LIAM BARTLETT:

Treasurer, good morning.

JIM CHALMERS:

Good morning, Liam.

BARTLETT:

Treasurer, you said yourself the economic numbers yesterday were encouraging. Economic growth, obviously, respectable. There’s a boom in exports, continued strength in household spending. Is this cost-of-living crisis exaggerated to a certain extent?

CHALMERS:

I don’t think it is, Liam. I mean, you’re right that there were some encouraging elements to the National Accounts that came out yesterday. People were spending in that June quarter, mostly spending in areas that they’d been prevented from spending in during the course of the earlier stages of the pandemic, so some of the services economy came roaring back. That’s part of the story. The other part of the story is exports, and obviously, the powerhouse that is the WA exporting economy was a big part of that story as well. But the cost-of-living pressures are real and I don’t think anybody in Perth fails to understand that. We do have an inflation problem in the economy, and we also need to remember that these numbers that came out yesterday are a couple of months old now. Since these numbers were generated, we’ve had interest rate rises, the global situation has got a bit trickier and we’ve got issues in our supply chains pushing up inflation as well. So there’s no shortages of challenges. The economy is growing, but the challenges are growing too.

BARTLETT:

Where do you see the number easing off, because we’ve had, as you say, interest rate rises, five rate increases in consecutive months? How many more before we see it start to ease off?

CHALMERS:

There’s a big speech shortly from the Governor of the Reserve Bank who’ll be speaking about these things, but he made it pretty clear when interest rates went up on Tuesday that they think that they’ve got a bit more to rise, that they were really effectively warning your listeners and Australians that there might be a little way to go yet. I try not to interfere with the independence of the Reserve Bank or second guess their decisions, but I think it’s good that Phil Lowe will be out there today explaining some of the context for these decisions and giving people a bit of a sense of how the bank is seeing things.

BARTLETT:

But you’re right, the other day he made those comments – he’s insistent; he’s determined to crush the life out of that growth. That’s why I ask you the question. I mean, what are your experts telling you about where the number eases off?

CHALMERS:

I think we take our cues on this from what the Reserve Bank Governor says publicly, and I think there’s a strong expectation in the markets and elsewhere that there’ll be some more interest rate rises this year. We’re not quite sure where that ends, and we don’t want to get into the kind of prediction game when it comes to these decisions.

BARTLETT:

Let me ask the question in another way then: how many more rate rises can the market take before, for example, the housing market falls over completely, nationally?

CHALMERS:

Well, it remains to be seen. I’m still relatively optimistic about our economy. I’m pretty confident that we can navigate this tricky territory that we find ourselves in now and emerge on the other side. Some of the countries with which we compare ourselves – the US, the UK – are having a much harder time of it. Their inflation is higher, their interest rate responses are harsher, so there is a fear in some of those big economies of recession and an expectation in lots of ways that they will go backwards. We’re in better shape than that, but that doesn’t mean that we’re out of the woods.

BARTLETT:

All right. Fair enough. Let me ask one last question about the Reserve: Treasurer, do you have full confidence in the actions of Philip Lowe as Governor?

CHALMERS:

I do, Liam, and –

BARTLETT:

Because remember, this is the bloke who said there would be no rate rises, zero rate rises until 2024. Does he know what he’s doing?

CHALMERS:

I think so, Liam, and I’m not in the business of taking shots at him as he goes about the difficult work with the board in making these decisions.

BARTLETT:

No, I’m not asking you to take a shot at him, but you largely – as you’ve said, Treasurer, you largely rely on his actions to a certain extent?

CHALMERS:

I think all Australians rely on his decisions and the decisions of the board. They have big consequences for all of us and I recognise that. I have tried to recognise that these decisions are never easy from the Reserve Bank Board, and I’ve also welcomed, frankly, that he has made himself available to defend some of the things that he’s said and some of the decisions that the Reserve Bank Board has taken. He’s capable of doing that. He’ll do that again today and so I prefer to focus on the areas where I can make a difference. I’ve got a Budget to hand down. I’ve got an important task to balance some pretty tricky competing objectives, so I’ll focus on that. It’s entirely normal for a Reserve Bank Governor to be accountable for his decisions in the public domain and to answer for those decisions and for that language. That’s what’s happening now and that’s appropriate.

BARTLETT:

Your forthcoming Budget, you flagged relief for households – coming back to this cost-of-living problem – in what form, Treasurer, will be the relief be?

CHALMERS:

We made it pretty clear that our priorities when it comes to cost-of-living relief are childcare, because there’s an economic dividend there. It makes it cheaper for parents, but it also means more people, especially more mums, can return to work when they’re ready to do that. So childcare is a big investment we’re making. We’ve announced yesterday the legislation to make medicines cheaper for people relying on lots of scripts. That’ll make a big difference, but it will also deliver a health benefit. We’re taking the fees off hundreds of thousands of TAFE places, which will ease the pressure. We’re making electric vehicles cheaper. And I think importantly this gets lost a bit, but when you are thinking about the cost of living, one of the big drivers of the pressure that people are under right now is their wages have been stagnant for a long time. Not in every industry – there’s some good well-paying industries out west, I’m aware of that – but in aggregate, we haven’t had the wages growth that we need to see for people to keep up with the cost of living and so a big focus of our economic plan is how we get wages moving again. You train people for higher wage opportunities, you make it easier for them to return to work to earn more, you invest in the industries that will create good, secure well-paid jobs, and you make sure that bargaining works to make sure that people are getting sustainable wage increases as well. That’s the other stunning fact out of yesterday’s National Accounts, that the profits share of national income is incredibly high, historically high. The wages share is not where we would like it to be. We want businesses to be successful and workers to get decent sustainable wage rises at the same time.

BARTLETT:

Okay. So, what will you be targeting for cuts in the Budget?

CHALMERS:

The first port of call is we found that there’s some wasteful spending that we want to eliminate. For example, we found, just as one example, this is not the whole task, but we found an $18 million grant in the last few days that would not be delivering value for money, so we’ll discontinue that. We’re going through the Budget line by line to make sure that every dollar that’s spent is spent for a meaningful defensible purpose. That hasn’t been the case unfortunately for the best part of a decade. There is a lot of waste and a lot of rorts in the Budget, so the first port of call is to wind that back so that we can invest this in some of these areas, whether it be skills or childcare or other important policies.

BARTLETT:

Do you have any estimates, Treasurer, for what you can cut? I mean are you looking for a particular number to cut, because obviously you’ve talked about the debt you’ve inherited, so you have to look after that, but, as you know, any increase in spending that you make will be inflationary. So how much will you need to cut?

CHALMERS:

We’re still working our way through the Budget. We’ve got six or seven weeks until I need to hand it down, so we’re working more or less around the clock on that task. And we haven’t completed it yet so I’m reluctant to name a number. But on the inflation front, it’s partly a story of how much you’re spending, but just as importantly is whether you’re spending it in the right areas and some of the areas where we’re intending to invest, that actually takes some of the pressure off inflation. So it’s not quite as simple as just the overall level of spending. Where you are spending that money matters as well, and there’s a number of areas that we’ve identified where we don’t think Australians are getting bang for buck, so we’ll wind that back and invest it somewhere else.

BARTLETT:

Okay. One of the areas that will be cut, obviously, that’s already on the table is the excise relief and you have well and truly flagged, Treasurer, that that’s all over at the end of this month. We can’t afford to keep it going, so the 22 cents a litre will go back on. But you did say last week that when that’s over at the end of the month, the ACCC will step up and keep the oil majors honest. I mean, that really is a joke, isn’t it? The ACCC has done nothing about the price cycle shenanigans that we’ve seen for years. Why would they all of a sudden do something to make it stop?

CHALMERS:

I think the ACCC does have a meaningful role to play here. I think that there is an opportunity, not just monitoring, but enforcement of the law to make sure that servos and suppliers aren’t treating people as mugs when the excise relief comes off.

BARTLETT:

Do they have the teeth?

CHALMERS:

I think they make a difference. I think they do, and I work closely with the ACCC on petrol. To be frank with your listeners, Liam, I know that this is going to be difficult for people when the relief comes off. I think people understand we can’t afford to continue it forever, but it’s going to be difficult when it happens. So we want the suppliers and servos not to treat people like mugs, not to just jack it up by 23 cents immediately when the relief comes off, because it matters how much they paid for the fuel, not just what the excise arrangement is when they sell it. So the ACCC has a role to play there.

BARTLETT:

No, exactly. I mean, especially here in the west, Treasurer. And you’ve got the amazing difference between diesel and regular, which affects a lot of the freight, obviously, and a lot of the long-haul stuff here in WA.

CHALMERS:

Absolutely, and we are aware of that. And I dug out the petrol prices in Perth when I knew that I was going to be speaking to you and one of the thing that we’ve got going on is the peak there, the average peak I think was about $2.11. The average at the end of last week was about $1.65, so it’s substantially off the peak. But it’s been so volatile lately the prices have been bouncing around, so the prices have come off lately. That’s a good thing. But I am wanting to keep an eye on it to make sure that people aren’t gouging.

BARTLETT:

The physical price of crude has come back, too, hasn’t it? I mean, that’s another reason. I mean, the price last night on the international markets went under $US90 for the first time in a long time.

CHALMERS:

I saw that too, but again there’s a lot of volatility, isn’t there, and it’s so dependent on things like the war in Ukraine and other factors. It’s so dependent on what’s happening in the US and China and elsewhere, and supply and all of that; and, so, it is good to see that oil price come down a bit. That is having an impact for motorists at the bowser, but it’s bounced around a bit for the last 6 or 9 months or so, and so we need to keep an eye on it and the ACCC’s got a role there.

BARTLETT:

Treasurer, I know you’re very busy but thanks very much for giving us access for our listeners this morning. Can I just ask you, finally, politically, as an overview, do you think the honeymoon is over now – the honeymoon period?

CHALMERS:

It hasn’t felt like much of a honeymoon, to be honest with you, Liam, already. Look, I think people understand that we’re trying to govern for the whole country. We’re trying to bring people together. We’re being upfront with people and leveling with people about our economic challenges, and I think for as long as we continue to do that and try do the best we can to make the right decisions in difficult circumstances, people will support us for it. If we don’t get that right, they won’t, and I think that’s just a realistic way to look at it.

BARTLETT:

It’s sort of at that point now, though, isn’t it, where you can’t turn around blame the previous mob? You’ve just got to sort of get on with pushing your own policies for better or worse.

CHALMERS:

I think 2 parts to that. Firstly, yes, we need to take responsibility, and we have and we are, for dealing with some of these challenges where we can, but, equally, I think Australians understand that when the Government changed hands the economy was in tricky terrain, and so it’s no use pretending otherwise there either.

BARTLETT:

Treasurer, thanks very much for having a chat to us this morning. Good to talk.

CHALMERS:

Enjoyed talking to you, Liam. Thanks very much.

BARTLETT:

That’s the Federal Treasurer, Jim Chalmers.