National Accounts Press Conference 02/12/20

02 December 2020

SUBJECTS: National Accounts; Recession and recovery; Labour market.

SUBJECTS: National Accounts; Recession and recovery; Labour market.
JIM CHALMERS, SHADOW TREASURER: Today's quarterly GDP number is welcome but it's not surprising. Australians are going through an extremely difficult year in the economy, the worst year in the economy since the Great Depression here in Australia. We have always wanted the recovery to be swift, broad and enduring but we've also always known that it's most likely to be patchy. Some parts of the economy will recover relatively quickly and relatively strongly, but other parts of the economy will struggle in different parts of Australia and in different parts of our industrial base as well. Our biggest concern has been the impact on real people, particularly in the labour market. We were very heartened and encouraged to see the Reserve Bank Governor make many of the same points earlier today about the patchiness of the recovery, it's important that we recognise that, but also about the enduring challenges that we have particularly in the labour market in this recovery which will be uneven around Australia and for different people. 
There are no surprises here when you consider that most of the Australian economy reopened during this period. We know that that was a key driver of the rebound that we saw because of those numbers in food and accommodation in particular. That shows that a key driver of the rebound in the September quarter was that most of Australia reopened having been more or less closed down in the months before which led to that quite extraordinary June quarter contraction, the biggest that we've seen. It's also not surprising because the economy is coming off an extremely low base. Having been in the deepest, most damaging recession for almost a century, it's hardly surprising that when the quarterly GDP numbers start to recover that they will recover in the way that we've seen today. It's important to remember that even a number like today doesn't recover lost ground and doesn't undo the more enduring damage that has been done in the economy. Remember that the economy is still no bigger today than it was almost three years ago.
What's most important here is the human face and the human consequences of this deep and damaging recession and the recovery as well. What looks like a recovery on paper will still feel like a recession for too many Australians. This quarterly GDP number will be cold comfort for a million Australians unemployed; cold comfort for the 2.4 million Australians who are either looking for work or looking for more hours at work. That's because what actually matters most is not just one GDP number on a page, but how Australians are actually faring in real communities right around Australia and whether or not they can provide for their loved ones. 
As always with this Government, it's important to go beyond the headline. This Government loves the headline. They don't want us to go beyond that to see what's really going on. When you do that today in these National Accounts, what we discover is the same stagnant wages, weak consumption, and stagnant living standards which have defined the economy for most of his Government's tenure in office, now in its eighth year. 
We need less smirk from the Treasurer and more work for millions of Australians who are looking for it. It's not clear to us why the Treasurer is patting himself on the back when his own numbers say that unemployment will be too high for too long for some years to come. That's why the Reserve Bank this week and the OECD overnight have said that there are great dangers in declaring victory at halftime. We shouldn't be declaring victory over this recession too early when too many people are struggling, and when too many people are without work or without the hours that they need at work. This is the point the OECD and the Reserve Bank have made very well in the last 24 and 48 hours. 
It beggars belief that when the economy and the country is crying out for a plan to kickstart the recovery and to create really good, secure, well-paid jobs that the Government seems to have three focuses here: to attack superannuation, to weaken consumer protections in the financial system, and also to celebrate the stagnant wages outcomes that ex-Minister Cormann described as a "deliberate design feature" of the Government's economic policies. This is exactly the same approach that left Australia vulnerable going into the recession and will leave Australians vulnerable coming out of the recession if they continue down this ideological path. 
You'll hear a lot today and you have heard a lot today from the Treasurer and the Prime Minister about Australia's ‘comeback’. Every time you hear the Prime Minister or Treasurer talk about a comeback, they really mean that they want Australia to go back to the insecure work, stagnant wages, and declining living standards that have characterised their time in office even before COVID-19. Australians deserve a much better return on the trillion dollars of debt that this Government has racked up. They deserve better than a Government which racks up a trillion dollars to pay for private jets for ex-Ministers, $1.2 billion Robodebt settlements, taxpayer funded executive bonuses, and all of the other ways that this Government is wasting money rather than focusing on the task at hand which is to recognise that a recovery in GDP is a good thing, but it will mean nothing for many Australians if it's not accompanied by a substantial improvement in the jobs market as well.
JOURNALIST: Do you believe that any further growth and recovery will be hampered until the Chinese relationship is back on track?
CHALMERS: It remains to be seen. I think the future is uncertain for a number of reasons; on the health front it depends on subsequent outbreaks and we've seen how damaging that can be; it depends on the timing and deployment of the vaccine; on the international front it depends in many ways on how some of our international partners perform, how their economies perform and their own capacity to limit the spread of the virus and as part of that clearly it relies on whether or not we can get the relationship with China into a much better place. There are other uncertainties too; the Government's capacity to get the withdrawal of stimulus right is a big uncertainty. My fear is that there will be a bumpy landing as the Government withdraws this economic support because they're in a rush to pat themselves on the back and withdrawal that support too soon. That's another uncertainty. The other one which is topical today, given the National Accounts, is the big uncertainty about when and whether Australians will be prepared to spend again, particularly to unwind some of the savings that they have accumulated in the last six or nine months. Whether or not they have enough capacity in the medium term to spend again which has obvious benefits for our shops and small businesses in the west and right around Australia.
JOURNALIST: Talking about the amount of money that people have, there is a huge amount of liquidity, there's a huge amount of money sitting in people's bank accounts, and yet you're worried about a withdrawal of support too early? Shouldn't both Government and Opposition be looking at ways to encourage people to spend I think it's more than 2 trillion [dollars] that's sitting in household deposits?
CHALMERS: I think those extraordinarily high savings are a reflection of the uncertainty and the nervousness that people feel about the immediate future and the medium term as well. One of the really stark features as you know of this recession has been people's willingness to try and build up a buffer in their own financial situation, anticipating the worst and not being not sure about how they will pay for that. We need to recognise that not everybody has been saving. Some people are living on the edge. Some people are doing it incredibly tough. We've all been to parts of Australia where the idea that people will be saving is a bit absurd. Think about Cairns and other communities like that where JobKeeper is keeping people attached to their job but also keeping food on the table. A lot of people aren't saving and we need to recognise that 1.5 million people are relying on JobKeeper, desperately relying on it in many cases. We shouldn't forget them in the Government's rush to withdraw support, to congratulate themselves and declare victory.  
We know anecdotally from quite extensive and exhaustive consultation, particularly in the banking sector, that a big part of people's accumulated savings or liquidity as you refer to it Shane, is because the Government is not checking that people who are accessing superannuation early need to and are in genuine hardship. We know that there's no checking, and we know anecdotally that a lot of people are accessing those $20,000 and just letting it sit in an account or an offset account and not touching it. They're doing that either because they're allowed to because they're not checked, or they're doing it anticipating harsher times ahead. That's part of the story about money that has been accumulated. Some people have got no choice but to access early super. We don't pick on them or judge them for having done so. But there's another cohort of people that have accessed super early just pocket money in their accounts and that's one of the reasons why we've got savings this high. 
JOURNALIST: The ATO was looking at a trial examination of what had gone on in that space. Do you think it formally needs to be investigated? Does that include a Senate investigation of what has gone on?
CHALMERS: Clearly we need to see what's gone on, but in terms of those savings the horse has bolted. We said to the Government privately and publicly at the very beginning of early access that we were concerned that there were no checks whatsoever about people accessing this money. They were very dismissive of our suggestions, but that's what's happened. There's been two categories of people accessing super. We don't judge either of those cohorts of people, but we do judge the Government for being in such a rush to diminish the power and undermine it that they didn't put any checks and balances in place to assure people that you could only get it if you were in genuine hardship.
JOURNALIST: Do you think there's an argument then for the withdrawal of JobKeeper to be done in a more regional fashion? You mentioned Cairns which is obviously highly exposed to the tourism industry. Should places like that have access to JobKeeper longer than others that have recovered more quickly? 
CHALMERS: Our view is that in aggregate and overall that the Government's been in too much of a rush. We are worried that the premature withdrawal of JobKeeper in particular will cruel the recovery for some of those communities. We haven't proposed a community by community differential. Some of the testing of businesses does that job for you. We have said at some future point JobKeeper won't be in the system anymore. At some future point it will be tapered away, but don't be in a rush because if you are you could cruel the recovery in these places, and unnecessarily throw people on the unemployment scrap heap. You've already got a big challenge with unemployment and underemployment. The Government should be very careful not to make that worse. My fear is that with these cuts to JobKeeper that's what they're going to do. 
JOURNALIST: How do you think that should work then? Dr. Lowe from the RBA said today that JobKeeper does need to tail back. It is about getting this balance right, but he is hopeful for more progress on the deficit. Going forwards, what do you think is that right balance? What do you want to see? It's going to wind down by March. Does it need to continue on? Does it need to be an increase in the payment itself? What are you saying?
CHALMERS: We think it's tapering too fast. We didn't support the cuts to the payment at the end of October. We feel that it's tapering too fast. We said obviously there is a case to test to make sure that businesses are still eligible, and to deal with any areas where there's been an overpayment. We obviously accept, as the Governor of the Reserve Bank has, that at some point JobKeeper will need to taper. One of the lessons of recessions past is that you can't get in too late and you can't get out too early. We need to learn those lessons. That applies to JobKeeper. I think that the Governor of the Reserve Bank has made some really compelling points about not being in a rush to withdraw support. The economy will rely on support for some time longer. We all wish that weren't the case, but it is the case. The OECD has made similar points. We want the Government to listen to those arguments. 
JOURNALIST: Is there a benchmark that you would suggest? The economy's grown 3.3 per cent in the last quarter, so would it be when you reach 4 per cent or 5 per cent or is there another measure that could be used?
CHALMERS: There's not one measure. But I think the most important area that we need to focus on is the labour market. The economy is not a GDP number on a page. The economy is what happens to people's jobs and their capacity to provide for their families. That's what the economy is all about. These are difficult and complex judgments. 2020 is the year of the deepest recession in almost a century. We're not pretending that these decisions are not difficult and costly, but when we're trying to work out the best thing to do, we should be thinking about the labour market first and foremost.
JOURNALIST: Can I just ask on the trade issue - I asked this of the Treasurer as well but he batted it away. When you think about the level of consumption in the quarter, he's saying trend is our friend. You're going to get 8 per cent consumption growth for the next three quarters? When you compare that to say, what's happening in net exports and trade around the world, it's likely that net exports are going to detract more from the economy than consumption is going to contribute to it over the next couple of quarters. Is that a concern?
CHALMERS: Two bits about that. Our exporters are concerned that the uncertainty in the global environment including in the China relationship is costly for them. If it's costly for them then its costly for the broader Australian economy. That anxiety has been expressed publicly and privately to us as well. A key concern about the size and shape of this recovery is our relationship with China and some of the other broader issues around our trade exposures around the world, given a number of economies are in a lot of difficulty. That's a key concern.
On consumption, consumption rebounded a bit in this quarter but it's really important to remember that consumption is still below what it was before the crisis. It's nearly 7 per cent below what it was before the crisis. I'm not suggesting you are Matt, but we need to be careful not to pretend that our issues in consumption, business investment, wages are just the product of COVID-19 or this extremely difficult year we had or this recession. All of those examples that I just gave you have been defining features of the economy for much of the past seven and a bit years. The Government wants you to pretend that this difficulty is because of recent difficulties with China or recent issues imposed by COVID-19 and the shutdowns. In all of those cases, we've been dealing with substantial weakness in those areas for years now. We shouldn't let the Government pretend that these are new problems. The other example here which would be of interest to your readers is business investment. Business investment has been woeful for some time now, partly as a function of energy policy uncertainty, but other factors as well which we've acknowledged in trying to help Government fix this problem. Think about business investment on its own. It fell again this quarter, it's fallen nearly 30 per cent under the Liberals on one measure, and nearly 80 per cent of that decline happened before COVID. Don't let these characters pretend that some of this weakness in the economy showed up in 2020. It's been a defining and enduring feature of the economy which has been neglected for too long. If they continue down the same path that they were going down before COVID with their approach to wages, super, consumer protections and all of these things, that will be a recipe to go back to all of that weakness that we've been warning about.
JOURNALIST: Do you agree then that the way out of this on a broader level is to get the private sector to do it? Is government in the way?
CHALMERS: I don't use that kind of language. There'll be a role for government. When the economy is this weak, in particular when the labour market is this weak, there'll be a role for government for some time. I have never disputed that you cannot get the economy galloping like we need it to gallop without a strong role for the private sector. The Government again wants us to pretend that one side of the parliaments with private sector and on one side of the parliament's for the public sector. That's rubbish. We're saying don't put all your eggs in one basket; don't rely too heavily on one lever, one approach, or one set of policies. We think there needs to be a broad approach here to the care economy, the construction economy, workforce participation, energy market modernisation, and energy policy certainty. All of these things are really important. Sometimes there will be a role for government temporarily or permanently. More often there'll be a role for the private sector. We've never quibbled with that; we're relying on that. 
Thanks very much.