E&OE TRANSCRIPT
DOORSTOP
CANBERRA
TUESDAY, 3 MARCH 2020
SUBJECTS: Reserve Bank decision on interest rates; Impact of Coronavirus on the economy; Scott Morrison’s failure to provide economic leadership or a plan; Bank pass through; National Accounts; Stimulus; Surplus; May Budget.
JIM CHALMERS, SHADOW TREASURER: New record low interest rates are a new low for the Morrison Government's economic credibility. This is the fourth interest rate cut in the last 10 months, all since the last election. Interest rates are now one sixth what they were during the darkest days of the Global Financial Crisis. Interest rates were already at emergency levels before the Coronavirus and the fires hit over this summer. Scott Morrison needs to concede after months of economic mismanagement and underperformance of the Australian economy that his inaction and his incompetence means that the Reserve Bank has had to do all of the heavy lifting here. How low do interest rates have to go in this country before Scott Morrison is shaken from his inaction and his incompetence on the economy? It has been obvious to everybody except the Morrison Government that the economy has been floundering and that it desperately needs a boost. The nation is crying out for economic leadership and an economic plan but Scott Morrison is missing in action. This is a Prime Minister who has time to pore over colour-coded sports rorts spreadsheets but can't be bothered coming up with a plan to protect Australians from this floundering economy which has emerged on his watch.
Tomorrow we'll get the National Accounts data. I won't predict or pre-empt what we'll see in those numbers. We already know that unemployment is rising, growth has been slowing, and wages have been stagnant. There are issues in the economy with productivity, business investment and household debt. In the Budget, net debt has more than doubled on this Government's watch so that most of the debt in the Budget is Liberal debt. The Prime Minister and the Treasurer are talking about the position that we find ourselves in as we face the significant challenges of the Coronavirus. We face these challenges from a position of relative economic weakness, not strength, because of the inaction and incompetence of the Morrison Government.
We are going into a difficult period where net debt has more than doubled and where the Government has engaged in the usual clumsy and ham-fisted expectation management about their surplus. This Government said that there was a surplus in this Budget for this year and that that would help with international uncertainty. They now can't make that same commitment. That's a test that they set for themselves and it remains to be seen whether they will meet it. But the fourth interest rate cut in the last 10 months is an indication that the Reserve Bank has had to do all of the heavy lifting because Scott Morrison and Josh Frydenberg couldn't be bothered coming up with a plan for an economy which has been floundering for some time.
JOURNALIST: Doesn't the Government deserve some slack given this is a pretty rare occurrence, such a huge pandemic outbreak like this?
CHALMERS: That might explain the fourth interest rate cut but it doesn't explain the first three. The Coronavirus doesn't excuse or explain an economy which was already slowing substantially or an economy where wages were historically stagnant. It doesn't explain the underemployment or the worst business investment in the 30 years since the [early 90s recession]. The Government should stop pretending that weakness in the economy only just arrived with the outbreak of the Coronavirus. The business community, credible economists and Labor have been saying for some time that the economy needs a boost, that it needs a plan and some kind of economic leadership from the Government. The Prime Minister is missing in action.
JOURNALIST: With interest rates this low would you support something like quantitative easing in the future?
CHALMERS: The Reserve Bank has had to contemplate measures that weren't even seriously contemplated during the Global Financial Crisis because Scott Morrison and Josh Frydenberg have been sitting on their hands. The Reserve Bank has made it clear for some time that while they would contemplate quantitative easing or other extreme measures their preference would be for the Government to do something and to come to the table with more infrastructure investment or other ways to boost consumption and business investment. The Reserve Bank shouldn't be left to do all of the heavy lifting. The Reserve Bank shouldn't have to contemplate these extreme measures. They wouldn't have to if the Government knew what it was doing and was prepared to show the required economic leadership to come up with a plan to turn the economy around.
JOURNALIST: If the Government had gone ahead like you called for late last year and stimulated the economy fiscally, wouldn't they now be in a less financially secure position to stimulate the economy?
CHALMERS: I don't think that's the right way to come at this issue. I think the right way to come at this issue is that the Government cannot guarantee a surplus this year and the economy is weaker than it should be because of their failure to act. The economy would be in a far stronger position to withstand and deal with the significant challenges of the Coronavirus if the Government hadn't sat on its hands for so long. That's not just Labor's position, that's been the position of business organisations, big employers, the Reserve Bank, and the IMF. As this Coronavirus fallout unfolds it will become clearer and clearer to more and more Australians that the Government's inaction in the period before the outbreak of the virus means that we confront these challenges from a position of weakness, not strength. That's costly for the Australian economy, for businesses, for workers and for families.
JOURNALIST: Do you think it's a cop out to blame Coronavirus for missing the surplus then?
CHALMERS: The Coronavirus does not on its own explain or excuse their failures in the Budget or weakness in the economy which has been apparent for a long time now.
JOURNALIST: What would you have suggested that the Government do instead?
CHALMERS: Since the middle of last year we've been calling for an incentive for business investment because business investment is the weakest it's been for three decades. We've said that they should contemplate other measures like Newstart and like bringing forward some of the tax cuts. The absence of an energy policy has been a handbrake on growth and the absence of a wages policy has contributed to historically low wages growth in this country. There's a menu of options for the Government to choose from. They've been unwilling to do that. Now we're seeing some of the consequences of that as we enter a difficult period from a position of weakness, not strength.
JOURNALIST: Are you concerned that we are heading towards a recession?
CHALMERS: Jen, I'm not prepared to speculate in that way. I don't think it's helpful for me to do that. The economy is quite weak. It's been weak for some time. We'll find out tomorrow what the end of last year looked like. We already know from some of the indicators which have been released that construction and CAPEX were extraordinarily weak. I'm worried that December wasn't especially strong but we'll find that out tomorrow and we'll know more about it then. The market is very worried about the March quarter partly because of the Coronavirus but also other factors. Without speculating on what the number might be tomorrow or what the March number might be it's been clear for some time that we are in a period of weakness. There are a range of reasons for that and one of the reasons is the Government's failure to act.
JOURNALIST: The Prime Minister and the Treasurer have made a show of calling for the big four to pass on the rate cut in full but surely that's just another display of their own clumsiness? Surely what matters is what it does cut to? You've got Athena cutting its rate to a standard variable of 2.59 today, passing the rate cut on in full. The big four pass it on in full, but those rates still have a four in front of them. What should they do to lift their game?
CHALMERS: Both are important. Passing on the full impact of the rate cut is very important. If the rate cut is to do the good it needs to do in the economy then it needs to be passed on. You’re right to identify that there are still vastly different interest rates available to people and they should familiarise themselves with all of those rates before they make a decision about who they might borrow from. Both things are important. Clearly, the first three interest rate cuts didn't do as much good as the Reserve Bank or I would have hoped. That is partly because they weren't passed on in full but also because monetary policy on its own can't do all the work. We need a Government prepared to come to the table but that hasn't happened so far and Australians are paying the price.
JOURNALIST: Are you concerned about the hit from the interest rate cut to retirees and others who rely on deposits?
CHALMERS: Absolutely. Savers have copped it in the neck from these last four interest rate cuts. One of our concerns about leaving the Reserve Bank to do all the heavy lifting has been that savers are punished every time rates are cut. It's puffing up asset prices but it's not doing as much good as we'd all hoped in the broader economy. That's yet another reason why we need to see action from the Government. We need to see a plan and economic leadership but we're not seeing either of those things.
JOURNALIST: There are no concerns about the banks’ earnings and their profitability?
CHALMERS: The banks are still extremely profitable by anyone’s standards and it's best for the broader Australian community and the Australian economy if they find a way to pass on these rate cuts in full. These are challenging times and they are more challenging than they need to be. We need people to get the full benefit of this rate cut so that they can pay down their loans faster or take it into shops and businesses to boost consumption. One of the big challenges which was highlighted in the Reserve Bank statement today was that wages have been stagnant. Wages growth has not been anywhere near what we need it to be. The Reserve Bank is saying that they don't see that changing anytime soon. That's a big concern for all of us who want to see more growth in the economy. People don't have the disposable income that they need to spend with confidence in our shops and businesses. That needs to change. Part of the story is interest rate cuts, but there needs to be other ways looked at too.
JOURNALIST: Will you be calling for the Government to bring forward the Budget and not wait until May?
CHALMERS: We've been calling for the Government to come up with a plan in advance of the Budget. One of the issues that the Australian Industry Group has rightly identified is that the Government flagging that they might do something about business investment in the May Budget is counterproductive. It encourages businesses to wait and see what that incentive might be down the track. We've already got anecdotal evidence that some companies who were about to invest have heard the Treasurer say that maybe there'll be an investment allowance at some point down the track and have deferred their investment, which is very troubling. The Government needs to come up with a plan quick-smart. These challenges in the economy have not just emerged. They've been obvious to everyone but the Government for a long time now. They've been sitting on their hands for far too long and we don't want them to leave things until too late. Thank you.
ENDS
