E&OE TRANSCRIPT
TV INTERVIEW
ABC THE BUSINESS
TUESDAY, 3 MARCH 2020
SUBJECTS: The Reserve Bank decision on interest rates; National Accounts and Stimulus Measures.
ELYSSE MORGAN, ABC THE BUSINESS: The Morrison Government's holy grail of a surplus is under attack from every quarter already battered by bushfires and drought, the Coronavirus is the new grim uncertainty for the economy. Shadow Treasurer Jim Chalmers says the heavy lifting has been left to the Reserve Bank, accusing the Coalition of a failure of economic leadership. I spoke to him from Parliament House. Jim Chalmers, you pointed out the weaknesses in the economy today. Do you agree with the Government that the economy needs fiscal stimulus?
JIM CHALMERS, SHADOW TREASURER: Well, Elysse we've been saying for some time that the Government needs to come up with a plan to boost the economy and not just because of the relatively recent outbreak of Coronavirus or even the fires over the summer. The economy has been remarkably weak for some time. It was slowing last year, wages have been stagnant for a really long time now and so we've got issues in the economy which have been left unattended for a long time. We've been calling for the Government to come up with a plan to deal with those weaknesses and it's even more pressing now that they do so.
MORGAN: Okay. We are where we are - what should it be? What form should it take?
CHALMERS: Look, there are a range of options available to the Government and we make suggestions but they have a better sense of the budget position at the moment. We've got a bit of a glimpse of the budget position on Friday. But we've said before that there are options available to them, like bringing forward part of their tax cuts. They could do something about Newstart or infrastructure. I think there is a case to be made for some kind of tax incentive for business investment, a bit like what we took to the last election and have been calling for for most of the time since then in concert with the BCA, the Australian Industry Group and others.
MORGAN: The Government would say that they have done several things to help the economy. They did bring in the tax cuts. They are coming. They've also sped up infrastructure spending and investment. And that also they're in a position to provide stimulus to the economy now because they have been prudent. They have been trying to build the surplus.
CHALMERS: Well a number of points about that. I mean, first of all, we voted for the tax cuts because we thought it was important to support the economy. Those tax cuts haven't done as much good in the economy as we had hoped and the Government had hoped. They're not finding their way in sufficient volumes into our shops and businesses to provide a big boost for the economy. They've underperformed from that point of view. The Reserve Bank's now cut interest rates four times in ten months. Clearly, that hasn't been enough to spur the economy either. So something else needs to be done. I don't accept that the Government confronts the serious challenge of the Coronavirus and the fires before it, I don't think they confront those challenges with a strong budget or a strong economy. And we've been making that point for some time now.
MORGAN: You said earlier that you would support bringing forward income tax cuts as part of this as a stimulus program. However, you've just said that, you know, so far these tax cuts haven't worked as well as they should or as they hoped. So why would you bring them more forward?
CHALMERS: The point that we're making, I have been making for some time is that something more needs to be done. I mean, if the Government does come to the table with a plan and we think it's a good plan, we'll support it. If we think it's insufficient or not designed the right way, then we'll make those points as well. We've all got an interest in the economy coming out of this Coronavirus crisis and dealing with some of the other longer standing challenges. We all want those to be dealt with. We all want the economy to grow more quickly so it can create jobs and opportunities in our communities. We've all got an interest in that. So we'll play a constructive role, as we have been. But we can also point out at the same time that the Government has been dragging its feet on coming up with a plan. There's been an absence of economic leadership and Australians are already paying a price for that.
MORGAN: The Reserve Bank move today, it's down to 0.5 per cent. You have concerns that today's rate cut will do little to help and may actually hurt confidence further?
CHALMERS: I am concerned that the Reserve Bank is running out of ammunition. This is, as I said, the fourth interest rate cut in ten months. Rates are now a sixth of what they were during the worst of the Global Financial Crisis and it hasn't been enough to shift the economy in a meaningful way. Growth has still been relatively slow since the election. So I am concerned that they're running out of ammunition. But most of all, I'm concerned that they're being left to do all those things on their own.
MORGAN: Do you think the Reserve Bank should have held off? If the Government has stimulus coming, should the Reserve Bank of held off?
CHALMERS: No, I don't second guess the Reserve Bank in that way. I don't pretend to give them advice. The point that I'm making is they're doing the best they can.
MORGAN: One obvious result of the latest cut to the cash rate will be another lift in house prices. We've already got Sydney and Melbourne in double digit price increases over the past year. Is now the time that APRA might need to step in with some kind of macroprudential rules to keep a lid on that?
CHALMERS: Well, you're right that the interest rate cuts so far, the three that we had before today, have had an impact on house prices, particularly in those big markets. That's been one of the consequences of those rate cuts in addition to what's happening to savers. Obviously the APRA and the other regulators, they'll take into account all kinds of developments, like interest rate cuts, like movements in the economy, like the Coronavirus, like the fires, and they'll try and calibrate their settings. I don't want to give them that kind of advice.
MORGAN: The Council of Financial Regulators met yesterday. Obviously, rate cuts would have been part of the discussion, as well as financial stability and the health of household balance sheets. Would you be disappointed if they weren't talking about macroprudential measures as part of what's happening now?
CHALMERS: It's been some years now since I've had much to do with the Council but I know that they look at these sorts of things all of the time. I know that the discussion they have is pretty broad ranging and they would be factoring in all these things.
MORGAN: Jim Chalmers, thank you very much for your time.
CHALMERS: Thank you, Elysse.
ENDS
