The Hon Jim Chalmers MP
TUESDAY, 5 JULY 2022
SUBJECTS: G20; rising inflation; the Budget; Deloitte report; ANZ/Suncorp deal; Reserve Bank review.
JIM CHALMERS, TREASURER: I've got a few issues to cover off on today before I take your questions. The first one is, having come back from a few days of consultation with economic ministers from key countries around the world as part of the G20, as well as the heads of some of the major international economic institutions, I think it's fair to say that there is a lot of concern around the world about the state of the global economy. Those concerns focus on China, focus on the United States and also, of course, on the situation in Ukraine. And the challenges that are being faced by countries around the world are some combination of high and rising inflation, rising interest rates and the slowing growth that that brings about, food and energy insecurity and also the issues around governments' choices being constrained by the debt that a lot of countries have added to over the course of the pandemic, in particular.
The world economy is a difficult, if not dangerous place right now. That combination of inflation and rising interest rates and slowing growth and food and energy insecurity, combined with the amount of debt that countries have racked up is a cause for concern in the global community. And that's why bodies like the IMF are downgrading their expectations for global growth as we speak.
Australia obviously has its own share of economic challenges and they are similar to many of these that are being faced by other countries, comparable countries around the world. But we go into this difficult period with historically low unemployment, which is obviously very welcome. But we also have a big advantage going for us and that is that we have the right economic plan for these conditions. Now obviously, the independent Reserve Bank will make their decisions about interest rates in the context of high and rising inflation. But there's a job for governments as well, recognising that a lot of this pressure on the cost of living comes from the supply side of the economy as well. And that's why it's so important that we implement in our October Budget, responsible cost-of-living relief, but also invest in lifting the speed limits on the Australian economy as well with cleaner and cheaper energy and childcare reform and investing in skills and the digital economy, advanced manufacturing and the care economy as well. This is the kind of plan that Australia needs right now to deal with this challenging combination of circumstances that we have inherited. It's more important than ever that we get value for money, for taxpayers’ money in the Budget, when you consider the economic context that we are operating under.
And that's why an additional challenge that we face right now is the rising cost of servicing government debt. As you know, as interest rates rise, the cost of servicing public debt rises along with it. That cost will be really substantial. When it comes to the trillion dollars of debt that we inherited from our predecessors, that is becoming more and more expensive for us to accommodate. Every dollar that they borrowed is now more expensive to service. That's just the reality. It's one of the pressures that I'll be outlining in the Ministerial Statement that I provide to the Parliament throughout the course of next week, when Parliament returns.
That Ministerial Statement, at this stage, will be provided on Thursday, the 28th of July. The news in that statement will be, in many ways, confronting. When it comes to our expectations of inflation, when it comes to the impact of interest rate rises on growth, when it comes to what this spike in inflation means for real wages, there will be aspects of this Ministerial Statement that people will find confronting. My job is to paint the true picture of the economy and our economic challenges. And that's what I intend to do on Thursday, the 28th of July in the Parliament.
Now Deloitte, of course, have come out today and made I think the accurate point that we have inherited the trickiest set of economic conditions that a new government has inherited in memory. And that's because we do have that high and rising inflation, those rising interest rates, we do have all of that debt, but we do have the right economic plan to deal with it. And that plan is focused on getting value for money, giving responsible cost-of-living relief, implementing our election commitments and making sure that we can lift the speed limit on the Australian economy as well.
Two other issues before I take your questions, I'd like to get the ball rolling on the review of the Reserve Bank before the Parliament resumes. And so, you can expect to hear from me from this lectern before long on the panel that I've selected, the terms-of-reference and other key details when it comes to that Reserve Bank review. I hope to have that settled and announced before the Parliament resumes next week. I've got a little bit of consulting still to do, including with the Opposition, but I have come to a concluded view, almost, on the nature and timing and composition of that review process and I hope to be able to talk to you about that before long.
And then finally, you all would have seen the announcements today in relation to the ANZ Bank and Suncorp. I wanted to remind you that there is a process involving the regulators which concludes with an approval process involving myself. It wouldn't be appropriate to get into the details of that process as it evolves. It obviously involves the competition watchdog and also the other regulators and culminates with a decision by me. So for that reason, I'm sure you understand that I don't intend to comment on that proposal that's been announced today, except to say there will be a time at the end of that process when I've come to a concluded view.
JOURNALIST: The Australia Institute has a report out today that profits, not wages are driving inflation in Australia. Why not consider a windfall profits tax as an option to pay for investments and pay down debt?
CHALMERS: Well, it's very clear to us that wages aren't driving the inflation problem that we have in our economy, I think that's self-evident. You could make a relatively long list of the factors contributing to inflation in the Australian economy and wages growth wouldn't be on it. We've had stagnant wages in this country for the best part of a decade, we've now got real wages going backwards substantially which is the worst combination of that wage stagnation and spiking inflation. And so I think that it is broadly accepted, certainly amongst independent, objective observers of the Australian economy that wages aren't the problem when it comes to the issues that we are confronting. We've made it clear that a windfall tax is not something that we are considering. It's not something that we are proposing. I had a long conversation with Joe Stiglitz about this this morning in my office. We've made our view clear on that for some time. Rosie.
JOURNALIST: Treasurer, will you have to find further savings, or you have to identify further savings to offset the COVID payments announced on the weekend and as you mentioned now, increased debt from high interest rates?
CHALMERS: We will be finding further savings in the Budget, we've made that clear. One of the expected outcomes of our audit into rorts and waste in the Budget is to see where we can trim spending, which has been allocated for political reasons, not economic reasons by our predecessors. And from time to time, you will ask me whether that will be a key task of the first Budget. And I say no, it will be the key task of every Budget - to make sure that we are getting maximum bang for buck from taxpayer dollars, which are costing more and more to service because every dollar, every additional dollar in the Budget is a borrowed dollar and that now costs us more to pay back because of rising interest rates. And if you think about the consequences of those rising interest rates on the Budget - more than a billion dollars this year, more than $5 billion in the last year of the forwards, $13 billion accumulated over the forwards, $18 billion in 2032 to 33. So these are not small amounts of money. And they really put additional pressure on us to make sure that any money that we do commit to invest in the productive capacity of the economy, that we do get that value for money because it costs more to service. Ron, and then Chris and then here.
JOURNALIST: Treasurer, you mentioned you had a chat with Joseph Stiglitz this morning. One of the things that he said is, it may be possible to provide more cost-of-living support to low and middle income families If you can either delay or take the savings from elsewhere in the Budget to reduce the inflationary impact. Is that something that you're considering potentially having additional cost-of-living savings in the Budget - measures in the Budget that can be offset by other savings?
CHALMERS: He's made those views publicly and we had a chat about that this morning, as well. I've already dealt with the windfall tax part of it, but as it relates to cost-of-living support for people, particularly people on low incomes, you know, we've got cost-of-living support coming in the form of relief for medicine costs and also a fairly substantial package of cost-of-living relief in childcare. And we've said that those are our priorities. We've also said - and we meant it - that we will always try and do the right thing by people and where we responsibly can and affordably can do the right thing by people, to help them through a difficult period, of course, we would consider that.
But we take our fiscal constraints seriously. A trillion dollars in debt costing more and more to service means that we have to be upfront with people. We can't do everything that we would like to do. We can't even afford the good ideas that people put to us. And so we have to prioritize. And our priority is childcare and medicines. Chris.
JOURNALIST: [INAUDIBLE] petrol excise to return to that 22 cents a litre I think, at the end of September, and won't that erode any cost-of-living package that you put forward in the Budget?
CHALMERS: Again, we've got to be upfront about the cost of that petrol package. Now we supported it through the Parliament for six months - the design that our predecessors put into the legislation. And in the many times I've been asked about that, I've been upfront with people and said, my expectation is that it would be too expensive to continue. And I just want to be honest about that. Clearly, we'll always try and do the right thing by people, we'll take the economic conditions into account when the time comes. But my expectation, and the expectation I'd encourage people to have is that we can't afford to continue that petrol price relief forever. I think we're going here and then Sarah.
JOURNALIST: The family of a 17-year-old Australian who was detained in a prison in Syria now believes that he has died. Do you have any further information on this situation and related, what's your government's position on repatriating Australians from northeast Syria?
CHALMERS: Well, first of all, I haven't I haven't been briefed on that. That's obviously tragic news for the family, horrific news, if that's the case. Beyond that, having not been briefed on it, I can't add much to that. Sarah.
JOURNALIST: Thanks Treasurer, you as the Treasurer, also a Queenslander - good to see you've got the maroon tie on today… Just on ANZ/Suncorp, is there anything, Queensland specifically, you've indicated you're actually going to follow the independent regulatory advice process? And is that the sort of modus operandi you as Treasurer are going to pursue following the expert advice of independent regulators generally around these sort of transactions rather than maybe a bit of Queensland parochialism?
CHALMERS: I wouldn't see it that way. I wouldn't apply that to the process. I mean, everybody knows where Suncorp is based. And everybody knows its contribution to the Queensland economy. And I don't intend to kind of colour that up for you. I will be entirely, completely consistent with the process that's set out. There is some discretion for Treasurers at the end of it but it's based on the conclusions of the competition watchdog and the other regulators, as well. And so I intend to take that advice seriously and for that reason not go into it any further. Shane
JOURNALIST: On your statement next week, will you be giving fresh forecasts, updating forecasts that were in the Budget? And on the RBA review, you said you were going to consult with the Opposition. Does that mean Angus Taylor? And if they come up with ideas, will you incorporate those into, say, your terms-of-reference or the nature of the review?
CHALMERS: In reverse order, I intend to consult with Angus Taylor about it. We've had a text exchange and a brief conversation where I indicated to him some time ago that I'd be in touch with him about the Reserve Bank review. I genuinely think that something like reviewing the Reserve Bank and the way that we conduct monetary policy in our economy and in our country is something that should be as bipartisan as possible. And so I'll have a proper conversation with him. I have a fairly formed view about where this should head and as you'll see when I make the announcement, I think people will see the terms-of-reference as sufficiently broad to accommodate views of people like Angus and others. And so I wouldn't anticipate big changes.
I'm not proposing - when you'll see them, you'll know what I mean - I'm not proposing kind of controversial terms-of-reference. They're pretty broad. They're pretty predictable. I'm sure if you wrote terms-of-reference, having followed as closely as you have, you'd come up with something pretty similar. So I'm not expecting big changes after I speak with Angus but I do want to have a proper conversation with him. And remind me the other part of your question, Shane.
JOURNALIST: Are you going to update the Budget forecasts across all the economic forecasts?
CHALMERS: I will be providing a suite of economic forecasts and an indication of what that means for the budget position as well. My inclination is to be as broad as I can and as full as I can when it comes to the update. As you would appreciate, we've got data coming out almost every day at the moment which has implications for the forecast, so I'll give as much as I can consistent with the fact that it is notoriously difficult right now to pick how the economy is evolving.
JOURNALIST: On the upcoming fiscal announcements you're going to make. Ahead of the election, Labor was talking about wanting to address the gender pay gap and that being a really big part of what you want to do. But now you of course inherited a Budget position - it's very, very difficult. Is that something now that [INAUDIBLE]… or if not, what can we expect in some of these updates and so on, regarding this particular area of policy?
CHALMERS: The Ministerial update on the 28th of July won't be a policy statement. It won't have new policy announcements. It will talk about the relevance of our economic plan to the combination of challenges that exist in the economy right now. But obviously, the gender pay gap is a huge focus for us. And whether it's the transparency measures that we have talked about in the past, whether it's making sure that in the care economy in particular, that people get decent wages, it is and will continue to be a big focus for us. Even if it's not, you know, a large portion of the Ministerial Statement on Thursday week.
JOURNALIST: Treasurer, will the Federal Government consider implementing the military to help out in the aged care sector? Obviously, a third wave of COVID is going through aged care homes, again. Will the Federal Government consider military intervention there?
CHALMERS: I haven't spoken to Mark or Annika about that today. I assume they're keeping their options open. But beyond that, I don't have much. We'll go to Phil. We'll go front to back.
JOURNALIST: Just in reference to Shane's question about the forecast. You said in your opening comments, “confronting”, I think. Can we take that as confirmation that the wage growth numbers in the Budget, the inflation figures and the GDP numbers will all be worse than Morison and Frydenberg's last Budget?
CHALMERS: I wouldn't assume that necessarily. But certainly, you know, there'll be an inflation spike, which will be accurately...
JOURNALIST: You said confronting news for wages growth and GDP. Will they be downgraded?
CHALMERS: Well, I think it will be confronting in terms of real wages because there is no credible economic forecaster in Australia right now who thinks that wages growth is going to keep up with inflation. And we will be revising up our expectations for inflation. And so that will make the real wages situation worse before it gets better.
JOURNALIST: Are you expecting a drag on growth, given all that's gone on in the last couple of months - COVID and inflation?
CHALMERS: Well, I would certainly say that rising interest rates have an impact, or will have an impact on growth in the economy. And I'll talk about that in the in the update. We'll go here and then Jane.
JOURNALIST: Given the paid pandemic leave debate exposing a lot about Australia's insecure workforce, do you think there's scope to actually bring forward some of the reforms in that area?
CHALMERS: We're obviously interested in making sure that paid leave as generous as it can be, consistent with our fiscal constraints, our Budget constraints, and so we're not currently contemplating bringing forward any of our plans in paid leave. But it's a big priority for us consistent with our fiscal pressures. And so we'll always be on the lookout for ways to be able to do better by people
JOURNALIST: Treasurer, just back on the question of repatriations. There are fresh calls for the Albanese Government to repatriate the Australian women and children, the families of IS fighters from Syria. The previous government refused to repatriate them. Are you comfortable with maintaining that position? And is that effectively Australia absolving its global responsibilities?
CHALMERS: Well, Jane and others, I understand the interest in this but not being fully briefed on these circumstances or the implications for our policy, I'd rather leave commentary to others.
TREASURER: Back to the COVID payments. Dominic Perrotet said this morning that he would like those payments to continue on for as long as mandatory isolation rules stay in place. Is it feasible for the government to turn off those payments at some point while you're still requiring people who have COVID to isolate under the law? Or are you going to have to entertain extending those payments beyond October cut off?
CHALMERS: First of all, I pay tribute to the Premiers and Chief Ministers of both political persuasions, for coming to the table and helping us solve what was a really difficult problem with substantial implications for the Budget. So whether it's Premier Perrotet or the other Premiers and Chief Ministers, I thought they did a really good thing on Saturday when Anthony got them around the table to work out how we could fund an extension of paid pandemic leave. And so that that is very much appreciated, and I'll be able to tell that in person to the state and territory Treasurers when I meet with them on Friday in Brisbane. That will be my message to them as well.
In terms of how long it needs to be extended for - what drove this decision was the health advice. And the health advice was that we will see a spike in cases which will be difficult to deal with. But the spike is expected in I think August or perhaps early September, I'd have to check the exact timing of that health advice. And so we've extended the paid pandemic leave to the end of September. We've been flexible about that for all of the best reasons. The health advice was important to us, our fiscal constraints were very important to us. And the States helped us out on that front. And we said all along, we'd try and do the right thing by people as we all try and confront this increase in cases. And it comes in addition to the deal we did with the states on hospital funding as well, which is another important part of the story. So we've extended it to the end of September. We think that's about right. But I think what we've shown is our capacity to respond responsibly to the health advice as it evolves.
JOUNALIST: A teacher in your electorate... I believe you're across her fight for a visa. Are you going to step in to help her stay?
CHALMERS: We've been working around the clock on this. You know, clearly, this is a very concerning issue for our community. She's a legend in our community, absolute legend. And ideally, we would have found a way to be involved earlier than now. It's quite late in the peace, which is personally worrying to me. I've been working with the Principal of Marsden High, Andrew Peach, who I've known for a long time. And my office locally, my electorate office has been talking with the department to see if anything can be done. I don't want to over promise and under deliver there. But I do recognise the serious time constraints. And I do recognise the contribution, the immense contribution that she makes to our local community. I'll take, I might take two more.
JOUNALIST: You say you're going to deliver cost-of-living measures in the Budget, but considering the impact that interest rates are going to have on taxpayers and the fact that debt's becoming more expensive, can you guarantee that Australian families and businesses will be better off once you've handed down your Budget?
CHALMERS: They will be when our cost-of-living measures come in. Absolutely. If you're a new parent, newish parent, dealing with astronomical childcare costs, of course, you'll be better off once we invest around $5 billion in relief from childcare costs. And that won't be some kind of social security measure, that will help make our workforce bigger and more productive as more and more people can afford to return to work.
Our labour market is desperately crying out for people. We've got skills shortages, labour shortages. And we deal with that through all of the issues that we'll be talking about at the Jobs Summit. But childcare is absolutely essential when it comes to that bigger, more productive workforce that we need so that business can find the workers that they need and so people can earn more if they want to by working more. That's the intention of our childcare policy. It'll come in next year, but it'll be budgeted for in October. Last one, Rosie.
JOUNALIST: Treasurer, you said your priorities are childcare and medicines for spending. Where are your priorities in looking for savings?
CHALMERS: The first stop when it comes to improving the Budget position is starting to deal with this legacy of rorts and waste that we've got in the Budget. Big buckets of taxpayer money doled out at ministerial discretion. There's been too much of that for much of the last decade. And so that's where we're beginning. But we've got some responsible changes in areas like multinational tax and tax compliance.
Clearly, we're looking for other ways to improve the quality of the Budget. But if you think about - and this is a sort of an overarching comment with relevance to Rosie's question - if you think about what we're dealing with here, so we've got high and rising inflation, and you've got the Reserve Bank which is lifting interest rates to try and manage some of the demand in the economy, right. And the Commonwealth Budget has a role to play here. But the primary responsibility of this government and our Budget will be to deal with these supply side issues. And I'll be talking about this at some length later in the week in a couple of speeches I'll be giving.
But our job, we need to recognise that the reason we've got high and rising inflation is not just a story about too much demand in the economy. It's also a story about choked off supply. And that's why almost every element of our economic plan is about making our supply chains more resilient. Making sure that we can get the workers that we need, making sure we can get the goods to market, making sure that we can lift the speed limit on the economy because if the Reserve Bank was doing their job on lifting interest rates in the context of rising inflation, they need us to do our job as well. And primarily, from my point of view and the Budget's point of view, that means investing in the productive capacity of the economy to make it more resilient so that we can deal with the kinds of shocks which are troubling us and concerning economic policymakers right around the world. Thanks very much.