Interview with Andrew Clennell, Afternoon Agenda, Sky News

ANDREW CLENNELL:

The Treasurer joins us now after those growth figures today – 0.2 per cent for the quarter. Thanks so much, Treasurer, for your time. Paul Keating called it ‘a recession we had to have’, is this the slowdown that we had to have?

JIM CHALMERS:

It's certainly the slowdown that we expected. Our economy is slowing in expected ways and that's really the inevitable consequence of these rate rises which are in the system, combined with this global economic uncertainty. So we're not surprised by the figures that we got today, I think they reflect the reality of people under considerable pressure and an economy which is slowing because of that combination of pressures.

CLENNELL:

Are you sort of trying to land this plane? They call it a soft landing, you need to get between two quarters of negative growth which impacts on confidence, and an economy that keeps going like that, so inflation does.

CHALMERS:

The Treasury expects our economy to keep growing, but it expects it to grow quite slowly. We've thought that for some time and the numbers that we got today are consistent with that expectation. We need some perspective here though as well – consumption is very flat, growth is not especially strong, but those are the things that we expected after these rate rises and what we're seeing in China and with conflicts around the world. But we need to remember that we've got inflation moderating, we've got wages growing, two consecutive quarters of real wages growth, we've got unemployment with a three in front of it, record participation, we've got a surplus, we've got much smaller deficits, saving tens of billions of dollars in interest. And so this is why our economic plan has been broadly endorsed by the IMF, the OECD, Fitch Ratings, the RBA Governor and others. We're making welcome and important progress, particularly in the fight against inflation, but the numbers today do remind us that our economy is slowing and people are under pressure.

CLENNELL:

Do you hope the Reserve Bank sees this and says 'okay, enough rate rises?'

CHALMERS:

Well, we've known each other a while now, Andrew, and you know that it's hard to get me to pre‑empt or second guess or predict decisions taken by the independent Reserve Bank. This period that we're talking about was the September quarter, we've had another rate hike since then and consumption was already flat in that quarter, and growth was already relatively soft in that quarter. They will weigh all of those things up as they contemplate the future trajectory of interest rates. My job is to keep rolling out this cost‑of‑living help, keep getting the budget in better nick, keep investing in the supply side of the economy, keep chipping away at competition reform. These are the things that I take responsibility for in this fight against inflation, taking into account all of these economic conditions that we learned more about today.

CLENNELL:

Alright, one figure that's up decent amounts – productivity. On you, it's been down so badly. I don't know how much to read into that, what should I read into that?

CHALMERS:

There were some rays of light in today's figures. I think the welcome uptick in productivity was one of them but we don't get carried away by that – it's one quarter where we've seen some growth, as you rightly identified in your question. Productivity growth has been really flat for a really long time now, the ten years to 2020 were the weakest for productivity growth in 60 years. It'll take us a while to turn this around, we give ourselves the best chance to doing that, with our energy policy, our technology, our approach to human capital in the Employment White Paper. Today's productivity growth number is welcome but it doesn't mean the effort isn't still required to turn this ship around.

CLENNELL:

When it comes to the productivity challenges, is the 'work from home' phenomenon playing into any of that?

CHALMERS:

I take a lot of advice about this, this is a contested idea. And really, I think, in aggregate, people are worried about the impact on productivity of more people working from home but it depends on the industry. Not everybody has the choice, not everybody has the bargaining power in their workplace to determine how frequently they work from home. Some people are more productive from home, others less so in aggregate. It is a bit concerning, but we've seen this 'work from home' phenomenon for a while now. We're getting lots of analysis, lots of advice on it. We just need to strike the best balance here. We want, particularly families, to have the right kind of flexibility when it comes to their work, and we want to make the economy more productive and we've set out how we intend to do that.

CLENNELL:

Alright, let's talk about my MYEFO, is it going to be a surplus for 24‑25 in MYEFO?

CHALMERS:

No, there won't be a surplus printed for this year in the mid‑year budget update. It will be a much smaller deficit, a much smaller deficit, but we're not yet ready to print a surplus for this year that we're in now. We delivered the first surplus in 15 years last year, we've got the deficits right down, and that's rebuilding our buffers, rebuilding our budget, but it's also saving on debt interest costs which is a really important part of our budget strategy. So what people can expect to see next week in the mid‑year budget update – a traditional update, not a mini Budget, not a whole raft of new initiatives – but the mid‑year budget update will be defined by one thing and that's responsible economic management, because we know that that responsible economic management is helping us make progress in this fight against inflation.

CLENNELL:

So, you sort of touched on this, but let's get it straight – no new cost‑of‑living relief in this MYEFO, is that right?

CHALMERS:

I've made it really clear that people shouldn't expect big new initiatives really –

CLENNELL:

Is there anything in there? Is there a little nugget, or?

CHALMERS:

We've made it clear that we will consider the budget situation and the economic situation between the mid‑year budget update and the budget itself in May. We've said that we're rolling out this cost‑of‑living help right now, and it's helping. The ABS says that it is making a difference getting downward pressure on inflation, that's really important to us – tens of billions of dollars of help rolling out. And we will contemplate and consider the economic and budget conditions after the mid‑year update but before the Budget.

CLENNELL:

But the backbenchers are restless with you on this, aren't they?

CHALMERS:

I talk to them about this all the time –

CLENNELL:

I'm sure you do.

CHALMERS:

I meet with backbenchers a lot and bilaterally little groups, bigger groups –

CLENNELL:

And they say 'Jim, can't we do a bit more here? This is killing me?' That's what they say, don't they?

CHALMERS:

Well, two things, they recognise that we are rolling out a heap of cost‑of‑living help, point number one,. But point number two, they're being good local members and good senators, and reflecting the very real concerns that people have in communities – which we share – about these cost‑of‑living questions and that's why we're not just acknowledging them, we're acting on them too.

CLENNELL:

Let me ask, can you summarise for us, the National Cabinet. What was achieved today and what it will cost the federal budget?

CHALMERS:

This was, in my view, an absolute triumph today, this National Cabinet outcome. I don't know anybody else who could have brokered the kind of progress that we've seen today, apart from Anthony Albanese. I pay tribute to the extraordinary work that he has done brokering this arrangement and I thank, genuinely, the state and territory leaders and treasurers for the way that we've engaged with each other in a spirit of goodwill. We all represent the same people, we've got very similar objectives, we all want the same outcomes for the people that we jointly represent. And the work that they've done collectively today is incredibly important progress. I pay tribute to Anthony‑

CLENNELL:

Well explain it to us, what does it mean? It means the states pick up more of the NDIS bill. It means you're given more money for hospitals. It means you continue the current GST arrangements is that right?

CHALMERS:

The three main parts of it are the NDIS, health and the GST No Worse Off arrangements. And what we've recognised here is not just the pressure on their budgets or our budgets, but the pressures on all of our budgets. We want to deliver better health services through hospitals, urgent care clinics, and when it comes to older people in hospitals – so we've found a way forward there. We want to make sure that we deliver for people in the NDIS system that we believe in, and which needs to have a really important future. And so we've found a way to recognise those cost pressures in the NDIS and I've been really pleased frankly to strike an arrangement with the states and territories on the GST No Worse Off deal. I understand they wanted some clarity. I understand they wanted some certainty. I got the ball rolling at the treasurers meeting last week. I always knew that there'd be some middle way between what they were proposing and what we were proposing, And Anthony Albanese has been able to strike that deal today. What this deal means is we all go forward together, delivering better services for the people that we jointly represent and that's our goal.

CLENNELL:

What's not clear from the press conference and now we're told we have to wait for tomorrow is what services are coming off the NDIS and going to those so‑called foundational supports. Is that autism, can you tell us what it is?

CHALMERS:

The purpose of today was to ensure that we're working together on the 8 per cent growth target, remembering the growth in the NDIS spending will still be quite steep but we want to target it at 8 per cent. We need the states to help us do that. That's what today was about and recognising we've got more work to do on foundational supports. Tomorrow is about releasing and taking people through the recommendations of the review. I don't think that's especially unusual to make sure that we've got the basic funding arrangements right, and to let the relevant minister – in this case, Bill Shorten – to outline the rationale.

CLENNELL:

Are some forms of autism out?

CHALMERS:

I'm not going to pre‑empt or front run the work of Bill.

CLENNELL:

What do you think about Mark Dreyfus blowing up today?

CHALMERS:

I think Mark was just reflecting the frustration that the whole Parliament feels about the cards that we've been dealt when it comes to the High Court decision. And it wasn't the government's decision to have these people out and about – it was a decision taken by the High Court, it was imposed on us by the High Court. And whether it's a Labor government or if it was a Liberal‑National government, we have to respond to that. We've been responding to that, we've been working through the Parliament, making progress through the Parliament and another opportunity tonight. And so I think it just reflected the frustration that we all feel about making sure as soon as possible, we get the right arrangements in place to respond to a High Court decision that we argued against.

CLENNELL:

Is the government hurting bad politically over this issue?

CHALMERS:

I think the political considerations are secondary. We want to get the right arrangements in place, we want to respond to the High Court, really right across the portfolio is what we need to do is to make sure that we're making the right kind of progress like we did at National Cabinet and like we hopefully will in the Parliament when it comes to preventative detention. We're focused on doing the right thing, the political cards will fall where they may.

CLENNELL:

You're pretty dependent electorally on what happens to the economy and cost of living next year, aren't you?

CHALMERS:

I think the economy is always front of mind for people for good reason. People are under pressure right now – we don't just acknowledge that, as I said a moment ago, we're acting on it. It will be an important part of the considerations – I think it always is, you'd expect me to say that as the Treasurer. I think the economy is at or near the top of everybody's list when they're working out what matters most to them and how they make their choices politically. I understand that but my main focus really is trying to get the right combination of policies to get us through a difficult period, at the same time as we make sure we're setting the country up for the future as well.

CLENNELL:

And just finally, I just wanted to give you the opportunity to say a few words about Peta Murphy after her passing.

CHALMERS:

I think what you're seeing in the Parliament today is people trying to assemble the right words to convey to your viewers and others who might not have met her just how wonderful she was. Peta Murphy was an absolute ripper of a person, an absolute gem, and she lifted this whole place up and so when we lost her I think we're all weighed down now by this immense sadness about her passing. She was courageous, she was hilarious, mischievous, she was luminous. We'll miss her a lot.

CLENNELL:

Treasurer Jim Chalmers, thanks so much for your time.