few weeks. It has been good that we haven't seen a big outbreak after those young women came back from Melbourne. But as we've seen in Victoria you can think you're on top of this thing and before you know it, you're not. People need to be vigilant. They need to get tested if they've got symptoms. They need to stay home if they've got symptoms. If we keep doing that then we can keep on top of this thing in southeast Queensland.
AUSTIN: Jim Chalmers thanks for your time.
CHALMERS: Thank you, Steve.