Interview with Greg Jennett, Afternoon Briefing, ABC

GREG JENNETT:

Jim Chalmers, always good to have you on the program. I wish we could be speaking in circumstances less grim for Australian borrowers though. A clear statement here by the Reserve Bank about inflation, perhaps fed by the April monthly figures too, going in exactly the wrong direction. How is today's interest rate increase not also a vote of no confidence in the Budget and recent wage utterances by the Government?

JIM CHALMERS:

First of all, Greg, because the Governor himself said less than a week ago that the Budget didn't change their outlook for interest rates. In fact, the Reserve Bank Governor said in the last week that the Budget is not adding to inflation, it's actually taking pressure off inflation. So he's made it incredibly clear that this interest rate rise today is not about the Budget. Nor is it about, in my view, the people on the minimum wage, getting a pay increase. This rate rise is not because people on the minimum wage are getting paid too much. And I think it's really important that we understand that ordinary working people already bear the brunt of these interest rate hikes, they shouldn't bear the blame as well.

JENNETT:

Alright, I might come back to wages in a moment. But just looking at the urgency of the short term, inflation was supposed to be at 6 per cent by the end of this month. Are you prepared to do anything immediately, almost immediately, if it misses that target by the end of this financial year, that is instead of waiting until the next scheduled update, which would be in November or December?

CHALMERS:

Well, obviously, we always try and take the best decisions in the economic circumstances that we confront, but already the Budget from last month is addressing this primary challenge in our economy which is inflation. Whether it's dealing with issues on the supply side, trying to make our economy more productive, whether it's providing this cost‑of‑living relief, which takes some of the pressure off without adding to inflation, or whether it's showing spending restraint in the Budget. Forecasting for example, the first surplus in 15 years, making the biggest improvement to the Budget when the inflationary pressures are most acute. Those three things are the things that people would be expecting us to do in this inflationary environment. We're doing that. The Reserve Bank has a different and separate job to do independently. We've seen them take that decision this afternoon.

JENNETT:

Yet, you get the impression that Phil Lowe hankers for a time when governments would step up to the plate a little more decisively. He lamented at Estimates last week, in a perfect world you'd have a different set of arrangements where the Reserve Bank wasn't led to do most of the work, where governments could increase taxes or reduce spending. Why aren't you prepared to make that perfect world, to make those decisions that he was almost theoretically calling for but calling for nonetheless.

CHALMERS:

First of all, I respectfully disagree with your description of his appearance before the parliament last week. You'd expect that the key point that he made is that the Budget is not adding to inflation, it's taking pressure off inflation. He actually welcomed the fact that we were banking such a big proportion of the upward revision to revenue in the Budget - something which hasn't been a feature of budgets before the last couple. That has been a feature of both of mine, we found $40 billion of savings in the Budget. We intervened in the energy market with the price caps, which are taking pressure, some of the pressure off price rises as well. And overwhelmingly the Governor's testimony before the parliament recognised that, he made it clear that he considered the Budget to be broadly neutral. But when it comes to our cost‑of‑living package, it's actually helping him do his job and that was the key takeout.

JENNETT:

And you're comfortable with the weight of responsibility falling to the RBA each month as it has for the last 13 months or so, without any subsequent action by you since that night in May when you handed the Budget down?

CHALMERS:

First of all, that's only a few weeks ago, Greg, and most of the Budget measures haven't come into effect yet. And so we need to recognise that first and foremost, I don't accept that the Reserve Bank is doing this job on their own. Certainly they're taking decisions about interest rates independently, and they can explain and defend how they came to this decision today. I take responsibility for my part of managing the economy and that's dealing with issues in the supply side, showing spending restraint and finding savings, and providing that cost‑of‑living relief in the Budget which is what I'm doing. I've made it really clear, since I've become Treasurer, that I know what my job is and I'm doing it. I know what the Reserve Bank's job is, they do that independently and they can explain their own decision.

JENNETT:

Alright, why don't we move on to wages? And again, Governor Lowe's comments last week, I think, although he was less clear on this, that he wasn't specifically referring to people at the lower end, perhaps more broadly, the bulk of income earners and workers in the middle. Have you overcooked people's expectations about getting wages moving again without a lift in productivity, because Philip Lowe circled that last week, and very much did so again in the statement today. It is about managing those expectations in the middle, isn't it?

CHALMERS:

Well, first of all, Governor Lowe said last week, we don't have a wage price spiral. He said that very clearly. Second of all, I think I made this point a moment ago, we don't want to see working people cop the blame as well as the brunt of these interest rate rises. And thirdly, we've always said that we want to see strong sustainable wages growth in a more productive economy. And so much of our agenda, whether it's in skills, or energy, or technology, is about making our economy more productive, not by making people work longer for less, not with some kind of scorched earth approach to industrial relations but by investing in people and their abilities, to adapt and adopt technology in a modern economy, which is powered by cleaner and cheaper energy. That's our productivity agenda and we've always said productivity is an important part of the puzzle. And even in the statement that the Reserve Bank issued today, they said that wages growth is consistent with inflation in the target band, so long as we work together to get that productivity performance up and that's what we're doing.

JENNETT:

Do you put the Same Job, Same Pay agenda in that category as productivity enhancing, because it does seem to have antagonised most business groups across the board. So much so, they're preparing the wage fight over it. Are you determined to plough on against that?

CHALMERS:

This is a commitment that we made before and after the election, Greg. It's not unusual, it's not particularly surprising, nor is it particularly troubling that from time to time, some of the peak big business groups will have a different view on industrial relations to the Government. We've got a responsibility to the whole country. And particularly when it comes to strengthening our economy in a way that we get this sustainable wages growth, which has been absent for much of the last decade. And so part of the way that you do that is you make sure that the system isn't biased against people who are working in labour hire. There's a legitimate role for labour hire and casual workers and the gig economy but we've got to make sure it's used for the right reasons, not the wrong reasons. That shouldn't be especially controversial, but nor should it be especially controversial that there's not an identical view on this, in elements of the peak big business groups.

JENNETT:

Well there is a bit of tension there, let's see how that's resolved. Final one on energy, Treasurer, Snowy Hydro the corporation that the Government fully owns - the ratings agency S&P Global is somewhat concerned that it's going to fall under what it calls credit stress. And this could push up energy prices overall because it's such a big player in the market, has that scenario being factored into your own energy forecasts over the next 12 months in particular?

CHALMERS:

Obviously, all of our expectations for the energy market are taken into account if we can, in our forecasts and our expectations for energy going forward. That's not the only part of the energy mix. I commend Minister Bowen and Minister Gallagher and others, for the way that they are working with Snowy Hydro to make sure it can be the best version of itself. It's got an important role to play. But there are other factors at play here in the system as well, principally a war in Ukraine, which has pushed up prices and necessitated the decisive, methodical response that we put in place which is taking some of the edge off these price increases at the same time as we help people with their energy bills, particularly when it comes to the cold months of winter.

JENNETT:

And in that battle it goes on, Jim Chalmers, we're going to have to leave it there. Thanks again for joining us on Afternoon Briefing.

CHALMERS:

Thanks Greg.