Doorstop interview, Parliament House, Canberra
JOURNALIST:
The RBA says we're going to see multiple rate rises this year. Is the central bank going too far and hurting households, and should they pump the brakes after nine in a row?
JIM CHALMERS:
The independent Reserve Bank is trying to get on top of this inflation challenge. They need to do that without crunching the economy and because the Reserve Bank is independent, I'm not going to pre-empt or predict or second guess the decisions that they take independently. Their job is to get on top of inflation without crunching the economy. My job is to focus on our three point plan to address the inflation challenge in our economy: responsible cost of living relief without adding to inflation, dealing with issues in our supply chains, including labour and skill shortages, and having a responsible budget with spending restraint at its core. That's my focus and that's my job. We need to get on top of this inflation challenge in our economy, which is doing such damage to household budgets and the economy more broadly. The Reserve Bank does its job independently. I've got my own work to do.
JOURNALIST:
Treasurer, there'd be a lot of homeowners that would be pretty angry with Philip Lowe given that he did say that interest rates would be likely to remain at a record low until 2024. His term expires in September. Is his actual term tenable beyond that time?
CHALMERS:
First of all, Governor Lowe has responded for some time to the criticism that's been levelled at him, and that's for him to respond to. When it comes to the Governor's reappointment, his term doesn't conclude until September. In the ordinary course of events that appointment would be considered closer to the middle of the year. When the time comes, I'll do the usual consultation with my colleagues and we'll come to a view.
JOURNALIST:
Normally these terms are extended - would you consider extending his term?
CHALMERS:
Obviously, all options are on the table. I mean it when I say that I will consult meaningfully with my colleagues closer to the middle of the year. We've got a Reserve Bank Review that I'll receive next month and respond to after that. That will obviously be a factor in my thinking when it comes to how we make sure that the Reserve Bank has the right structures and objectives and how it weighs up those objectives. But one of the things that the review team won't be messing with, and one of the things I won't be messing with is the Reserve Bank board's independence from government.
JOURNALIST:
Has the government been given any figures on concerns around defaults of loans this year, and are you personally concerned about that too if you don't have figures?
CHALMERS:
I speak frequently with the banks about the pressure on the home loan part of their business. As the Governor acknowledged in the statement yesterday, some people have some buffers in their home loans but a lot of people are really feeling the pinch from these interest rate rises. I consult regularly with the banks and with others about pressure on the home loan part of their business. My concern is with the substantial portion of people with a mortgage who will go from a very low fixed rate on to a higher variable rate. I think that is going to be one of the big pinch points in our economy this year. It is something I've been concerned about for some time and monitoring for some time, and so I think we need to keep an eye on that.
JOURNALIST:
Are there any figures on that given the RBA says about 800,000 coming off fixed loans?
CHALMERS:
Those are the numbers that we have - that's our understanding. We said around Christmas time that we're anticipating something like around every fifth loan comes off a fixed rate on to a variable rate in 2023. That's obviously going to be really difficult for people. Obviously, one of the things that the independent Reserve Bank weighs up is that the pressure that comes from higher interest rates is felt immediately by people on variable rates but the impact on people on fixed rates comes in later down the track and the impact on the economy takes a little while to flow through as well. The people who do the government's forecasts in the Treasury expect the combination of higher interest rates and the global downturn to slow our economy considerably this year. And that's something obviously that the Reserve Bank weighs up in coming to its decisions and they will provide their own forecasts for the economy at the end of the week.
JOURNALIST:
On Medicare, there's a report out today that says there's not enough carers out there so people that should be going into aged care are being left in the public system and it's costing $2 billion a year. Is that not a sign that we need to increase the Medicare rebate and put more money into the sector?
CHALMERS:
Obviously, we need more investment in health and in aged care - those are two of the fastest growing areas of spending in the Budget. Strengthening Medicare is alongside dealing with this inflation challenge among the government's highest priorities. And when it comes to the workforce, we need more workers in healthcare and in the care economy more broadly. We need to train more and we need to have sensible migration settings as well. So the government is acting through the relevant ministers and more broadly as well to try and strengthen our healthcare system to strengthen our aged care system. A big part of that is making sure we've got the right workforce and a big part of that is making sure we've got the right resources. Those two things are obviously a big part of the considerations of the Expenditure Review Committee as we work towards the May Budget.
JOURNALIST:
Is it fair to say you are concerned about an increase in people defaulting on loans and potentially being forced to sell once those 800,000 come off their fixed mortgages?
CHALMERS:
I'm concerned about the pressure on Australians with a mortgage as interest rates rise - that's pretty obvious. We haven't yet seen broad-scale defaults on loans but people are under increasing pressure. These interest rate rises, which began before the election and continued afterwards, mean that people have to find much more in their monthly family budgets to service their mortgages and that will put pressure on people. That was something that was acknowledged in the RBA board statement yesterday for the first time. Thank you.
