Interview with Martin Soong, CNBC Indonesia

MARTIN SOONG:

Jim Chalmers joins us now live. Let's get right to it. Treasurer, great to see you. Good morning and appreciate your time. Necessarily, we need to start with Australia's expectations for the Xi‑Biden meeting.

JIM CHALMERS:

Thanks for the opportunity to speak with you here from Bali, Indonesia at the G20. Obviously, this is a crucial meeting between President Biden and President Xi, an opportunity for the two big powers to meet and confer on some of the big issues that we are all confronting, and there's no shortage of challenges in the global economy right now. Counterparts here are expecting a bumpy ride in the global economy, that conditions are high risk and they are volatile and so, the more engagement that we can see between the Americans and the Chinese, the better.

SOONG:

What does it tell you though when we understand that we should not be expecting a final statement out of that meeting, similarly, out of the G20 Summit? Unlikely we're going to get a final communique?

CHALMERS:

Well, there's a lot of pressure on the G20 right now, a lot of pressure on the multilateral system. I think primarily that comes from Russia's immoral, illegal war in Ukraine, which is not just putting pressure on global energy markets which is the most important consequence, but also putting pressure on our ability to come to collective solutions - in my own finance track, and no doubt in the leaders track as well. The war in Ukraine hangs over the discussions here and any progress that can be made in that context is welcome.

SOONG:

So with regards to Ukraine, the United Nations, as we speak, is negotiating with Russia to try and extend this grain access deal to get stuff like wheat and corn - much needed to feed the rest of the world - out of the Black Sea and out of the Black Sea safely as well. Russia, or rather President Putin, though, has been a little erratic on that deal. Are we in? Are we out? It changes by the day. How confident are you that this deal can get extended?

CHALMERS:

We need to see progress on this deal. The defining challenge in the global economy is high energy prices but food insecurity is a big part of the story, as well, as is the slowdown in China. And when you combine those three factors together, you can see - we've all got some version of an inflation problem and rising interest rates as well. So the whole world has an interest in making progress here when it comes to food security, whether it's this deal or more broadly and that's been an important part of the discussions here.

SOONG:

And indeed, Australia is big in food and grains also in energy as well and that's the other thing that's going to be coming up to bat within the next week or so and that is the G7 agreeing to a price or price level for a cap on Russian oil - the thinking being, yes, we need to continue incentivising them to produce oil for the rest of the world, but at a price at which they are not able to - I say, I guess gouge to continue funding their war in Ukraine. But Australia's view - I'm sure you've crunched the numbers, right? Because you're in the energy game. What should that level be? What should that price be?

CHALMERS:

Well, we're engaged with the Americans and others when it comes to the oil price cap. We've indicated publicly our support for the efforts of the G7 to try and come to a landing point here. I've had three conversations with Secretary Yellen about this directly and we're pleased to be able to support it but there is work to be done on setting the right level of the price cap and a number of other associated implementation issues as well. We're doing work on it in our country, as you'd expect, the Americans and others are doing that and I think before long, there'll be a concluded view on where that price cap should be set.

SOONG:

Treasurer, I need to push a little bit harder on this because for our constituency, our viewers, investors and markets, this is crucially important, right? Is Australia more in favour of a fixed price ‑ and let's reference let's say historical average for Brent $63‑64, or more a spread over Brent or a floating rate because, this is going to matter.

CHALMERS:

It will matter and what I'm indicating to you is that we are doing the work behind the scenes and engaging with our colleagues and counterparts. For us, the biggest challenge is the chaos in energy markets, which is pushing up the price of gas and coal in our own domestic economy. It risks strangling some of our own industries and makes life harder for ordinary Australians as well and so, we are contemplating some interventions in our own domestic market at the same time as we engage with the Americans, the G7 and others on setting the most appropriate price cap globally for Russian oil.

SOONG:

Indeed, and of course, inflation and the cost of living is becoming an increasing issue for Australia as well, I appreciate that. Now, your Prime Minister Albanese is also hoping for a reset in relations with China. He's been talking for several days about weeks now about potentially meeting Chinese President Xi Jinping here in Bali at the G20. Are we able to confirm that meeting yet or not?

CHALMERS:

Not yet. The Prime Minister's schedule is still being finalised as we speak. He had a good initial conversation with Premier Li earlier in the week in addition to his 40 minute meeting with President Biden as well. We are interested in stabilising the relationship between Australia and China. I think it's in the interests of both countries for that to occur. We want a stable, safe, prosperous and peaceful region. And so, we will engage with China where we can at the highest levels if that's possible because engaging in a respectful and calm and considered way is the best way to make progress on some of the issues before us.

SOONG:

Indeed, and you know, your Foreign Affairs Minister just days ago, was saying, look, for any progress to be made on a reset in relations with China, the one thing, the one concession that China needs to give that Australia wants to see is look, guys, ban on trade in Australian lobsters, barley, timber, wine - that's got to go before we can talk. That is still Australia's position, yes?

CHALMERS:

It is. We think that one of the ways that we can stabilise this relationship in the interests of both countries is to remove some of these trade sanctions on Australian goods. Our economic relationship with China is incredibly important. It's a very important market for our exporters and our employers and we've said for some time - whether it's Foreign Minister Wong, one myself, the Prime Minister and others - is we do want to see those restrictions lifted, that would be an important part of stabilising this relationship in a respectful way.

SOONG:

Okay, quick last one before we let you go, Treasurer, and this is directly your remit, of course. We have not just the latest jobs report stateside but more that latest CPI print, right, which came in well below expectations - headline as well as core and the market just went totally bananas: “great this is the Fed pause, this is the Fed pause coming up” etc. Do you think it is one and what does this mean for the trajectory of Australian rates because well before that CPI print came in weaker than expected, we had BOC, RBA as well, starting the ball rolling, getting investors in markets thinking that, hey, maybe things are going to be slowing down in terms of central bank hikes?

CHALMERS:

Look, I think it's a bit of a sign of the times that a CPI print that high was seen as a good outcome relative to expectations. We've got a huge inflation problem in the US, around the world, in Australia as well and that does invite the blunt and brutal application of monetary policy. I'm not going to forecast what the US Fed might do or the Australian RBA, but very, very clearly, this inflation problem will be with us for a little while yet. It's driven primarily by high energy prices out of the war in Ukraine. Our responsibility in Australia is to do what we can to rebuild our buffers against this international uncertainty. That means a more responsible budget, it means a more resilient economy, and that's what we're focused on.

SOONG:

Excellent Treasurer. Fantastic to talk to you. Appreciate the time. Please have a great summit here.

CHALMERS:

Appreciate it. Thanks very much.

SOONG:

Pleasure is ours.