Press conference, Blue Room, Canberra

JIM CHALMERS:

First of all condolences to the family and friends of the late Jim Molan, Senator in this place, not somebody who I knew but certainly somebody who is greatly respected for his contribution to our country, particularly his military service. Today will be an incredibly difficult day for his loved ones, and so condolences to everyone who is at the funeral of Jim Molan today. We once again salute his service to our country as we mark his passing, and today his funeral.

And again, big congratulations to Chris Hipkins, the new Prime Minister of New Zealand, we have an incredibly strong relationship with our brothers and sisters on the other side of the ditch. We congratulate Chris Hipkins, we thank Jacinda Arden for her service. We've got a big trans-Tasman agenda in the 40th anniversary year of closer economic relations. Chris Hipkins is a person of remarkable experience and depth and intellect. He will be no doubt a very worthy successor to Jacinda Ardern and somebody that we look forward to working with, and I look forward to working with my great friend Grant Robertson, and with Chris Hipkins' Cabinet, as we work on issues of mutual interest to our mutual benefit of the people on both sides of the Tasman.

But I'm here today to talk about the new inflation figures that have just been released in the last hour or so by the ABS. The consumer price index rose 1.9 per cent in the December quarter, and 7.8 per cent throughout 2022. I think it's worth remembering and noting that when it comes to headline inflation, the quarterly profile of that inflation in 2022, was 2.1 per cent in the March quarter, 1.8 per cent in both the June and September quarters, and 1.9 per cent in the December quarter. So the biggest jump in inflation in 2022 was actually the first quarter of 2022, and not the last quarter of 2022. The trimmed mean for the year for 2022 was 6.9 per cent. This is very high inflation by historical standards, there is no use pretending otherwise - it's unacceptably high. It's in line with the Treasury forecasts for inflation and it's almost as high as the Reserve Bank's forecast for inflation as well. Now, this is likely the peak in inflation, but we won't know that for sure until we get the numbers for this March quarter that we're in now. Inflation was the defining challenge in our economy in 2022, and it will be a defining challenge in our economy in 2023. We are optimistic about the future of our economy and the future of our country, but we are realistic about the extreme price pressures that Australians are facing right now. The impact of interest rate hikes and the costs and consequences of a war in Europe, and a period of substantial volatility in the global economy as well. Our expectation and our hope is that inflation has now peaked, but it will still be higher than we'd like for longer than we'd like, even on the other side of the peak in inflation. Even as inflation moderates, the pressures coming at us from around the world will continue to be felt around the kitchen tables of our country.

Now the big drivers in the numbers released this morning, the big drivers of inflation were holidays and accommodation, new homes as well, and energy prices too - which is no surprise, I think, to anyone who's been following developments in our economy in recent times. And the energy price rises in the numbers released today, and the forecast energy price rises in the October Budget, are precisely why we are acting in such a decisive way to try and take some of the sting out of these price rises, which are putting so much pressure on Australian families, pensioners, small businesses, and industries as well. It will take a little bit of time for our interventions in the energy market to flow through, and there's obviously a long way to go, but we are really quite pleased and quite encouraged to see some early evidence that our energy plan will moderate some of these energy price increases that we expected in 2023. If you think about just in the last few days, we've seen Treasury analysis that shows forecast price rises are coming off considerably. Shell is offering eight petajoules of gas under the price cap. And just overnight, we saw a new analysis from the energy market operator, which backs in the steps that we took late last year as well. I'd really encourage you to check out the AEMO report which was released overnight. The energy market operator has drawn a direct link between the interventions that we made late last year with the price drops, which was the market anticipating and then responding to the steps that the Albanese Government took. So we are starting to see our energy plan take some of the sting out of the energy price rises that we have been anticipating in 2023. And obviously on top of that, there is electricity bill relief coming in the Budget, and that's an important part of our energy plan as well, to help people through a period of high and rising energy prices.

Now, don't forget when it comes to our interventions in the energy market, and when it comes to household assistance, cost-of-living relief in the form of electricity bill relief, that the Opposition voted against all of it. If they had their way, government would do nothing to deal with these energy price rises, industries would be smashed and hollowed out, and families and pensioners and small businesses wouldn't get any help from government at all. That's what the Opposition voted for in this place, when they voted against our energy plan. Now we understand and we have understood for some time, that the main driver of higher energy prices is the war in Ukraine, but the decade of energy policy chaos has made us more vulnerable to these sorts of international shocks. So we're acting in the near-term to take some of the edge out of these energy price rises, but we're also putting in place the energy policy certainty when it comes to cleaner and cheaper, more reliable, increasingly renewable energy, to make sure that we're making up for missed opportunities of the last decade as well. Now, energy is a big part of the inflation story but it's not the only part of the inflation story. We still have pressure on supply chains, we still have the consequences of natural disasters, we still have the workforce shortages in our economy, that the Budget and our plan has been designed to begin to deal with. Because of all of these reasons, because of all of these pressures, our three highest priorities in our economic plan to make the Budget more responsible, the economy more resilient, and to provide cost-of-living relief, where we can do that responsibly without adding to inflation. These were the priorities in the October Budget, and they will be the priorities in the May Budget as well.

JOURNALIST:

Rents are rising very fast in the major cities. We know you want responsible cost-of-living relief, but can you please explain where increasing the rent assistance component of government payments, where that ranks in terms of its cost and in terms of its priority for you?

CHALMERS:

Obviously when it comes to the various government payments and pensions, we keep them under constant review. And we always try and do what we can to make sure that people on fixed incomes are able to keep up with the rising cost of living. The indexation is obviously a really important part of that, but I understand that there are people around the country and around the community that would like us to do more - whether it's rent assistance, whether it's single parents, whether it's JobSeeker, or some of these other payments that have been prominent in all of your stories - and in much of the economic conversation for some time now. We understand that when it comes to rental properties, in particular, there aren't enough of them. We've got vacancy rates incredibly low, we've got the growth in rental costs faster than we'd like, and so the most important thing we can do is build more supply. We don't have enough affordable properties for people to live in, particularly where the jobs and opportunities are being created. And so my colleague, Julie Collins, the whole Cabinet, is focused on delivering more social and affordable houses - whether it's the Housing Australia Future Fund, or the Housing Accord, that we announced in the October Budget - we need to get more supply into the system. When it comes to various payments and pensions, they're obviously typically under constant review.

JOURNALIST:

Treasurer, we saw a fairly significant decline in fruit and vegetable prices over the quarter. I think you'd previously indicated your expectation was that floods across the eastern seaboard will be putting upward pressure - are you still expecting to see that come through in the first half of this year? And have you given any thought to replacing Sean Hughes as the ASIC Commissioner, given his announced his exit ahead of schedule?

CHALMERS:

So a couple of parts to that. Firstly, when it comes to fruit and vegetable prices in particular, I think if you ask most families around Australia, they still feel like that's a substantial part of the pressure that they feel. And obviously, natural disasters, when they occur in our prime agricultural land, they have an impact. That number has come in lower than many people expected, but another reminder of the swings and roundabouts in these inflation figures. Over the course of recent months, fuel hasn't gone up by as much as what people were anticipating, shipping costs have come off a bit. And so inevitably, when you're forecasting some of these numbers, there will be an element of swings and roundabouts, even though, the number that came out today is in line with what the Treasury expected, in aggregate. When it comes to ASIC, I think it's entirely appropriate that we have a proper merit-based selection process for the replacement at ASIC, and so that's what I've asked to occur. And typically, when you run a process like that, you get some advice from the Treasury and from elsewhere about the best way to fill that vacancy. I don't have a preconceived view about how we might fill the vacancy left by his departure. I'll put a lot of thought into it and I'll rely very heavily, of course, on the merit-based selection process, which will be underway.

JOURNALIST:

Treasurer, in the December quarter, you saw electricity prices go up around nine per cent in the December quarter, do you think that's the peak in the quarterly growth in electricity prices? And in terms of the household energy relief, that I believe you scheduled for the start of April, is there any chance of bringing that forward? Or why not bring it forward if electricity prices are rising so quickly, already?

CHALMERS:

First of all, it remains to be seen whether that's the peak in electricity prices. Certainly there's been some very encouraging early indications that some of the futures pricing, some of the forecast pricing for 2023, those increases will be lower than we expected in October, partly as a function of largely as a function of the interventions that we made in the market. So I mentioned before, whether it's the AEMO report out overnight, or other evidence, we are encouraged by that, the beginnings of that evidence that our interventions are likely to work. Obviously, when energy prices are such a big part of our inflation challenge, that's been our main priority. We've been working over Christmas, to put together the electricity bill relief package. As you would appreciate, Patrick, this involves a lot of negotiation with each of the states and territories bilaterally, and so that takes a bit of time. I want to thank the colleagues who have been engaged with that work over December and January, at the state and territory level and at the Commonwealth level. There's a heap of work that goes into it. It's not just one scheme that applies in identical ways right across the Commonwealth and so it takes some time. I don't think it's likely at all that that would begin in April, given the various implementation challenges with each of the states and the negotiations with the states. I would expect that that electricity bill relief is a key feature of the May Budget, and flows not too much longer after that. And when it does, it will make a meaningful difference. We are talking here about one and a half billion dollars in Commonwealth money, in addition to state and territory effort to take some of the sting out of these electricity bills, as people receive them. It requires a heap of work, there's a heap of implementation thinking to put in place. My aspiration is that a lot of that work that's happening right now, will advance quite quickly. It will be part of the May Budget, and it will flow some time after that.

JOURNALIST:

Just a follow-up on Pat's question - given all the changes that you've made, have you done any remodels in the expected increase in electricity and gas prices and what are they? How long do you expect prices to continue rising?

CHALMERS:

We'll obviously update all of the forecasts, including our forecasts for inflation and for electricity prices and gas prices in the usual way for the May Budget and the expenditure Review Committee and the Cabinet will consider any updated forecasts as we go, so we will do that in the usual way. Our expectation, our hope, is that inflation peaked in the December quarter, that we will start to see it moderate from the March quarter that we're in now. Already, the Budget expects and forecasts that. If there are any changes required, whether it's to the overarching inflation forecast or to the energy price forecasts, we'll make them and we'll publicise them in the way that we did in October.

JOURNALIST:

Treasurer, what's your reaction to Woodside's December quarter earnings today, given they've been a key critic of your gas cap plan, and the figures themselves show record high production?

CHALMERS:

The gas companies are doing incredibly well on global markets because prices for gas are extremely high as a consequence of the war in Ukraine - those are all facts. And the numbers released today by the company underscore those facts. I see the gas industry as a really important part of our economy and I acknowledge that and I respect that and I want them to be profitable. All that we are asking by imposing this cap on the price of domestic gas is that these incredibly high prices that they're getting on markets don't hollow out our local industries or smash Australians in the process. And so it's self-evident that they're doing well. Obviously, we don't expect there to be any unanimity about the decisive steps that we took at the end of last year. We expect them to have a view about it, and they do. But they're doing well. We're asking them to do something meaningful and temporary on behalf of the broader Australian economy. It's my job to care about how all of the pieces fit together and not just one part of our industrial base. They've got a different job, and I respect it.

JOURNALIST:

As you said, the inflation data looks like it may have peaked, but it has still increased. Is that going to be putting more pressure on the RBA to go for a ninth consecutive increase in February? And are there any levers you can pull to help ease some of the pressure on mortgages?

CHALMERS:

First of all, obviously the usual caveat about Treasurers don't make predictions about interest rate movements into the future. Certainly even before today, the market was expecting more interest rate rises before there was a pause and obviously, they will calibrate their expectations after these new numbers today. And so I think most people will expect that there will be more to come. I don't make predictions and I don't second guess the decisions taken by the independent Reserve Bank but we are and we will provide cost-of-living relief to Australian families who are doing it tough right now. If you think about it - already, either rolling out now or not far away, we've got cheaper early childhood education for more than a million families, we're expanding in time paid parental leave, we've got cheaper medicines already flowing, we've got more affordable housing coming including with the Accord but also other steps in Julie Collins portfolio and we're seeing the beginnings of wages growth. And so you can see how our whole economic plan and our whole government is focused on where we can provide cost-of-living relief without adding to these inflationary pressures. And so what people can expect to see in May is more of an effort to provide that cost-of-living relief in a responsible way. There will be electricity bill relief as a centrepiece of the May Budget with respect to Patrick's question before and so that people know that's coming. If there's more that we can responsibly do, obviously we'll consider that.

JOURNALIST:

Thanks Treasurer. Just on the PWC tax consultation issue - as the nation's Treasurer, what's been your reaction to that? Can I just ask - is the Government/Treasury/you planning to take any more action either against PWC or more generally to deal with this in future consultation so it doesn't happen, no matter whether it's PWC, or more generally?

CHALMERS:

Absolutely furious, absolutely ropeable about these revelations. There is no consultation without trust, and we want to be able to consult in a meaningful way when changes to the tax system are in prospect, and the actions that we've seen alleged and reported cut across that. And so this is a shocking breach of trust, an appalling breach of trust and as a government that wants to be consultative where we can, this puts that sort of consultation at risk and so it puts the quality of economic decision making and policymaking at risk as well. There will obviously be a process about the specifics of the allegations in this case. More broadly what I've done - I had a meeting with the Assistant Treasurer this morning about it and I have asked Treasury and I've written to the Chair of the Board of Tax, and to the head of the ATO to ask for advice on any additional steps that we should be taking to protect the integrity of these important processes. I see these processes as absolutely essential and central and we want to protect the integrity of these processes and so I've asked the ATO, the Board of Tax and the Treasury to give Stephen Jones and I advice about how we implement recommendations from the review in 2019 when it comes to the Tax Practitioners Board and beyond that whether any other additional steps are necessary.

JOURNALIST:

You've spoken a lot today about power bills but from next week families are going to be hit again by increases in household gas bills? Will there be any relief for them in the Budget? And on another matter if I may, should Kanye West be allowed into Australia despite his anti-Semitic comments?

CHALMERS:

First of all, these gas price increases are precisely why we are acting in the way that we are. When gas prices are high in Australia, it risks hollowing out our industries, it puts extra pressure on households, which you're referring to - our view was and our determination was that we wouldn't sit on our hands and do nothing about that. That's why there's a gas price cap. That's why there's electricity bill relief coming. That's why we got the states to impose a price cap on coal as a feed in to higher electricity prices. Now we've been upfront with people as we've done that work. It hasn't been without controversy, which goes to Ben's question. But we've done that, we've said all along - this is a big thing that we're doing. There will be mixed views about how it's implemented, but the benefits will flow to Australian families as these new prices begin to flow in the retail system. We've been upfront with people about that - we didn't flick a switch at the end of December and have it flow through immediately but it is - judging by the early evidence - going to flow through and families will be beneficiaries of those steps that we took. When it comes to Kanye West, I don't intend to comment on individual cases. Obviously Minister Giles has a role to play here when it comes to any visa applications for non-citizens coming into Australia. Obviously, in the event that Kanye West came to Australia, he'd have to comply with visa conditions and part of that are our considerations around character. Obviously, this will be a matter of some interest and no doubt Minister Giles is working his way through the details.

JOURNALIST:

There are clear signs of slowing homebuilding activity in the CPI report and elsewhere. Are you worried about having enough housing supply coming through with a general impact on the sector more generally?

CHALMERS:

I'm worried about housing supply. I think it's one of the perennial challenges in the Australian economy, but particularly when we think about trying to make sure we can house people near where the jobs and opportunities are been created. The first six months of the Albanese Government was the strongest jobs growth for any new government on record. There are a lot of jobs and opportunities being created, what we need to do is make sure people can live near them particularly at a time when population growth is bouncing back. The status quo in housing supply is not acceptable, not sustainable. And that's why Julie Collins - and I commend her in her work - and the whole Cabinet is so focused on rolling out the Future Fund for housing, rolling out our other housing supply measures. It's why we got the super funds and the states and the local government and the industry together about building more homes in our housing Accord. We need more homes in this country. That's been obvious for some time but it's particularly obvious and particularly acute now when you think about the pressures on our population, the pressures on our workforce, and the pressures on the household budgets of people who are renters. So for all of those reasons, building more houses is a huge priority for the Albanese Government.

JOURNALIST:

Some economists have suggested the rising wages is starting to feed into inflation, particularly in some services sectors. Are you still confident there is a separation and wages can grow the way they are without feeding inflation?

CHALMERS:

We have an inflation problem in our economy because of a war in Ukraine, supply chain pressures and some other issues which have been neglected for too long in our economy. We don't have an inflation problem in our economy because people are earning too much. In fact, for the best part of a decade, because of a policy of deliberate wage suppression and wage stagnation, ordinary working people have been falling further and further behind. And so one of our key aspirations, one of the key objectives of our economic plan is to get wages moving strongly and sustainably again in our economy and we're heartened to see the beginnings of that in recent data. Wages growth is beginning to pick up in our economy - that's a good thing, not a bad thing. It's not the reason why we've got an inflation challenge in our economy. Our inflation challenge comes from a whole range of sources, but wages growth isn't one of them.

JOURNALIST:

Treasurer, just on PWC again - are you confident that that was a one off? Have you got officials going through other consultations, maybe not only in tax, to see whether information has been shared in a way that undermines the intent of policies?

CHALMERS:

Obviously, when something like this is alleged we make sure that we are being diligent in making sure that it's not happening elsewhere and that it doesn't happen again. And there is no doubt a process at the individual agency level to make sure that this isn't happening in other cases, but my focus is in getting the structures right, getting any necessary changes in place, working closely with my colleague Stephen Jones to make sure that it doesn't happen again. It's in lots of ways a wakeup call. Rightly and understandably there's always a call for more consultation when it comes to policy changes, particularly tax policy changes. That is not possible without integrity and trust in the system. And so we need to find where this has happened and throw the book at people and we need to make sure it doesn't happen again.

JOURNALIST:

Should you scale back consultation? Are you over sharing information with these people who can't be trusted?

CHALMERS:

Clearly in this case, we were. Clearly in this case we were, but I hope not. It's not possible in every case to consult on every policy change, but our default setting is to consult where we can because that leads to better policy. And we want consultation to lead to better policy not to lead to more profits for the people who are helping us with the consultation, that's clear, that's self-evident. And we don't want to compromise consultation by not being able to trust it, by there not being enough integrity in it. And so we are doing a bunch of work, I've written to those three bodies today as I said, I've met with Stephen Jones, we will do what we think we should to make sure that we've found out if this is happening elsewhere, but I think just as importantly, if not more importantly to make sure it doesn't happen again. Thanks very much.