Interview with Patricia Karvelas, RN Breakfast, ABC

PATRICIA KARVELAS:

Jim Chalmers is the federal Treasurer and he's our guest this morning. Treasurer, welcome.

JIM CHALMERS:

Thanks for having me back, Patricia.

KARVELAS:

Today, you'll acknowledge that Australia will fall short of its energy targets without significant private investment from industry. So what changes are you looking at?

CHALMERS:

Well, first of all, Patricia, we should recognise that the country has made really important progress over the course of the last 18 months or so and the government is doing its bit, investing $40 billion in this energy transformation and a lot of the foundational pieces of our policy are in place and I pay tribute to Chris Bowen and Ed Husic and Madeleine King and other colleagues who take primary carriage for these policy developments. We are making progress, our targets are ambitious, but they're achievable and they will require more work, more collaboration between government and industry and communities, and unions, really everyone with skin in the game here to make sure that we can grab these vast industrial, economic and employment opportunities in the net zero economy of the future.

What I'm doing today is I'm recognising that progress that has been made and I am flagging that we need to do more work together. This will be a focus of the Budget next May, it's been a focus of the last two Budgets as well and what we need to do as we go about this important task is we need to recognise that Australia has big geological, geographical, meteorological, geopolitical advantages here that we need to bring to bear to the task. It's a matter of attracting investment which is very important, but also making sure that our economy can absorb and deploy that investment as well ‑ all of that capital ‑ and in order to do that, we've got to get the workforce right, technology right, the planning right, the relationships with the states right and that's our focus.

KARVELAS:

So in your speech, you mention the incentives of the Inflation Reduction Act. The IRA in the US is worth around $500 billion but you say you don't want to just mimic that approach. You've flagged what you describe as a uniquely Australian revamp of industry policy but how will you encourage $225 billion which you mention of investment if you don't do it the US's way? What is your Australian way?

CHALMERS:

First of all, we've got to recognise the Inflation Reduction Act is demand driven and so nobody really knows what it costs ‑ it might be anywhere from the figure you quoted ‑ half a trillion dollars ‑ anywhere up to closer to a trillion dollars and the point that I make today and the point that we've made in different ways over time is our job here is to complement not copy what other countries are doing. We do need, of course, to incentivise capital, incentivise investment, it's a big focus of what we're doing but unless we can absorb and deploy that capital as well, unless we can get the skills base right, the technological base right, the research, the industry policy, the supply chains, the planning reforms so that we can get big renewable energy projects up and running ‑ unless we do all of that, then attracting the capital won't be enough.

One of the main points I'm making today really, is in complementing but not exactly copying the Inflation Reduction Act, we need to recognise we've got our own advantages and they're important – a different set of advantages to other countries but we also have other challenges as well and we've got to get on top of those because no amount of capital that we attract will be effective unless we get all of the other pieces right.

KARVELAS:

You say this will be the focus of the Budget next May. When you say we need to incentivise capital does this mean more government intervention and spending?

CHALMERS:

Well, what we're saying really for the first time today and again, this is a combination of some work that Ed and Chris and Madeleine and others have been doing ‑ what we're saying really for the first time today is if we apply a set of tests to our net zero industry policy, making sure that it's good for the energy transformation, good for our emissions reduction goals, national security elements, supply chain elements, value for money ‑ when we apply those new tests to our net zero industry policy, we come up with some initial industrial priorities, some areas where we think we are more likely to succeed and that is largely critical minerals, manufacturing battery and storage technology, renewable hydrogen and its derivatives like ammonia, and also green metals. This doesn't mean that they are the only areas that attract our attention and potentially our support but we think those four areas are where we've got the best combination of advantages. For each of those areas, there might be a different policy response ‑ in hydrogen, we've already got the Hydrogen Headstart, in critical minerals, we've already got the critical minerals boost that the Prime Minister announced last week in Washington DC, so for different technologies, there will be different policy responses.

KARVELAS:

You say that the Productivity Commission under the new chair you've appointed Danielle wood should and will play a bigger, more constructive role in organising our thinking when it comes to climate and energy policy. Can you decode that? What does that mean?

CHALMERS:

We think the Productivity Commission has been an underutilised resource. It is in lots of ways the think tank for the Australian people. If we care about productivity and progress and prosperity more broadly ‑ and we do ‑ then we need to really get it engaged in a bigger, more constructive way with this energy transformation, because the energy transformation is one of the biggest challenges and opportunities that we face. And so what I'm going to do really for the first time in the 25‑year history of the PC is between now and when Danielle Wood starts her new job on Monday week, I'll be releasing for the first time a Statement of Expectations which identifies some of the priorities that Danielle and I have agreed and really key amongst those will be the energy transformation. So that Statement of Expectations is not a usual thing. We do that with regulators and other economic institutions, but we haven't done it with the PC before and I think it's really important because we want to put the energy transformation front and centre in our economic reform efforts. We see it as crucial to the future and that means it should be absolutely central to the work of the PC too.

KARVELAS:

This Statement of Expectations, you say it's going to put this energy and climate work front and centre, what else will be cantered?

CHALMERS:

People will see that when we put it out. I think people know the sorts of things that I have been interested in revamping and refocusing and renewing the Productivity Commission for ‑ our big challenges are the energy transformation, adapting and adopting technology, making sure we get the human capital right in our economy, so that our people can be beneficiaries and not victims of the big changes that we're seeing in our economy and in our society. People can expect to see that reflected in the Statement of Expectations but the energy transformation and our prospects as a renewable energy superpower will be absolutely front and centre.

KARVELAS:

And that Statement of Expectations, you say it's not usual practice, the Productivity Commission has been able to go and do its own work. How much of it is a partnership between the government and the Productivity Commission or is this the Productivity Commission being directed by the government?

CHALMERS:

It's a partnership. I've already had a number of conversations with Danielle Wood about it. We'll agree it. What we put out between now and Monday week will be an agreed Statement of Expectations. It's the sort of thing we do with APRA and other government bodies, and it's not designed to get in the way of the independent work of the PC. On the contrary, it's designed to put a structure around that, it won't interfere with the usual work of the PC. It will clarify that, it will endorse that, but it will also tell the Australian people the sorts of things that we expect the PC to focus on.

KARVELAS:

I want to just move on to the International Monetary Fund, which has said that the Reserve Bank will need to increase interest rates to bring down inflation in Australia. Does the central bank need to listen to that advice?

CHALMERS:

I think that's just another way of inviting me, kindly Patricia, to sort of pre‑empt or predict or try and shape the decisions and considerations that the Reserve Bank will undertake next Tuesday when they go about that independently. I cherish the independence the Reserve Bank, that's why I'm implementing these Reserve Bank Review recommendations which are designed to strengthen that independence.

What the IMF said yesterday in their report, in addition to the part that you just paraphrased a moment ago, is that they were very complimentary of our efforts to repair the Budget. They also pointed to our efforts to provide cost‑of‑living relief and invest in things like the energy transformation, skills and housing in our economy. What they concluded when they said all of that, they made it abundantly clear that what the government is doing with our responsible economic management is helping rather than hampering this fight against inflation. They said very clearly that they think that fiscal and monetary policy is working together in our economy, and that's as it should be. I've got my own job to focus on and the IMF is capable of giving its own advice to the bank.

KARVELAS:

Treasurer before I let you go, obviously, there is a huge war unfolding and sadly Australians are being caught up in that. We know some Australians have made it across the border now into Egypt. What can you tell us about what is happening at that border crossing?

CHALMERS:

As you know, Patricia, that Rafa border crossing is a really important part of what's unfolding in this escalating conflict in the Middle East because we do see it as an opportunity to provide humanitarian assistance and part of that is getting people out and so we've been working closely with the Egyptians, with the Americans and others, to make sure that that can happen. We're really relieved that, as I understand it, 23 people registered with DFAT were able to cross that border overnight. Twenty of them were Australian citizens. But we know that it's very distressing and there are people still in there so we're continuing that work. We continue to press for more people to be able to get through that crossing and to get to safety and we're obviously monitoring that very closely and doing whatever we can with our international partners to get more people out.

KARVELAS:

Treasurer, thank you for joining us this morning.