ABC Melbourne Drive 08/06/22

08 June 2022

SUBJECTS: Interest Rates; Inflation; Cost Of Living Pressures.






SUBJECTS: Interest Rates; Inflation; Cost Of Living Pressures.

RAFAEL EPSTEIN, HOST: Jim Chalmers is a Labor MP in Queensland, the MP for Rankin. He is, of course, the new Treasurer of Australia. Good afternoon. Thanks for joining us.

JIM CHALMERS, TREASURER: Thanks for having me back on your show, Raf.

EPSTEIN: We haven’t had inflation above five per cent, you know, over a long time significantly since the ‘90s. Do you think it’s going to stay above five per cent for a long time?

CHALMERS: It’s certainly a big challenge in our economy, Raf, and I’ve been pretty up‑front with people and my expectation is this inflation problem will get worse before it gets better. It is pretty much the universal expectation of all the economists now that the 5.1 per cent inflation that we got in the March quarter, which was already the highest in more than 20 years – almost everybody expects now that that will go even higher, and so what I intend to do is when the Parliament resumes at the end of July is I’ll give a full statement on the state of the economy and I’ll update that forecast for inflation.

But what that means for your listeners and for families right around Australia, people right around Australia, is that we are in for a difficult period ahead. Prices are skyrocketing, in energy, of course and groceries. Now we’ve got interest rate rises as well and we do understand and acknowledge that that makes it tougher for people who are just trying to make ends meet.

EPSTEIN: The market expects our official interest rate will get a lot higher a lot faster, something like two per cent when they’re not even at one per cent yet. Do you expect interest rates to go up a lot more?

CHALMERS: Just like my predecessors, Raf, I don’t want to get into the habit of second‑guessing or pre‑empting movements by the independent Reserve Bank, but you’re right, the expectation right across the markets – and also the sense that the Reserve Bank Governor himself has given – is that the interest rate rise before the election, the one that we got yesterday, everybody expects that there will be more of that to come. Where it settles is up to the independent board of the Reserve Bank.

EPSTEIN: There seems to be a problem. Governments often overpromise and then under‑deliver. You made very specific and limited promises about child care and energy prices during the election campaign. You didn’t in the detail promise you had the whole solution, but you and Anthony Albanese, you spoke endlessly about everything going up except wages and that you had a plan. I guess the question is: haven’t you created high expectations that you cannot deliver on?

CHALMERS: I think we’ve done the opposite, Raf, in the sense that we’ve been up‑front with people on both sides of the election. Yes, there are severe cost‑of‑living pressures. Yes, it is a fact that people’s real wages are falling. Yes, it’s a fact that we’ve inherited a trillion dollars in debt and that constrains some of our choices when it comes to helping people get through this difficult period. But we’ve also said in a pretty responsible and measured way, here’s where we can make a difference in child care, in medicines, in power bills over time, in getting real wages moving. Those are the core elements of our economic plan. We’ve been really measured about the commitments that we’ve given. We’ll implement those commitments in the Budget that I’ll hand down towards the end of October.

But we have said, and I think in the clip that you played from Anthony Albanese a moment ago, and I’ve said it countless times, since the election, there’s no switch that you can flick which will make these cost‑of‑living pressures disappear. There’s no switch you can flick to make a trillion dollars of debt in the budget disappear. We’ve got to work at it around‑the‑clock in a sensible and responsible and methodical and measured way, and that’s what we’re doing.

EPSTEIN: Maybe I’ll have another go at that question with this text. It actually came through yesterday, but it was a text from Sally. “Labor said all the way through the campaign they had a plan for making everything better and doing it better than the Liberals. They also knew everything was going up already and would continue. Stop pretending they didn’t know. They did damn well know and they said they could do it better, so just get on with it.” What would you say to someone who’s feeling that?

CHALMERS: Well, respectfully, Sally, and to anybody else who thinks that, we are getting on with it, and that begins with acknowledging the situation as we find it. These aren’t political opinions. They’re economic facts that we’ve got high and rising inflation, rising interest rates, falling real wages and a trillion dollars of debt. That’s just a blunt summary of the economic situation as it existed when the Government changed hands. But I think Sally is right to say, and right to expect, that what follows that acknowledgement and that assessment of the economic conditions is a responsibility for the new Government to implement economic policies and plans which will begin to deal with these challenges, and that’s what we’re doing.

EPSTEIN: The things you’ve spoken about during the campaign, can they fix the problems we’ve got with inflation and with interest rates? Have you promised enough to actually make a dent in those problems?

CHALMERS: Well, there’s a couple of different ways you have to come at it, and also you have to recognise that because a lot of these challenges have been developing, certainly when it comes to stagnant wages, for the best part of a decade, and so you can’t fix that in 18 days of a new Government, as much as you would like to. So, you’ve got to come at it in all different ways. First of all, provide responsible cost-of-living relief and we’ve said our priorities there are child care, energy, medicines and real wages. But you’ve also got to have a plan but grow the economy in a way that doesn’t add to these inflationary pressures. You almost need to sort of lift the speed limit on growth in the economy – 

EPSTEIN: You need to do a lot more than what you’ve spoken about. These problems are big. You’re going to have to do a lot more than what you spoke about during the election campaign.

CHALMERS: These are big challenges definitely, but you’ve got to start somewhere. We think that training policy, we think childcare policy, investments in the NBN, the care economy, digital economy, advanced manufacturing – all of these investments which we’ve announced are a good place to start. But we have acknowledged the problems are very big and we’ve highlighted where we’ll begin to deal with them. We’ve also got some pretty serious constraints in the Budget which we shouldn’t lightly dismiss. We can’t do everything that we would like to do immediately. There’s not room in the Budget for even all of the good ideas that people have, so we’ve got to begin somewhere. We think a targeted package of cost‑of‑living relief, plus training, energy and childcare reform and investments in key parts of our economy those are the right places to start.

EPSTEIN: I’ll run through a few of the options you might have in a moment. Jim Chalmers is with us, the Treasurer of Australia. It’s a quarter past 5. I’ll get to power in a moment, but the LAMITO, every year the Coalition put off the low- and middle-income tax offset. It’s due to expire after the end of this financial year. It’s the easiest, simplest thing for you to do, isn’t it, extend it so people under $120,000 get that little bonus at the end of every financial year?

CHALMERS: Well, it comes with a price tag of somewhere between $7 billion and $8 billion so it’s not a decision that we’ve been able to take because of those budget constraints. The Government didn’t extend it beyond – it existed last year and people get it in their refund this year. We’ve been pretty up‑front about that and I expect that some of the other measures that you are about to run through in saying that we can’t afford to extend them all forever. That’s a key part of us being responsible with the Budget.

EPSTEIN: Let me switch to energy prices then. A few different options you may or may not have. Has the Energy Minister found any coal‑fired power stations that can be started up soon? Does that capacity exist?

CHALMERS: Well, there’s an issue with some of the generators where they’ve either for planned reasons, like maintenance, or unplanned reasons, a shortage of stock or some other reason, there’s an unusually high amount of outages at the moment. So one of the things that the Energy Minister Chris Bowen is talking with his State and Territory counterparts about – as we speak, unless it’s finished in the last 10 or 15 minutes – how we get that generation back online, because that is a big part of the problem, but not the only part of the problem and so...

EPSTEIN: Is there going to be any of those switched on? Do you know?

CHALMERS: Chris Bowen will update us on those conversations when they conclude. The point I’m making is there’s a near‑term set of challenges in the energy market where, the regulators have rightly, and in welcome ways, imposed caps and guarantees. I’ve empowered the ACCC to make sure there’s nothing dodgy going on with pricing. There’s a whole range of short‑term measures but in the medium term, the only thing that will build the resilience and strength and certainty in our energy market to deal with these kinds of shocks is a decent energy policy and, as Anthony rightly pointed out in that clip you played a moment ago, a lot of what we’re seeing now is the costs and consequences of a decade of energy policy chaos.

EPSTEIN: So, medium term – Santos was saying today that we need to open up more gas projects. Would you think about imposing on any new gas or coal plan here? Would you impose some sort of domestic reservation on those new gas plants or a new coalmine? Would you do that?

CHALMERS: That’s part of the discussion that the Resources Minister and the Energy Minister and others would lead in our team. I’m not prepared to kind of make a commitment one way or the other – 

EPSTEIN: But it’s an option?

CHALMERS: Well, we’ve tried to make a make sure that all the options are on the table, all the sensible options are on the table. We’ve said before that there are types of reservations around the country and around the world, which are worth a look at, but I kind of don’t want to pre‑empt the discussions that my ministerial colleagues are having.

EPSTEIN: The Nationals want you to look at nuclear power. Will you look at that?

CHALMERS: No, because the economics of it don’t stack up. People have often an ideological view about nuclear power and that’s fine. But from my point of view, I don’t think the economics have ever stacked up in Australia, and they especially don’t stack up now as cleaner and cheaper sources of renewable energy come on to the market in ways that are economically undeniable. So, I’m not a supporter of nuclear power in Australia.

EPSTEIN: Will you bring forward the childcare things you promised in the campaign? I don’t think they’re due until the middle of next year. Would you bring them forward?

CHALMERS: That’s pretty soon in budget terms. We will budget for them in October and we’re not planning at this stage to bring them forward. There’s a few things we would need to put into place and we’d have to think about the budget consequences as well. So, I think for the time being, people should assume that kicks in on 1 July.

EPSTEIN: What’s surprised you the most after you became Treasurer?

CHALMERS: This is not the answer you’re expecting, Raf, I reckon, but one of the things that’s been really surprising in a good way is the way that people have come from all corners of the community, business, unions, community sector and elsewhere, with a spirit of genuine collaboration. I think there is a sense of... 

EPSTEIN: Did that surprise you?

CHALMERS: A little bit, a little bit. I thought it would be there, Raf, to be honest, but it’s been really – I don’t want to overdo it, but kind of uplifting to see the way that people – everyone wants to be part of the solution here, and I think that they’re tired of kind of needless conflict. They’re tired of complacency when it comes to our economy and they want to be part of solutions, and that’s been really quite a great surprise, actually.

EPSTEIN: A final loaded question: does News Corporation now have less influence than ever before? All of their newspapers came out against you. Does that prove they now have less influence than they ever have?

CHALMERS: Certainly people chose a majority Labor Government, so I’ll leave others to make the media commentary.

EPSTEIN: I want you to make the media commentary.

CHALMERS: I can tell. Well, most of those papers came out, editorialised against us and the Australian people came to a different view. That’s fine.  Our hope for media in Australia is that it’s as diverse as possible and people get their news from a range of sources. They obviously did that in the election campaign.

EPSTEIN: Someone reckons you look like Kevin Costner in The Untouchables. That’s from Andrew in Hampton Park. Have you had that before?

CHALMERS: Andrew, you need to get your eyes checked, my friend! I’ve not had that before, and I pity Kevin Costner.

EPSTEIN: Well, there’s a first time for everything. Thanks for your time.

CHALMERS: Thanks, Raf.

EPSTEIN: Jim Chalmers, the new Treasurer, of course, the Labor MP for Rankin.