20 July 2022

SUBJECTS: Reserve Bank review, October Budget, petrol prices.

The Hon Jim Chalmers MP

E&OE Transcript

SUBJECTS: Reserve Bank review, October Budget, petrol prices.

JAMES GLENDAY, HOST: Well, the federal Treasurer has announced the first major review of the Reserve Bank since the current arrangements for managing Australia’s monetary policy were set in place in the 1990s, and the Treasurer Jim Chalmers joins us now from Parliament House in Canberra. Jim, good morning.

JIM CHALMERS, TREASURER: Good morning, James.

GLENDAY: For much of the last year the RBA was telling Australians it was plausible interest rates wouldn’t go up before 2024. You’ve been asked this before, but is it acceptable for a mistake like that to happen again?

CHALMERS: As you’d appreciate, James, my interest in setting up this review and announcing it today isn’t to take pot shots at the Reserve Bank or its Governor or its Board or to second guess the decisions that it’s taken independently. They’re capable of defending their own decisions. My job as the Treasurer is to make sure we give them the best set of institutional arrangements and so that they can make the right decisions into the future.

It's been a really long time since we’ve had a proper look at our Reserve Bank. It’s served us well over a long period of time – more than six decades now in its current form. But now is the time given all of the near-term economic challenges we’ve got, some of the longer-term complexities we’re dealing with as well, now is the right time to have a proper look, an independent, external, expert look at our Reserve Bank to make sure that it’s the best – the world’s best into the future. That’s my interest. That’s my objective.

GLENDAY: Sure. Would you like, then, into the future, to see this review change the way the bank communicates with the public? Maybe put more nuance on comments about rates going up or down or even have some alternative views in there?

CHALMERS: Yes, I think that’s an important consideration for the panel that I’ve set up to review the Reserve Bank. The Australian Reserve Bank actually communicates pretty frequently with the public. That’s been something that has changed over time. But if there’s better ways that the bank can do that, better systems to communicate with Australians so that Australians can better understand the decisions that they’re taking or contemplating, then that would be a good thing for the panel to look at. But not just that – the breadth and depth of the expertise and experience on the RBA Board is of interest to me, the inflation targeting regime, its objectives and mandates, its governance [INAUDIBLE] the culture of the institution. All of these things are really important things for us to have a proper look at. Not forever – it’s not going to drag on for years. It will report back to me by March next year, which is relatively quick and relatively soon. But now’s the right time to do that, whether it’s the communication issues that you raise or all of the other issues that I’ve just run through. It’s an important time and an important task.

GLENDAY: On one of these issues you just mentioned, a key aim of the RBA is to keep rises in the cost of living within a target band of two to three per cent. It’s failed to do so – undershooting for a long time and now massively overshooting. Is there any point – there are some people who question the point of a target like that? What’s your view?

CHALMERS: Well, my initial view, my longstanding view, is that there’s a role for a flexible inflation targeting regime like the one that the Australian Reserve Bank uses, and other countries employ a different version of inflation targeting. But I don’t want to pre-empt the outcome of the review, James. I mean, this is a really central part of what we’re asking the panel to look at. If there are better ways to do it, we should hear about it.

But I don’t come into the review with a preconceived idea that the inflation targeting regime that we currently have is right or wrong. The reason I’ve put three absolutely top-shelf, high-calibre people as the panellists leading the review is because they have the capacity to reach out around the world, around the country, around the profession, around the business and working community to make sure that we’ve got the best set of arrangements. And if there’s a better way to do it, let’s hear about it.

GLENDAY: Okay. I won’t get you to pre-empt the review. I might get you to pre-empt the Budget, though. Yesterday there was a shocking State of the Environment Report. Conservation groups are pretty clear – more money needs to be spent. More money needs to be spent on defence. Certainly more money needs to be spent on aged care. What are you going to cut to find the money for your priorities?

CHALMERS: Well, first of all, I thought it was a first-class contribution from Tanya Plibersek yesterday. In addition to all of our economic challenges we do have some serious environmental pressures as well, and they’re related. We’re used to seeing those two things as two very different concerns. Now they are so closely interrelated, and that’s why, when it comes to the wellbeing budget, for example, and measuring what matters, the environment will be an important part of that. Tanya mentioned that yesterday.

When it comes to our spending pressures, yes, they are immense. The pressures on the Budget are immense.

GLENDAY: And all your colleagues are knocking on your door at the moment saying, “I want this for my portfolio.” I mean, you’re going to turn a lot of them away, though, aren’t you?
CHALMERS: I think our whole team understands that the October Budget is about implementing our commitments, providing that cost-of-living relief that we promised and starting to deal with the legacy of rorts and waste in the budget which has culminated in a trillion dollars of Liberal Party debt. I think there’s a broad understanding of those pressures.
We will be able to do important, meaningful things in the October Budget, consistent with the commitments we took to the last election. People have got a lot of work to do. My colleagues have got a lot of work to do implementing those commitments. And they understand the restraints and the constraints that we have when it comes to the budget.

GLENDAY: Yeah, just lastly, Treasurer, I wanted to ask you: in a couple of months a tax on fuel is due to jump up by 22 cents a litre. Are you definitely going to let that happen given what we’re seeing with the rising cost of living everywhere else?

CHALMERS: Yes, your viewers should expect that to happen, James, I mean, that’s my intention. That petrol price relief was designed to end in September. We can’t afford to continue it forever… for the reasons that we’ve just been through. There are serious pressures on the Budget. It’s absolutely heaving with a trillion dollars in Liberal Party debt. It would cost some billions to extend it even for another six months. And so we need to be upfront about that and we need to be responsible about it.

But what we’re seeing now is the wholesale international price for petrol has come off a bit. We call on the service stations to pass those savings on because Australians should be getting that petrol price relief now and not just reliant on the program that runs out in September.

GLENDAY: And no plans for a big tax, a super profits tax, anything like that?

CHALMERS: No, not contemplating anything like that, James. We’ve got our plans on multinational taxes. We’ve got our plans to wind back rorts and waste, and we’ve made a series of very responsible commitments to invest in the productive capacity of the economy and get it growing the right way so we can get wages growth going again. Those are our priorities.

GLENDAY: All right, Treasurer. Thank you so much for speaking to News Breakfast.

CHALMERS: Have a great day, James.