Interview with Hamish Macdonald, RN Breakfast, ABC Radio

HAMISH MACDONALD:

The Final Budget Outcome for the past financial year is a $22.1 billion surplus which is higher than expected. The government’s attributed some of that to higher wages and a strong labour market and on Monday the Treasurer will be releasing his Employment White Paper.

The Treasurer Jim Chalmers is in our Parliament House studio this morning. Good morning to you.

JIM CHALMERS:

Thanks for having me back, Hamish.

MACDONALD:

We’ll come to all of that in a moment, but first, the news breaking overnight on Rupert Murdoch. What’s your view? A great Australian business success story or a scourge on democracy?

CHALMERS:

Well, obviously there’s mixed views about Rupert Murdoch. He’s a controversial figure but also an influential figure and I think really one of the defining figures of the global media landscape for some decades now and so, in lots of ways the end of an era at News and there will be mixed views, often strongly held, about his contribution.

MACDONALD:

No doubt. He obviously has a big impact on public discourse and also politics. Are politicians afraid of Rupert Murdoch? Have they been?

CHALMERS:

I don’t think so but I think all of us really right across the media landscape, we understand how important it is to a well‑functioning democracy. You and I were at those Walkley business awards earlier in the week talking about some of these sorts of things. We want there to be diversity, we want there to be quality, we want there to be strong national broadcasters like this one so that we can have the best version of the media in a good, healthy democracy and economy.

MACDONALD:

To the news relating to your actual job, the surplus is $3 billion higher than forecast back in June. Where has that come from exactly?

CHALMERS:

Well, it’s come from a range of places, but primarily our labour market is stronger and we’re getting better prices for what we sell the world but the really important thing about all of this, Hamish, is we would not be in surplus without the responsible approach that we’ve taken to these revenue upgrades. Our predecessors used to spend most of the upgrades, we have banked almost all of them and we’ve done that at the same time as we’re rolling out billions of dollars in cost‑of‑living relief for people who are doing it especially tough and so our responsible economic management is paying dividends. We’re helping people through tough times, we’re getting the budget in much better nick, and that will put us in a better position as we confront some of the global economic uncertainty which is coming at us over the next year or two.

MACDONALD:

The economist Chris Richardson from Rich Insight, you will have seen his analysis of this. He actually says this has nothing to do with your policies; it’s because the situation was never as bad as Treasury projected. In his words he says our budget came good despite our politicians, not because of them.

CHALMERS:

He’s wrong about that and I respect Chris Richardson, I read what he writes and I take him seriously. I engage with him respectfully but he’s wrong about that because what his analysis neglects is when you get revenue upgrades like what we’ve seen in recent times, governments have choices – do they spray that around in politically motivated ways which has largely been the experience of our predecessors and that’s why we don’t have enough to show for a trillion dollars in Liberal debt, or you can take a more responsible approach to it. You can invest in the future, you can provide cost‑of‑living help at the same time as you bank most of this revenue upgrade and that’s the reason why we’re in surplus today – the biggest surplus in dollar terms in our history, the first in 15 years. Not an end in itself but a much stronger foundation from which we can help people and invest in the future.

MACDONALD:

Given that so much of this has come from increased tax receipts from hard‑working Australians, does this affirm in your mind the argument for the stage three tax cuts or does it make you consider who the beneficiaries of any such tax cuts should be?

CHALMERS:

Well, first of all, it’s partly a function that people are working more and earning more. The labour market is incredibly resilient given what’s coming at us from around the world and so unemployment is lower than what many people anticipated and wages have begun growing again and that’s a good thing too and that’s one of the reasons why the budget is in better nick, but also getting better prices for our commodities and what that means for company tax and so there is an important improvement here across those two areas.

When it comes to personal income tax, as you know, as we’ve spoken about that before and I’ve spoken to Patricia and others on this program in this time slot, we haven’t changed our view about the stage three tax cuts but we have found a way to provide substantial cost‑of‑living relief for people on low and middle and fixed incomes because we recognise people are doing it tough, and they’ve been our priority.

MACDONALD:

On Monday you’ll release the Employment White Paper. Will unemployment remain low in the area of the threes while you bring inflation down?

CHALMERS:

We expect or the Treasury expects in the budget forecasts that unemployment will tick up a bit and it will have a four in front of it, so historically very low but not as low as it has been in recent times. Since these monthly unemployment records were kept, they started being kept in 1978, and since then there’s only been 18 months where unemployment has had a three in front of it and 15 of them have been under this Albanese Labor Government, so we’ve had an incredibly strong period of low unemployment. We expect unemployment to tick up a bit in the coming months because of the consequence of higher interest rates and because of the slowdown in China and global economic uncertainty. Still historically low but perhaps a bit higher than what we’re seeing right now and at the same time, we are seeing inflation moderate and we’re playing a part in that by taking pressure off the budget with this surplus we’re announcing today but also rolling out cost‑of‑living help in a way that takes the edge off these cost‑of‑living pressures without adding to them.

MACDONALD:

Sure. I’m just trying to establish for listeners what you think the connection is between bringing inflation down and unemployment. I mean, is it your view that unemployment does have to go up if we’re going to tame inflation?

CHALMERS:

Not necessarily and I appreciate you reminding your listeners that the Employment White Paper comes out on Monday. We’ve put a hell of a lot of work into this and one of the things that we have grappled with is to try and inform your listeners and the country more broadly about the distinction between a quite narrow, technical assumption about full employment where unemployment is inflationary or not inflationary, there’s a narrow technical assumption about that which feeds the forecasts of the Reserve Bank and the Treasury and others but that’s very different to the government’s objective and our objective is a good, secure, fairly paid job for everyone who wants one without looking for too long – that’s our objective, that’s a separate thing to these narrow assumptions, technical assumptions, that people make about full employment.

That’s a long way of saying our job is to keep unemployment as low as we can at the same time as inflation moderates in our economy. We’ve made good progress on inflation, but we’ve got a fair distance to travel. We’ve got a great labour market, resilient labour market, but we know we’ve got more work to do there too.

MACDONALD:

It is more than just a technical argument, though. The property billionaire developer Tim Gurner made some comments at a conference recently. You’ll be familiar with them, saying that the economy needs hurt, people need to hurt, workers need to hurt a little bit in order for the economy to move back into the direction it needs to be going. This is what he said.

TIM GURNER:

We need to see unemployment rise. Unemployment has to jump 40, 50 per cent in my view. We need to see pain in the economy. We need to remind people that they work for the employer, not the other way around.

MACDONALD:

What’s your view of those ideas?

CHALMERS:

I think those ideas are appallingly insensitive and others have made that point as well. I thought they were appalling, I thought they were insensitive and I thought they were wrong, frankly. And they also –

MACDONALD:

Because some economists think that actually there’s some merit – even if expressed poorly, there’s some merit to the argument.

CHALMERS:

No, I don’t share any of those views. I don’t share any of those views. First of all, people are going through a difficult period – we’re seeing that in household consumption, we’re seeing that in household savings. These interest rate rises are biting and people are hurting and that’s why our highest priority is helping people with this cost‑of‑living relief at the same time as we get the budget in much better nick. People are hurting already. We want the kind of labour market which is a win‑win. We want good, well‑trained, well‑paid workers in secure jobs and we want businesses to be profitable and our economy to be productive and the Employment White Paper is about bringing together all of those goals and objectives and aspirations to show where we’ve made some progress together but also to identify where we can make progress into the future and in doing so, I think we can show a much more optimistic version of the future than that described by that clip that you just played.

MACDONALD:

On the Reserve Bank, Michelle Bullock is now in place. Have you chosen a deputy yet?

CHALMERS:

Not yet, but I have been interviewing prospective deputy governors. I’ve interviewed a small number – three of those so far. It’s a high‑quality field and we’ll end up with a very good deputy governor of the Reserve Bank but we haven’t made a decision yet. We’ll make it before long.

MACDONALD:

The former Reserve Bank Governor, Ian Macfarlane, has made some commentary this week saying it’s very bad policy, the separation of the boards so that there’s a separate monetary policy board. Will Michelle Bullock chair both the Reserve Bank and this separate board?

CHALMERS:

Well, we’re working through the recommendations of the Reserve Bank Review, as you know and one of the recommendations was that the Governor not chair the governance board.

MACDONALD:

What’s your view on that?

CHALMERS:

We’re working through it. There’s a handful of issues that we haven’t landed yet and we haven’t landed them yet because we’re trying to do it in a bipartisan way and we’re trying to do it working with the new Governor on some of these sorts of issues and so that’s one of the issues, to be up‑front with you and your listeners, Hamish, that we haven’t landed yet.

MACDONALD:

It would create a tension within the structure, wouldn’t it, if she was not chair of both? And Ian Macfarlane would be right, wouldn’t it – that she would be a weaker Reserve Bank Governor if she wasn’t sitting across both boards?

CHALMERS:

Well, two things about that. First of all, one of the objectives of the Reserve Bank Review and one of the objectives of the government is to make sure that the Reserve Bank arrives at its decisions independently but also accessing contested views and contested advice – I see that as a good thing and I don’t speak for Governor Bullock but I’m pretty confident that she sees that the same way. It’s a good thing to have a range of views and voices represented given how important these decisions are. The second point I wanted to pick up, Hamish, you mentioned Mr Macfarlane. I don’t know him but I obviously respect his contribution to the Reserve Bank Board but the unusual thing, the strange thing, is he is saying that somehow it’s a big change to go to a monetary policy board where the majority of people are external – that’s the case right now, that is already the situation – a majority of people on the monetary policy‑setting board are externals right now. That’s the situation that has existed for a long time, so he’s wrong to say that that’s a radical change. Most people are externals currently, most people will be externals into the future on the monetary policy board as well and so there is no radical change there and I’m not sure why he says that it is.

MACDONALD:

On the COVID inquiry – I don’t want to get too much into the politics of all of this – we’ve spoken to Catherine Bennett who’s been appointed as one of the three experts on this panel to review Australia’s pandemic response. She is of the view she told us that state premiers should appear before this inquiry, that in order for it to produce a full picture of what happened that it would be useful to have their contribution. It’s obviously not a Royal Commission so it can’t instruct these premiers past and present to take part. Is it your view that to do this properly to get a full handle on the national response that the premiers should be asked to take part?

CHALMERS:

I think we’ve got the right set of arrangements here and there’s nothing preventing the states from making contributions to this but our primary focus is to take responsibility for the Commonwealth’s powers and levers, to learn from the past so that we can do things better into the future.

MACDONALD:

But hold on. A key – we all know that a key tension throughout the pandemic was where the power lay between the Premiers and the Commonwealth, and that was a genuine difficulty in terms of decision‑making. Should the premiers appear before this inquiry?

CHALMERS:

The arrangements that we’ve announced, that we’ve set up and announced, primarily focus on the Commonwealth's roles and the Commonwealth’s responsibility.

MACDONALD:

So is that a no, Jim Chalmers? Is that a no? Let’s be clear.

CHALMERS:

I said earlier that there’s nothing preventing the states from participating but our primary focus is on the Commonwealth role. I think your listeners, Hamish, they want us to take responsibility for our part of all of this and we are. We’re not doing it in a partisan way, it’s not about taking cheap shots at predecessors, it’s not about any of those sorts of things – this is a comprehensive and genuine effort to work out how the Commonwealth can do better into the future. Your listeners want us to take responsibility for what we are responsible for and that’s what we’re doing.

MACDONALD:

Sure, but one of the very people you’ve appointed to this inquiry says that she thinks to get a full picture it would be useful to hear from them and you’re coy on the matter.

CHALMERS:

I’m really not, Hamish. This will be the third time that I say to you that there’s nothing preventing the states from taking part and that’s consistent with what the reviewer has said. There’s nothing to prevent that but our primary focus is what we can do better. Our responsibility at the Commonwealth level is to look at all of the decisions that Commonwealths can take, the decisions that were taken and the decisions that we might need to take into the future and to make sure that we learn the lessons of the past so we do things better in the future.

MACDONALD:

Jim Chalmers, always a pleasure talking. Thank you very much.

CHALMERS:

Appreciate it, Hamish. All the best.