Interview with Liam Bartlett, 6PR Mornings
LIAM BARTLETT:
Are you impressed by the debut performance of Treasurer Jim Chalmers or are you one of the critics today arguing that it hasn’t gone far enough, given the conditions that we are facing both here and overseas. Many newspaper editorials around the country are making the point today that there are big storms on the horizon and this economic blueprint doesn’t do enough to shelter us from the impending tax problems and the spending issues that will inevitably arrive on our shores, if some of them aren’t already here.
However, the Treasurer says this budget does exactly that. And his Treasury team has deliberately set up a foundation on which to tackle those potential outcomes and begin what he calls the hard yards of Budget repair. Jim Chalmers admits electricity prices will soar, real wages are going nowhere for the next two years, and inflation will not peak until next year. There is limited good news. That happens chiefly in the areas of cheaper child care and prescription medicines.
But the Treasurer joins us on the program now. Jim Chalmers, good morning.
JIM CHALMERS:
Good morning, Liam.
BARTLETT:
Treasurer, firstly, congratulations on your very first Budget. These are no small things.
CHALMERS:
I appreciate it, Liam. Thanks very much.
BARTLETT:
Now, on to the hard stuff – electricity prices.
CHALMERS:
That was quick, Liam.
BARTLETT:
Yeah, sorry. It’s a tough school, as you well know. A rise of more than 50 per cent, gas prices more than 40 per cent. Look, is it time to just admit that the promise of cheaper electricity, this $275 cheaper under Labor, is scrapped, that promise has gone?
CHALMERS:
It remains the case, Liam, that renewable energy is cheaper energy, and that’s why we’re putting so much effort into getting more renewable energy into the system but there’s no use pretending that between that modelling being done in 2021 and the year that it refers to – 2025 – in the middle of that we’ve got a war in Ukraine which is causing absolute havoc with global energy markets, and that’s having implications for our electricity market and electricity prices here at home.
BARTLETT:
But you knew –
CHALMERS:
And also, we’ve had a decade of energy –
BARTLETT:
That war was well and truly going, Treasurer. That war was well and truly up and running when you made that promise during the election campaign.
CHALMERS:
I think the war has become more entrenched and the impact on electricity markets has become clearer but it remains the case, as I said, that the reason the modelling came to that conclusion, the reason why investors and others have come to that conclusion is because renewable energy is cheaper energy as well as cleaner energy. That remains the case. We want to get more into the system. We’ve had a decade of energy policy chaos which hasn’t helped, we’ve got a war in Ukraine which is pushing up prices around the world and here, and we can’t ignore that.
BARTLETT:
Okay, so is that it? It’s off the table? Come on, you’re a pretty straight talker. That promise has gone?
CHALMERS:
The modelling that was done last year referred to a whole set of conditions that we didn’t foresee, including a war in Ukraine. I don’t think anybody was really foreseeing when that modelling was done that there’d be a war in Europe.
BARTLETT:
All right, I’ll take that as a yes. Okay. So that’s a yes.
CHALMERS:
Clearly, we’ve got big price increases in the Budget as a consequence of the war in Ukraine and a decade of policy chaos - we’re very attuned to that. We want to get more renewables in the system because they’re cheaper as well as cleaner. We’ve had a decade of policy chaos that we need to end, and that’s what we’re focused on.
BARTLETT:
So, you talk about spending more money on renewables, for example. There’s $20 billion there extra. There’s new transmission networks, Treasurer. Not one country in the world has managed to make this switch without costing more. Yet Australia thinks it can. Is that the way I’m reading it?
CHALMERS:
Yes, I think it’s a huge economic opportunity for Australia. That’s what the investor community thinks as well. I think that most people that have spent time looking into this have concluded that there’s a big opportunity here for Australia in cleaner and cheaper energy. We see that in industry. A lot of the big industries which are so important to our economy out west, for example, are looking at ways to decarbonise – things like hydrogen when it comes to trucks on mine sites and other ways. There is money to be made from this, there’s national prosperity to flow from this, and that’s why we take it so seriously.
BARTLETT:
Can we look at our debt figures? So, you have our net debt increasing almost $200 billion more over the next four years. Are those figures, are those forward projections, based upon the stage three tax cuts? Are they factored into this Budget?
CHALMERS:
They are, yes. They’re legislated from ’24 onwards, and so they have an impact on the Budget from 2024 onwards. The important thing about debt to recognise is particularly when it comes to gross debt, what we’ve been able to do in this Budget, we’ve got this temporary surge in revenue from high commodity prices, we’ve let that flow through to the Budget, and what that means is less debt than what our predecessors had in their Budget over the forward estimates but we think we’ve got more to show for it.
BARTLETT:
Less debt than the other mob, the old mob. But we’ve still got incredible debt. I mean, the structural deficit, Treasurer, as you know, billions in the red. We’re spending more than we’re getting. Why aren’t we making more cuts?
CHALMERS:
We made a pretty good start on that - $22 billion in cuts is a substantial effort in spending – trimming of spending yesterday in the Budget. That hasn’t happened for a while, a savings effort of that magnitude. Plus, we’ve returned to the Budget that temporary revenue surge I was talking about. Plus, we’ve shown restraint. Plus, when we’ve made a commitment, we’ve made sure it’s carefully targeted in providing cost-of-living relief or strengthening the economy. And so, all of those things together are important ways to put the Budget on a more sustainable footing but I think your prouder point is right – we do have pressures on the Budget which are intensifying rather than easing over time and yesterday’s Budget was the beginning of putting the Budget on a more sustainable footing, but it wasn’t the end.
BARTLETT:
I’m pleased to hear you say that. I mean, we still seem to be living beyond our means, don’t we? That net debt figure worries me – 200 billion over the next four years increase. We’ve got the cost of servicing that debt rising from 18 to almost 33 billion in that time. That’s almost double. And yet you’ve got cheaper child care, you’ve got more paid parental leave for those earning hundreds of thousands of dollars. I mean, why indulge in that sort of middle-class welfare?
CHALMERS:
A a couple of things about that. Firstly, you’re right – it’s actually the fastest growing area of spending in the Budget is the cost of servicing that trillion dollars of debt that we inherited. And so that is, I think, an important, significant pressure on the Budget.
Secondly, when it comes to the commitments that we’ve made, we’ve been pretty restrained in our commitments and what we’ve done is we’ve limited those big extra spends in areas like early childhood education, but we’ve made sure that wherever we are investing a substantial amount of taxpayer money we’re making sure we get an economic dividend for it because part of our task here when it comes to managing the Budget is to make sure you’re growing the economy the right way that’s good for the Budget as well. The cheaper child care policy is about cost-of-living relief, but it also means that we can get more people working more and earning more if they want to. And we’ve got labour and skills shortages - they’re particularly intense out west, we’re very conscious of that, and one of the ways that we can help fill these skills and labour shortages is make it easier for newer parents if they want to work more and earn more.
BARTLETT:
Treasurer, you talk about that trillion dollars in debt that you inherited. This is it now, isn’t it? This is the line in the sand this morning, because this is yours. You own this, don’t you? So, from here on in you can’t blame the other mob, can you? This is it. This is just your patch from here on.
CHALMERS:
Obviously I take responsibility for the Budget. I handed down a Budget yesterday with my name on it. I take responsibility for that Budget and part of that is recognising the starting position and unfortunately, the starting position was a Budget weaker than it should have been and we weren’t getting the value for money. There was a lot of wasteful spending and we started to trim that and I take responsibility for that.
BARTLETT:
The interest rate forecast, a lot of our listeners will be very keen on hearing this – you’re saying that the Reserve’s cash rate will peak at 3.35 so that represents at least another three-quarters of a per cent increase on people’s mortgage rates, is that the way you’re reading it – at least?
CHALMERS:
Yes, what the Treasury does when they’re doing their forecasts is it takes an average of the market context. I don’t personally make predictions about interest rate rises; I never have and never will and I don’t pre-empt the decisions that the independent Reserve Bank makes, but the Treasury has to factor in an estimate of interest rates, and the best way to do that is they take the median of market expectations, or one of the measures of market expectations, and that’s how they get that number that you rightly referred to.
BARTLETT:
Okay. Do you think that’s reasonable, though? Do you think that’s reasonably rational in this current climate?
CHALMERS:
It’s consistent with how it’s typically been done and I think the Reserve Bank themselves – you can understand I’m being really careful because I don’t want to –
BARTLETT:
Yep, yep, yep.
CHALMERS:
– tread on the RBA’s work, but what they’ve said is that the cash rate now is 2.6. They have said themselves that they anticipate that that rate will go higher. We have to estimate that in the Budget, or the Treasury has to and so, they pick a number based on what the market thinks.
BARTLETT:
Okay. Look, one of the line items – this is not going to break the bank either way – but an extra $1.4 billion in foreign aid, $900 million for the Pacific. How much of that extra money is going to the Solomon Islands?
CHALMERS:
That’s to be determined by the Foreign Minister. We’ve got existing programs and some newer programs, and the balance of that is determined by Minister Wong and others, Minister Conroy.
But the reason for that – and I think Australians do understand this – is we need to engage in the Pacific. Our region is a relatively uncertain place and we want to be the partner of choice for some of our friends in the Pacific and that means investing where we responsibly can, not being over the top about it, but making a contribution –
BARTLETT:
But it’s a one-way street, isn’t it? That word “responsible” is a one-way street. I mean, you’ve gone out of your way to make cuts and show restraint and do all that sort of thing with the Budget domestically, and then we’re giving millions of dollars extra to the Solomons. This bloke whose in charge has spent just last week almost a quarter of a million dollars on a junket with his wife and his mates paid for from the fishing fund that we finance.
CHALMERS:
I think it’s important that we invest in the Pacific and obviously we don’t want to see that money wasted, but we need to invest. I think people understand there are important national security elements to all this, and we’ve neglected the Pacific I think for too long and we need to rectify that. At the same time, we’re investing much more in child care. We’re investing much more in aged care than we are in this area and that I think demonstrates the higher priority that we place on those areas of spending.
BARTLETT:
Treasurer, your big ticket item – one million new homes over the next five years. Two hundred thousand homes a year. Now, given that we already build 150,000 homes a year in total and the building industry has a waiting list as long as your arm, how the heck are you going to do that?
CHALMERS:
The million homes is from 2024, because it recognises that pressure that you just rightly identified. In the housing market right now, as you know and your listeners know, we’ve got labour shortages and we’ve got higher costs of building materials and we’ve also got an existing pipeline of activity, so all of the effort that currently goes in plus the new effort that we want to put in with super funds and the states - working closely with Premier McGowan’s team on this – is to see if we can build more affordable rental properties near where the jobs and opportunities are. We’ve got low vacancy rates and high rents. We’re creating job opportunities, but it’s harder to live near them and that’s what this is about. The reason it starts in 2024 is precisely because of the pressures that you just identified.
BARTLETT:
Is that part of your growth policy? Because we’ve got growth falling off the cliff here, haven’t we? Going down to 1.5 next year from 3.25 currently. I mean, it builds back up a little bit, but it’s not a good figure. Is that all part of your growth policy led by the building industry?
CHALMERS:
Of course it’s part of it. All of our policies in one way or another are about growing the economy, making it more resilient, making it more modern, and housing is a big part of that but when it comes to that growth forecast, no use pretending otherwise – you know, that is a slowing of growth brought about by a big global downturn, which is what we’re expecting, combined with the impact of these higher interest rates which will slow the economy as well. And so that all comes together next year in that quite troubling forecast for growth. That’s why we’re making investments and strengthening the economy. We do have some difficult days ahead in the global economy, and that will have implications for us as well, and that’s what that forecast reflects.
BARTLETT:
It’s a caldron, indeed, isn’t it? I mean, you really have got a tiger by the tail here, Treasurer.
CHALMERS:
I think there are big risks, frankly, particularly the global economy. There’s no use tiptoeing around that. I’ve spent a fair bit of time with my international counterparts in the last few weeks and there are big fears in the UK, Europe, a slow down in China, the risks in the US, the war in Ukraine is not helping. All of this combined means that most people are preparing for some pretty heavy weather in the global economy. The job of the Budget is partly to batten down the hatches against all of that but it’s also, at the same time backing in families and building a better future. We need to do all three of those things at once.
BARTLETT:
How’s your experience with wildlife? I know you used to work for Wayne Swan, but I’m not sure if that works.
CHALMERS:
I’ve never hung out with a tiger, if that’s your question. A tiger by the tail reference, that sounds troubling.
BARTLETT:
I tell you what, I don’t think there’s a job in Australia today that would be less sought after than yours. No offence.
CHALMERS:
No offence, taken, Liam. I think sometimes I feel the same way.
BARTLETT:
Treasurer, thanks very much for having a chat to our listeners. We really appreciate your time.
CHALMERS:
I appreciate your time, Liam. All the best to you and your listeners.
