ABC Radio National Breakfast 24/07/20

24 July 2020

SUBJECT: Budget Update

FRIDAY, 24 JULY 2020
SUBJECT: Budget Update.
HAMISH MACDONALD, HOST: Shadow Treasurer Jim Chalmers joins us from Parliament House this morning. Good morning to you.
MACDONALD: The numbers are deeply alarming, that's evident. The ratings agencies Moody's and S&P though have reaffirmed Australia's AAA rating. Is that not a strong vote of confidence in the Government's response to this crisis?
CHALMERS: A couple of things about that, Hamish. For the first time in our history we got a stable AAA rating [from all three ratings agencies] during the Global Financial Crisis, under Labor. It's good to see that maintained. Unfortunately a couple of the three ratings agencies have actually put us on negative watch in recent months. But we need to maintain that AAA. It's important for the price that we pay for money on international markets and it flows through to borrowing costs, which are thankfully very low at the moment already.
MACDONALD: Do you give the Government any credit for its handling of this? I mean, just on those ratings agencies affirming the AAA rating?
CHALMERS: We've welcomed aspects of the Government's response to this recession. Clearly there was a place for wage subsidies. We called for them. We welcomed the Government's change of heart when they said that they would introduce the JobKeeper program. Then we directed our efforts towards improving that program. Clearly some of the intervention in the economy from the Government has been important. It hasn't been enough to prevent what will be skyrocketing levels of unemployment predicted in the budget update yesterday. The Government needs a more comprehensive plan for jobs. Unfortunately we haven't seen that yet.
MACDONALD: How would you go about creating more than a million jobs?
CHALMERS: There needs to be a comprehensive plan. Let me give you a couple of examples of what we think the Government should be considering. Clearly public housing is a good idea because it's labour intensive, there are lots of jobs in it, and you're building something with lasting benefit for some of our most vulnerable people. We've said for some time that should be considered. Clearly we need a settled energy policy. There’s a big problem in the economy with business investment. It didn't just show up with the virus, it's been around for a long time now. Businesses tell me one of the reasons for that investment problem is because of the uncertainty around energy. We've approached the Government and said let's work together to settle that so that business can get cleaner and cheaper energy and get investing again, because that's good for jobs.
MACDONALD: Energy policy, public housing? You think that would get us to a million jobs?
CHALMERS: Clearly other things need to be considered as well. We've got an open mind to changes on tax incentives for business to invest; we've got an open mind on income tax cuts. There are a range of other things that should be considered. For us to be a responsible and constructive Opposition, as we want to be and as we have been, we need to engage with a plan from the Government and that's why yesterday's budget update was a badly missed opportunity. The Government told people how bad the economy was going to get but most Australians already have a sense of that; they didn't say what they were going to do about it.
MACDONALD: You just mentioned you're open minded on income tax cuts. Could you be a little more specific?
CHALMERS: If the Government has an intention to bring forward some tax cuts, let's see that plan. We've said for some time that we would engage with that responsibly and constructively and that we'd have an open mind to that, but we need to see what they're actually proposing. Clearly middle Australia needs help right now. There's been a problem with spending, consumption and demand in the economy, not just during this recession, but in the lead up to it as well. Bring forward a plan and we'll engage with it as we have with other aspects of their response to the recession responsibly and constructively.
MACDONALD: The unemployment rate is tipped to hit 9.25 per cent by the end of the year, another 240,000 people out of work. The Government expects another 2 million people currently on JobKeeper to move back into the paid workforce by the first few months of next year. But then there's also this expected 12.5 per cent plunge in business investment. Do you see that many businesses being able to actually reopen and start paying their own way by then?
CHALMERS: The Treasurer talks about eye-watering numbers. I think the eye-watering numbers in the half a budget update which was released yesterday are actually the ones around jobs. I think they're the most important ones and you're right to identify the extra 240,000 Australians who are expected to lose their job between now and Christmas. We owe it to them to come up with a plan. Business investment needs to be part of that because again, as you rightly point out, that's one of the most important drivers of growth in the economy and jobs in the economy. We've had a problem there for some time so we do need to deal with that. There are some assumptions about how many workers will come off JobKeeper in the coming months. It's not clear to us how many of those 2 million they expect to lengthen the unemployment queues and how many they expect to be working for businesses which are bouncing back. Some will and some won't. The point that we're making is when that happens there needs to be a plan for jobs in the economy for when JobKeeper trails away.
MACDONALD: Is a jobs-led recovery realistic at this point?
CHALMERS: It's crucial. We absolutely owe it to those 240,000 Australians to come up with a plan for jobs. It's not a -
MACDONALD: I mean I'm not questioning whether that might be the right way forward, just whether we're actually on track to be able to do that?
CHALMERS: We're not currently because there's not a plan. In the absence of a plan we’re crossing our fingers and hoping for the best which won't get people jobs. Raising the white flag on unemployment won't do the right thing by those hundreds of thousands of Australians. We need to do better. The Government needs to come forward with a plan. We'll engage with it, we'll improve it if we can, but sitting on our hands was a recipe for a weakening economy going into this recession, and it will be a recipe for fewer jobs coming out of the recession.
MACDONALD: But can I just ask you to offer a broader observation on employment, on jobs and what the way forward is? I know you're saying that you're not entirely critical of the Government, and that you are constructive where possible. When you look at the OECD figures on unemployment Australia is streaks ahead of so many similar countries and territories on this score. Could you offer an observation on our standing globally?
CHALMERS: First of all, we should be doing better than the rest of the world. For the Government to say that our jobless queues aren't as long as they are in Donald Trump's America, I don't think that washes with people. I think that's cold comfort for the millions of unemployed Australians, and the extra 240,000 who are expected to lose a job by Christmas. We use those comparisons, we take note of them, but they're not really what matters most to the people who, in the absence of a plan, will lose their job. That's our focus. To say that we're not doing as bad as Italy or the US is an interesting point, but not any comfort whatsoever to people who are very anxious, very uncertain, and very worried about losing their job.
MACDONALD: PWC modelling suggests the budget won't be back in balance for another 20 years, and that net debt won't be paid down for another 40. You've got small kids, will they be as old as you before we get back in the black?
CHALMERS: It rests on a couple of things. There's going to be a lot of debt for a long, long time. Nobody is contesting that these are extraordinary levels of debt, and they will be passed down through the generations. They need to be paid back carefully and over time, but we won't pay back that debt unless we have a way to grow the economy. As Deloitte Access Economics and others have rightly pointed out, if you want to fix the budget you have to fix the economy. That's why we need a plan for jobs. That's why it's disappointing the Government didn't come forward with one yesterday.
MACDONALD: Do you see it as being possible over that time period for Australia to remain essentially what it is, in terms of the provision of services, the social safety net? You're clearly questioning whether the growth model actually is going to be achievable, certainly in the immediate-term. Do you think it'll be a different Australia, put simply?
CHALMERS: With something of this magnitude, a recession of this depth, and unemployment queues this long, will inevitably change how we think about government and how we think about the economy. I think that's inevitable. There will be, to some extent, some kind of reset. The point that we make about that is let's not assume that the best we can hope for as a country is what things looked like in 2019. That's the Government's approach. That implies that we peaked in 2019. What we say is we should be able to do better for people and that means being smart about the provision of services. It means being smart about how we do energy and how we create jobs into the future. If we don't do that thinking now then all that will happen is we'll have this prolonged downturn, unemployment will be higher for longer, we'll have long-term unemployment which cascades through the generations and creates pockets of disadvantage in our community and that means that we would have badly let the Australian people down. Now is the time to work out what we want the country to look like afterwards and to work our way there.
MACDONALD: What do you want it to look like?
CHALMERS: I want us to have cleaner and cheaper energy. I want us to be more inclusive as a society. I want our growth to be more sustainable. I want more people to get a slice of the action. I want to be able to train our people to keep up with technological change so that technological change is a good thing and not a bad thing. These are the conversations that we need to be having. We are absolutely hanging out for a conversation like this with the Government. We're not getting it because they focus on these old narrow ideological obsessions. That's been a recipe for an economy which wasn't as strong as it should have been coming into this and will be much weaker coming out unless the Government recognises that we as a country can do a bit better after this than we did before. But that requires a plan.
MACDONALD: Just a view on the debt. Money is relatively cheap right now. Should we be that bothered by how much we owe currently?
CHALMERS: The priority should be jobs. We need to be active in the economy to support people in their jobs in the immediate part of this crisis and we need a plan for afterwards, as we've been discussing. The most important thing here is when we are borrowing this money that it's effective, that we get bang for buck, and the measure of its effectiveness should be what it means for jobs, what it means for those hundreds of thousands of Australians which have made the unemployment queues longer in recent times. That's how we measure effectiveness, and that's the most important thing.
MACDONALD: The economic update sets the scene for this October Budget. We're likely to see reforms to try and kickstart the economy by then. A raft of reforms could be on the table we're told from tax to IR to regulation and infrastructure. Will you continue to be cooperative on those scores?
CHALMERS: Let's see what they're proposing. Our intention all along as we've talked about before Hamish on the show is we will agree where we can and will disagree where we must. That's the guiding principle that we've taken here and that's meant that we haven't stood in the way of welcome support getting out the door into the hands of businesses and workers and circulating in the economy. We'll look at whatever the Government proposes in that light. They delayed this budget update a couple of times for a couple of months and the message yesterday was we have to wait a couple more months before the budget, before they'll talk about some of these things. I would urge the Government to come forward with a jobs plan sooner rather than later, and we will do our best to engage with that, agree where we can, and disagree where we have to.
MACDONALD: Jim Chalmers, thank you very much.
CHALMERS: Thank you, Hamish.