Interview with Patricia Karvelas, RN Breakfast, ABC

PATRICIA KARVELAS:

Jim Chalmers is the Treasurer, and he joins us this morning. Treasurer, welcome.

JIM CHALMERS:

Thanks very much, Patricia.

KARVELAS:

Let's start on the stunning unemployment figure, was it a surprise?

CHALMERS:

I think the fact that our jobs market has been really quite remarkably strong, has been a good kind of surprise. It's broadly consistent with what we expected in the Budget, maybe a little bit stronger than most people anticipated. But when you consider what's coming at us from around the world, it really is quite a remarkable thing that we've got unemployment at three and a half per cent, and under the life of this government, the first 13 months of this government, something like half a million new jobs have been created. So that's a real source of strength, our jobs market is really holding up despite the economy slowing considerably elsewhere.

KARVELAS:

But this puts pressure on the RBA doesn't it, to increase rates again?

CHALMERS:

Well, they'll weigh up a whole range of factors. They'll weigh up global uncertainty, some of the other data has been a bit softer ‑ the National Accounts for March were certainly relatively flat. And so they'll have the opportunity to consider the jobs market but also in the context of all of these other indicators that show our economy is slowing but our labour market ‑ our jobs market ‑ is holding up really well.

KARVELAS:

Okay, but the new Governor who comes in in September, Michele Bullock gave a speech saying that unemployment should rise to about 4.5 per cent. If unemployment is staying stubbornly high, the logic is that we will see an increase to rates again, right?

CHALMERS:

I don't want to pre‑empt it. I didn't do that for the whole life of Governor Lowe's tenure, and I won't be doing that when Governor Bullock takes over in the middle of September either. I think the point that Michele Bullock was making, was that the RBA's forecast and the Treasury's forecast for that matter, show that as inflation moderates, we expect the unemployment rate to tick up a bit. I think that's what most people expect. But I think this broader conversation about full employment is really welcome, I think it's a good thing. I don't see it as an argument, really, I see it as an opportunity. And there's a big difference here between a technical definition which feeds a forecast, which is what Michele Bullock was talking about, and our broader aspirations and objectives which is what others have been talking about. And that objective is to try and create good, secure well‑paid jobs for everybody who wants one. That is, in lots of ways, the government's reason for being and that's why the Employment White Paper that I'll be putting out before long, the first priority of that Employment White Paper will be the full employment objective.

KARVELAS:

Okay, so given you're saying it’s welcome rather than seeing it as a divisive debate, this debate about full employment, where do you see full employment being at? You know what the ACTU has been arguing, do you think we need to revisit our ideas and the RBA's expectations about it?

CHALMERS:

We'll have an opportunity in the Employment White Paper and also, as we nail down the reforms to the Reserve Bank under its new leadership, we will have a good opportunity, a welcome opportunity, I think, to try and find some common ground on this. But again, we need to separate out the technical definition that feeds the Budget forecast that's around four and a quarter per cent ‑ that's based on a very, not especially catchy name thing called the Non‑Accelerating Inflation Rate of Unemployment. We need to be able to separate that out from what our goal is here, what is our objective here, and that's what the unions and others have been talking about. And that's a good, secure, well‑paid job for everybody who wants one. That's certainly an objective that the government shares, and the Employment White Paper will be an opportunity to flesh that out.

KARVELAS:

Treasurer, Deloitte says it's concerned the RBA has already gone too far with rate rises, and that most of the inflation is coming from supply side issues. Do you agree that it's mostly coming from supply side issues?

CHALMERS:

I certainly think that there are supply side issues which have been part of the inflation challenge. We've had inflation, really since the beginning of 2022 was when it really started galloping. And we've seen the consequences of ‑ whether it's the war in Ukraine, whether it's some of the pressure on supply chains coming out of the pandemic ‑ a whole range of factors here, and a number of those factors are supply side issues. It's why the government is so focused on things like the energy market, things like the rental market, and other price pressures, because there is a bunch of supply side impacts that people are feeling in their household budgets. And I think the other point that that report was making was that the interest rate rises, which are already in the system, are putting pressure on people. I think that's self‑evident and I don't think that's an especially stunning or controversial point to make. People are under the pump, we do understand that. Interest rate rises, which began before the election and continued after, have been part of that pressure, and I think that's the point that this report's making.

KARVELAS:

I want to move on to the report you're releasing today. Employment is a traditional metric of the health of the economy but overnight you've released this report into the wider wellbeing of the economy, looking at aspects like health, security and sustainability. This is your first report you've released, what does it show?

CHALMERS:

First of all, I think it's really important that we make it clear, as we have, that the government's overwhelming focus is rolling out the cost‑of‑living relief for people who are under the pump right now and also, while we try and keep our labour market strong ‑ some of the other things that we've been talking about this morning. But that shouldn't prevent us from thinking more broadly as well, about how we align what we want in our economy with what we want in our society ‑ and you and I have spoken about this before too often. In the economic conversation, people see our society and our economy as in conflict, and I don't think that's a good thing. I've wanted to change that. So this report that we're releasing today, is part of an effort to kind of refocus the economic conversation, so that it's about the wellbeing of real people in real communities around the country. And what it shows is that there are things that we can be pleased about in Australia, obviously we have our advantages, but we've got work to do as well. And what we want to do, is track our progress against a whole bunch of indicators over time. This is just the first crack at it, we'll refine it, we'll improve it over the coming years.

KARVELAS:

Let's go to that refining, because Treasurer, it does use out‑of‑date data to say that homeowners, for instance, are finding it easier to repay mortgages. I mean, I don't think that matches reality does it?

CHALMERS:

Obviously, we understand people are doing it tough, we've already talked about that. And that's why our major focus, the main game is rolling out that cost‑of‑living relief for people who need it. And we do get more frequent, more regular data that helps us understand those pressures and calibrate our cost‑of‑living relief. And so what we're talking about here, and this wellbeing framework is in addition to that, it's about broader trends and changes. And we've made it clear, as I just did a moment ago, that this is a first crack at it. And one of the tasks is to identify the gaps in the data, or where it's not up to scratch or not frequent enough ‑ we've been up‑front about that as well. And we do want people, frankly, to discuss it, and critique it and give us feedback. And we'll take that into consideration as we refine it.

KARVELAS:

You say it's your first crack at it, so it's not up to scratch as a first report?

CHALMERS:

I'm not saying that, I'm saying we haven't had a national wellbeing framework before, this is the first attempt at it. And one of the things that it makes clear, is that we need to do, collectively, a better job of measuring our progress over time. And we know where the gaps in the data are, we know where we need it to be more regular. We know where we need to fill those gaps, and that's an important part of the work that we're doing.

KARVELAS:

Sure, but on that critique ‑ and you've seen it splashed all over, for instance, the front page of The Australian ‑ says that the old data fails to reflect the COVID‑19 pandemic, also, the most aggressive series of interest rate rises in a generation. So there are real deficiencies, right, in our metrics in this report?

CHALMERS:

Well, a couple of things about that. We have more regular, more frequent data that helps us understand the pressure that people are under from higher interest rates and in the aftermath of the pandemic. And that helps us calibrate our main focus, our major priority, which is rolling out that cost‑of‑living relief. Also, we're trying to look here at broader trends over a longer period of time and we're trying to work out where the data could be better. That's an important part of it as well. And so, where there is genuine feedback, where there is a genuine critique, we welcome that ‑ that's a good thing. There will also be the usual, kind of ranting from the usual places, that's easy enough to ignore, I'm relaxed about that as well. And my predecessor, you might recall, famously bagged the idea of wellbeing in the parliament, and he doesn't work there anymore. So there'll be the usual partisan stuff from the usual places, but they'll also be welcome feedback, genuine feedback, and I'll take that into consideration as we refine it.

KARVELAS:

Treasurer, on another issue, Premier Daniel Andrews says cancelling the Commonwealth Games came down to the cost. Why didn't the federal government step in to do more?

CHALMERS:

We're obviously prepared to play the usual role of a Commonwealth Government in the staging of the Commonwealth Games, as we had in previous occasions when other state governments had hosted the Commonwealth Games. And so as I understand it, we were in some kind of discussions with the Victorians about what kind of help the Feds could provide. But overwhelmingly, this was a state government project. We know that the decision taken here has been disappointing for a lot of people. But we also understand that you've got to get value for money for these kinds of events. And I think at the end of the day, when the state government weighed that up, they've come to this decision ‑

KARVELAS:

Was it the wrong decision for them to bid in the first place though, and then renege like this?

CHALMERS:

I'm not going to second guess it, Patricia, because what I've tried to do ‑ and not just in state Labor governments, but other governments of other political persuasions, as well ‑ is everyone's got difficult decisions to make, everyone's budget is under pressure in one way or another, and so they've made this decision. Obviously, it's a difficult decision, it's been disappointing for some people, but at the end of the day, they've got to try and do what's right and part of that is making sure that they get value for money. They've come to the view that this doesn't represent value for money against all the other priorities that they have.

KARVELAS:

The Gold Coast Mayor says they'd like to host the Games ‑ you're a Queenslander ‑ he's joining our show, actually, after eight. Will you provide financial support for the Gold Coast games?

CHALMERS:

Look, I think the Premier of Queensland has made it clear that that's not something that they are looking at. Obviously, Tom Tate, just down the road from me, is someone that we listen to and whose views we take into consideration, but I think the Premier has made it clear that they're not coming at that suggestion. So it may not be a starter. If it was, hypothetically, a starter, then we would just engage in the usual conversations about providing the usual support.

KARVELAS:

Okay. Just briefly on a couple of other issues, the government is looking to save $3 billion over the next few years reducing your spending on consultants. A chunk of that is savings from the Treasury, can it be done?

CHALMERS:

I believe it can, yes, and I think it's important that we do it. What we're trying to do here, is to recognise there'll always be a role for external expert advice, but to try and rebalance away from the kind of over reliance that we saw on contractors and consultants under the previous government, and to try and invest instead in the capacity and capability of the public service. That's the work that Katy Gallagher is doing a great job on, with my support and the support of the Cabinet. And I think it's really important that we do that and that at the same time we get the standards up, and we insist on the highest standards for the consultants who provide this kind of advice to government.

KARVELAS:

Does it mean beefing up the public service, though?

CHALMERS:

Yes, I believe so. One of the big reasons to try and rebalance away from this over reliance on labour hire and contractors and consultants is so that we can redirect some of that money into rebuilding the public service. The public service has been hollowed out ‑ not their fault ‑ has been hollowed out over the life of the last conservative government. We want to rebuild their capacity and their capability. And one of the reasons we can afford to do that is because frequently, spending on contractors and consultants actually cost more than what it would cost to hire a public servant to do the same kind of job, and so we want to get value for money.

KARVELAS:

So beyond what you've already announced, will we see a greater per centage increase in the public service?

CHALMERS:

This is the preserve of Katy Gallagher, the Finance Minister. I don't want to front run the work that she's doing. But Katy's doing a wonderful job, I think, insisting on the highest standards here and also rebalancing towards capability and capacity in the public service. A big priority for us because we think ‑ whether it's service delivery or advice to government ‑ we've got a big chance here to lift the standard, and part of that is recognising the role of external expert advice, at the same time as we make our own in‑house capabilities that much better.

KARVELAS:

Treasurer, thanks for your time.

CHALMERS:

Thanks, Patricia.