Interview with David Koch, Sunrise, Channel 7

DAVID KOCH:

What do you say to voters that you haven’t delivered relief for power prices that you went to the election on?

JIM CHALMERS:

I think Australians understand, Kochie, that when you’ve got a war in Europe which is causing havoc on global energy markets then that has consequences for electricity prices here in Australia. I think people do understand that and I think they also understand that renewable energy is not just cleaner energy, but it’s cheaper energy as well. That remains the case.

What we’re doing in this Budget is investing in new sources of energy, which is important over time in getting prices down. But we’ve also got some important regulatory steps, boosting funding for our regulators and boosting our efforts there as well. There is more work to do when it comes to the electricity market. We do understand that these electricity price rises make it harder for Australians who are already under the pump and that’s why we’re taking some of the steps that we’re taking.

KOCH:

Fifty per cent by the end of next year, increase in power prices. When can we expect them to come down?

CHALMERS:

That remains to be seen, Kochie. In the Budget, you’re right, there’s 20 per cent already occurring this year ‑ that began at the start of this financial year when the price rises were hidden during the election campaign by our predecessors. But there is more to come and there’s no use sugar coating that. That will make things difficult for Australians who are all facing these cost‑of‑living pressures.

KOCH:

Okay, you also went to the election promising real wage increases, and again the Budget says that’s not coming any time soon.

CHALMERS:

I think people recognise that even though wages growth is picking up in the Budget, partly as a consequence of some of the steps we’ve already taken to get wages moving again – supporting a minimum wage rise and now we’re also supporting a rise for aged care workers in the care economy, we want to train more people for higher wage opportunities, our child care policy is about people earning more and working more if they choose to do that – so wages growth is happening again after a decade of wage stagnation.

But when you’ve got inflation as high as it is right now and as high as it’s expected to be, higher for longer than we would like as a consequence of the war in Ukraine and natural disasters and other factors, then it will take some time for real wages to be growing again. But wages are going in the right direction. If we get on top of this inflation problem, we’ll see real wage growth.

KOCH:

Okay. So that’s two failed election promises in your first Budget. Did you think of bringing in cost‑of‑living relief to at least get us by? Because that’s what a lot of the critics are saying today – no cost‑of‑living relief on those two failed areas. Why can’t you help more?

CHALMERS:

We’ve got a seven and a half billion dollar cost‑of‑living package, which is about cheaper child care, paid parental leave, cheaper medicines, more affordable housing and getting wages moving again. So that’s a substantial cost‑of‑living plan. But as you would appreciate, Kochie – I think you and I have spoken about this on other occasions – when you’re providing cost‑of‑living relief, if you do it in an excessive way or an indiscriminate way you risk pushing inflation up even further and interest rates up even further. And so that’s the challenge that we grapple with as a government. I think your viewers understand that in broad terms. We are providing cost‑of‑living relief but we’re doing it in the most responsible way we can.

KOCH:

And also you just looked to what the UK did – they gave cost‑of‑living relief and sent the economy to the brink and into recession. We don’t want that. I agree. You’ve also fudged the figures a bit, haven’t you, as well, and built a bit of a slush fund on the income side. You’ve fudged the income figures. Our two biggest exports – iron ore and coal – you have seriously undervalued the outlook for that as well, haven’t you? You’ve got coal in at $60 a tonne. It’s currently $400 a tonne. And you’re assuming $55 for iron ore, it’s currently 91. Is that your little slush fund to help us a bit later in the year, to dish out more income?

CHALMERS:

Of course not. We do take a conservative approach to our forecasts for our commodity prices ‑ that’s consistent with past practice.

KOCH:

I know.

CHALMERS:

That’s what Treasury does and when you think about how volatile these prices have been ‑ for example, you mentioned iron ore, and if you think met coal, they’ve come off substantially since the middle of the year, but gas and thermal coal has gone up. And so you need to be very careful with these commodity forecasts.

KOCH:

All right.

CHALMERS:

And not just that, Kochie, but when you get a surge in revenue, you’ve got to return it to the Budget. That’s the most responsible thing to do, and that’s what we’ve been doing.

KOCH:

Okay. How about we have a bottle of red on the outcome at the end of June? I reckon it’s going to be nowhere near your assumptions. And we’ll see how we go. Up for it?

CHALMERS:

Well, I think it’s important that we’re conservative about it, Kochie. I’m off the reds, but I hope the prices stay strong. Everyone does, but it’s best to take a conservative approach.

KOCH:

All right. Treasurer, thanks for joining us. Here’s Nat.

CHALMERS:

Thanks, Kochie.