JIM CHALMERS:
The global economy is treading an increasingly narrow and perilous path - that is one of the key messages from meetings that we've had through the course of yesterday and this morning as well. The number one enemy when it comes to the global economy is inflation. We've seen some very troubling outcomes for inflation in the United States released this morning - the highest core inflation in something like 40 years. The Americans, like all of us around the world, are very concerned about the high levels of inflation, which is persisting in our economies. It's this high level of inflation, which is inviting that blunt and brutal response from central banks right around the world. So far at these meetings I've met with Secretary Yellen, I've met with the head of the IMF, I've met with the UK Chancellor, the head of BNP Paribas, I've met briefly with the finance minister of the Ukraine, Minister Marchenko. Later today I'll be meeting with the Finance Minister of India, the Finance Minister of Canada, the head of the World Bank, and of course the Governor of the US Federal Reserve, tomorrow with the President's economic advisors and with my counterpart from Korea.
The pretty consistent message from the G20 meetings here in Washington DC is that the pressures on the global economy are intensifying. We are treading a narrower, more perilous path when it comes to the global economy. The best defence against global economic uncertainty is responsible budgets - budgets cannot be irresponsible, they can't be untargeted, they can't be excessive when it comes to the support that's provided to our citizens. We need to make sure that any support that's provided in budgets around the world doesn't make our inflation problem worse. That's obviously something that's front of mind as we put together our own budget, put the finishing touches on the document that we'll hand down in less than two weeks’ time now. The Budget that I hand down will put in place the building blocks of a more resilient economy. The premium on the budget I hand down will be responsible economic management. That's because the best defence against this intensifying global economic uncertainty is responsible budgeting, and that's what you'll see two Tuesdays from now from me.
JOURNALIST:
Were you surprised by the inflation figures out of the US today and do you think they guarantee another big rate hike next month?
CHALMERS:
Certainly the market was surprised by the extent of inflation still in the American economy. I think core inflation is at its highest for something like 40 years. The market was expecting a more substantial drop off in inflation and it didn't happen so that will obviously be something that's factored in by the US Federal Reserve here. Obviously right around the world, inflation is public enemy number one when it comes to our economies - that's certainly the case here in the United States and it's the case really in most of the developed economies of the world.
Central bank governors from right around the world will be looking for ways to put this inflation fire out. That's what we're seeing certainly in the United States and in other developed economies.
JOURNALIST:
[Inaudible]
CHALMERS:
I think these conversations have really focused the mind on the substantial impact of this deterioration on the global economy on our own economy. We're putting the finishing touches on the forecasts in the Budget that I'll hand down. Treasury is very attentive, of course, to the situation which has deteriorated around the world even in the course of the last couple of weeks. We will make sure that the forecasts in the Budget take into account the kind of real‑time lessons that we're picking up from these meetings.
JOURNALIST:
Earlier in the year we asked you about inflation in the US, you said Australians couldn't give a stuff what inflation was in the US. What's changed your view on this now? And can I also ask, do you think Australians can get higher wages under your government and what does that mean for inflation?
CHALMERS:
First of all, it remains my view that the primary focus of Australians is what's happening to their own pay packets and what's happening to the prices of essentials in their own household budgets. That remains my view and I've been entirely consistent about that. It's important to recognise that one of the reasons why people around the world are concerned about the possibility of a hard landing for the global economy is because we've got inflation right around the world and that's pushing up interest rates and that has consequences for our economy. The second part of your question was, Matt?
JOURNALIST:
Do you think Australians will get higher wages under your government and what does that mean for inflation?
CHALMERS:
What's most important when it comes to wages is that wage rises are sustainable, that wages rise in a strong and sustainable way. For too long now in our country - for the best part of a decade - we've had a government with a deliberate policy of wage suppression and wage stagnation. They even said that it was a deliberate design feature of their economic policy. Now, this Government takes a very different approach to wages. We understand that wages growth if it's strong needs to be sustainable as well. Our inflation problem has absolutely nothing to do with wages growth. The sources of our inflation challenge are energy prices and busted supply chains and some of the other issues that I've been talking about. It's not been principally an issue around wages. We expect wages growth to pick up - you'll see that in my forecasts that I release in the Budget. We don't expect that to have a big inflationary impact on the economy - our inflationary challenge comes from other sources.
JOURNALIST:
Treasurer, are you concerned that aggressive tactics from central banks increasing interest rates so rapidly and so broadly is not having the desired effect on inflation?
CHALMERS:
Clearly, we've still got an inflation problem in our economies around the world and that's something that central bank governors are very focused on. I've tried my best not to second guess or not to pre‑empt or to give free advice to the governors of central banks around the world or indeed in Australia. But clearly, we still have an inflation problem. Clearly, the Americans still have an inflation problem. There are a lot of reasons for that but primarily it comes from Russia's war in Ukraine. And so I think a lot of people have made the quite wise contribution in these G20 meetings that the best economic policy would be peace in Ukraine, absent that central bank governors are doing their bit.
JOURNALIST:
Could we get a bit of detail about your discussions today with Miss Yellen? She obviously was very strong yesterday, calling out the Chinese for not participating properly in the global framework, the debt restructuring. Maybe you share some of those concerns. But could you just give us a general synopsis of the sort of the things that were discussed in those meetings?
CHALMERS:
The main focus of my discussions with Secretary Yellen was inflation as you'd expect on a day where the inflation number here in the US was stronger than the market expected. We spoke as well about Russian sanctions, particularly as they relate to oil and the proposal that Secretary Yellen has put on the table which we supported for a cap on Russian oil. We talked about the implications of the war in Ukraine on the European economy. We talked about the expected impact of the Inflation Reduction Act here in the United States and talked about President Biden's plans to invest in semiconductors being an important part of their industry policy - a whole range of issues. We get along really, really well with Secretary Yellen. It was as always a frank conversation, an enlightening conversation, and very valuable to us as we put the finishing touches on our budget.
JOURNALIST:
[Inaudible] Are measures in the Budget open to change given what you take away from your meetings?
CHALMERS:
The full suite of policies in the Budget has not yet been finalised - it will be finalised in the course of the next few days. But in putting a premium on a responsible Budget and unwinding wasteful spending in the Budget, we take into consideration what we know about the global economy, including what we've learned over the course of the last two days. Our best defence against this global uncertainty, which is the main issue being discussed here in Washington DC, is responsible budgets. We need to make sure that every dollar allocated in the Budget that we're getting maximum bang for buck - we're not wasting money, we're not spraying money around because that would be counterproductive when it comes to our inflation challenge.
JOURNALIST:
So the Budget is getting tougher here?
CHALMERS:
I think in some areas where we are trimming spending or reprofiling spending, it will be seen as a series of difficult decisions taken in difficult times. And of course when you're trying to rebuild your buffers against this international uncertainty and when you recognize the best defence is a responsible Budget, of course we're putting maximum effort into trimming spending where we can and Australians will see the fruits of that effort on Budget night.
JOURNALIST:
You've spoken about the cycle of rising inflation rates here flowing through to a growing inflation problem for us back home. [Inaudible]
CHALMERS:
One of the issues that I've raised, one of the concerns that I've raised, including in recent days back home, is that obviously a bigger and bigger part of our inflation challenge is going to be electricity prices, and that's very concerning to us as it would be very concerning to every Australian. And so we will update our forecast for inflation in the Budget. We still expect it to peak roughly where we had anticipated before around Christmas time but there is some prospect that upward pressure on electricity prices will change the profile of inflation after that and I'll make that clear on Budget night.
JOURNALIST:
[Inaudible]
CHALMERS:
Our intention is to make room for some of this unnecessary spending in areas like health and aged care and the NDIS and defence. One of the big challenges that we've inherited in a Budget that's got a trillion dollars of debt is how do you make room for those things which our society truly values - our investment in people, in their health and in their prospects, and in the defence and in the advancement of our national security. So these are the things we want to be investing in - in order to do that effectively, you need to make room somewhere in the Budget. And we think the best place to start is to unwind some of the waste and rorts which has been a defining feature of Australian budgets for far too long.
JOURNALIST:
On the Jerome Powell meeting, can you tell us anything about it - are you taking a particular message?
CHALMERS:
I'm not here to give free advice to the US Federal Reserve Chair. My intention in my discussions with Jerome Powell is to get the most up‑to‑date assessment from him on the likely trajectory of monetary policy here in the United States; the inflation challenge, which is more troubling with the release of that data this morning; and to get a real time up‑to‑date assessment from him that I can feed into the Budget. I'm looking forward to having a meeting with the chairman of the US Federal Reserve. He's obviously a person of immense influence in the global economy and it's important that Australians engage with him.
JOURNALIST:
[Inaudible]
CHALMERS:
The primary things I discussed with the Chancellor of the United Kingdom, Kwasi Kwarteng, was energy security, climate change policy, the impacts of the war in Ukraine, and what's happening with our supply chains. He knows that we are less than two weeks from our own Budget and he's in between a kind of a two‑step process when it comes to his own budget. He like me is taking into consideration all of the conversations that he has here in Washington DC. Thanks very much.
