Press conference, Blue Room, Canberra

JIM CHALMERS:

G'day everybody. I've got three issues that I wanted to touch on today. Obviously the National Accounts, I wanted to make an announcement about the Productivity Commission, and I also wanted to talk about the passage of our competition bill as it relates to the ASX. I'll deal with the National Accounts first.

Today's National Accounts show economic growth of 0.4 per cent over the June quarter, matching the pace of the previous quarter revised and 2.1 per cent growth through the year. The Australian economy remains steady and sturdy in the face of unrelenting pressure. Economic growth held up relatively well despite the inevitable toll of higher interest rates, high but moderating inflation and continuing global uncertainty, particularly as it relates to China. We know that there are challenges ahead but we face them from a position of relative strength. This is a steady result but we know that people are under pressure from the rising cost of living and higher interest rates as well. We see that in the National Accounts data.

Australians continue to pull back on discretionary spending to make room for essentials and also to cover mortgage repayments. Household consumption grew by just 0.1 per cent in the quarter. People are also spending less on renovating their homes and they're saving less out of their incomes – the household savings ratio declined to 3.2 per cent, which is the lowest since about the middle of 2008. Despite these headwinds, our economy continues to benefit from a strong labour market, easing supply chain pressures and a welcome boost to our services exports as well. With more Australians in jobs, compensation of employees rose by 1.6 per cent in the quarter, and 9.6 per cent through the year. Strong public and business investment was supported by a further easing in supply chain pressures. New business investment was up 2.1 per cent in the quarter, as businesses were more easily able to access the capital goods that they need to grow. And we also saw welcomed strength in non-dwelling construction driven by renewable energy projects in the eastern states, in particular. The big rundown in inventories in the quarter reflected some one-off factors, but it also suggests firms are becoming more confident that they can access goods as they need them on global markets. Services exports grew by a strong 12.1 per cent in the quarter, and a big part of that was returning international students and overseas visitors providing a welcome boost to our education and tourism sectors as well. So all up, this is a steady and a sturdy result in difficult circumstances. As I've said before, we expect the economy to slow considerably over the next year and we expect the unemployment rate to tick up as well. Our economy is being buffeted by rate rises also in the system, particularly with another half a million low fixed rate loans to roll over this calendar year. There continues to be a lot of uncertainty in the global economy with the slowdown in China playing a bigger role in that. We won't be immune from any further deterioration on that front but we face these challenges from a genuinely enviable position. Our economy was one of the fastest growing advanced economies through the year to June. Faster than Germany, the UK, France, Canada and Italy. We have an unemployment rate with a 3 in front of it still, remarkably. Wages are growing around their fastest pace in a decade, and we've got the first surplus in 15 years which was taking pressure off inflation when inflation was most acute. We know that people are under significant pressure, which is why the Government's number one priority is roll out of billions of dollars in cost-of-living relief to take some of the edge off these inflationary pressures without making them worse. We are realistic about the challenges in the 12 months ahead but we are optimistic about the future of our economy and our country. So that's the first thing, the National Accounts, and no doubt you'll want to ask me about that.

But secondly, I wanted to make an announcement on the Productivity Commission. The Government is recommending to the Governor-General that Danielle Wood be appointed as the next Chair of the Productivity Commission. This decision does come after the previously announced candidate Chris Barrett informed the Government on the weekend that he has decided not to proceed with this appointment. I thank Chris and I wish him well for the future. I know that he will continue to make a meaningful contribution. Danielle will be no stranger to you as CEO of the Grattan Institute. Danielle Wood is an outstanding economist and a public policy expert of the highest calibre. Previously she was Principal Economist and Director of Merger Investigations at the ACCC. It will also be a homecoming of sorts for Danielle, she was formerly a Senior Economist at the PC as well. And I am absolutely thrilled that Danielle Wood will be leading the Productivity Commission and that she will be the first woman to lead the PC, or any of its previous incarnations that stretch back now more than a century.

This is another core institution in this country to be led by a woman for the very first time. As I've said before, I want to broaden and deepen the PC's work so that it's well placed to provide robust advice in a changing global economic landscape, and part of this is exploring new avenues to lift our productivity and our prosperity and maximise the opportunities that come from the big shifts in our economy in our society. I really look forward to working with Danielle in our efforts to renew and revitalise and reform the Productivity Commission.

Just briefly before I take your questions. The Senate has passed this morning, as I understand it, our legislation to improve competition in the trading of shares and other securities. This is a really important reform to strengthen our financial system and modernise our economy at the same time. Because by making our markets more modern we will make our economy more productive, more dynamic and more competitive at the same time. The legislated reforms today are all about ensuring we've got a competitive financial system that works for consumers and businesses and investors and that delivers for the Australian economy and the Australian people more broadly. I'm really pleased to see the Senate pass this very important legislation. We're modernising our markets and our economic infrastructure as part of modernising our economy more broadly.

JOURNALIST:

Thanks, Treasurer. Average Australians will be hearing this term ‘per capita recession’ and wondering what it is. Should they be worried?

CHALMERS:

Well, our economy is slowing considerably. It has been slowing considerably as the inevitable consequence of higher interest rates and global economic uncertainty. We see evidence of that in the numbers today at the same time our population growth has been recovering as we make up some of the lost ground from the COVID period. So what we're seeing right now is negative real per capita GDP growth. In the last 50 years or so that we have measured these things, about every fourth quarter on average has seen real per capita GDP growth go backwards. And so it's not especially unusual – about every fourth quarter we see this – and we've now had a couple of quarters in a row. That's because our economy is slowing for all of the reasons that we've talked about before, at the same time as our population is growing. We're seeing that particularly when it comes to the return of international students and the success of our tourism sector. Both of those things are good things, and you see that in the numbers today as well for services experts.

JOURNALIST:

Treasurer, what can households expect from a slowdown in China? And what does it mean to the budget bottom line?

CHALMERS:

So what we've seen in recent months is a substantial slowing in the economic conditions in China. And because our economy is closely intertwined with the Chinese economy, we are not and will not be immune from a slowdown in China. You can see in the profits numbers, you can see in some of the other indicators that when it comes to our exports to China some of those are suffering from the slowdown there. Obviously, the stronger our exports the better off our employers and our workers are here in Australia, and so that's the channel through which any weakness in China is felt here in Australia.

JOURNALIST:

Productivity has now fallen to March 2016 levels. Has Danielle Wood given you any early advice on how to turn that around? And can we get a bit more information about why Chris Barrett pulled out?

CHALMERS:

Productivity is a challenge in our economy. It was a challenge in our economy before these National Accounts made it clear. And as we have said for some time, this productivity challenge has taken some time to build, and it will take some time to turn around. It is partly global, it is partly a consequence of a wasted decade of missed opportunities which meant that productivity growth in the ten years to 2020 was the slowest decade in the last 60 years. So we've got a productivity challenge and what I've tried to do is to broaden out the productivity frontier beyond the usual suspects to include things like the energy transformation, adapting, adopting technology and getting the human capital piece right. And we'll have a substantial piece of work to release on human capital when we release the Employment White Paper before The Voice referendum. So that's the productivity challenge and it's incredibly clear. I've also made it clear that part of addressing this is to strengthen our institutions and I want to renew and refocus and revitalise the Productivity Commission, and I've been clear about that as well. Now, Chris Barrett has decided not to proceed with the appointment. That is ultimately a matter for him. As I understand it there is another opportunity that he has that has either been announced or is about to be announced. And he's decided to take up that opportunity and I genuinely wish him well. The good thing is we have, in Danielle Wood, an outstanding appointment to lead the PC. I'm very proud of this appointment. I'm excited about the opportunity to work with her and I wish Chris well for the future.

JOURNALIST:

Just following on from Riles’ question, your stat about one in every fourth quarter, there's only been three per capita recessions this century and there's a real chance that you'll have another negative quarter this quarter – and the last time we had that was during the depths of the 1991 recession. They don't happen all that often. How do you – can you see where consumers are going to get their mojo back given the spending that's going on? If it wasn't for spending on rent, there would have been a collapse in consumer spending through the quarter.

CHALMERS:

Well, consumer spending is weak in the June quarter because interest rates are higher, and people are being buffeted by higher prices in the economy. And so what we're seeing in the household consumption part of these National Accounts is not especially surprising. It is obviously concerning and that's why we are rolling out billions of dollars in cost-of-living relief. Because inevitably when you've got the cost-of-living pressures that people are under, you've got these interest rate rises which began before the election, that will obviously impact on household consumption. We've seen that in other data as well, as you know, Shane, in the retail figures and in other ways as well. So that's not especially surprising. I'm obviously not going to make predictions about next quarter, but we've been up‑front with people and said we expect the Australian economy to slow considerably. The combination of higher interest rates, slowdown in China and other factors, all of these things are buffeting our economy and we expect to see that in future quarters. Now the point that I made about the per capita numbers – 48 times out of the last 199 quarters, which is all of the quarters that have been measured – we've seen this measure go backwards. And as you rightly point out, it's already happened a couple of times in the 2000s. So this is more common than people might expect or anticipate. It is obviously concerning that our economy is slowing considerably. One of the reasons why it's not slowing further is because we've got some of this population growth that we missed out on during COVID, and we can see in the export numbers for services that international education and tourism are especially strong for us and that's very helpful.

JOURNALIST:

Thanks Treasurer. Linked to the productivity figures, unit labour costs are growing quite strongly so doesn't that raise risks about the management of the cost of labour and the inflationary pressures that come from that period?

CHALMERS:

Look, over the year we've seen welcome progress on wage growth, and one of the Government's objectives is to get wages growing in a responsible and a sustainable way and over the course of the year we have seen that. People are working more and they're earning more and that's a good thing and there are a number of ways that you can see that in the data today. You can see that in some of the labour market figures and you can see it as well in the income tax part of it. People are working more and earning more and that's what we want to see.

JOURNALIST:

You mentioned Danielle Wood being an outstanding economist a couple of times. This year she's written, "the Government could have done more if it was willing to take bolder decisions on reducing spending or increasing taxes", she also said you don't get BMW services on a Kia budget. Is yours a Kia budget and should taxes be higher?

CHALMERS:

Look, I think it would be strange in the extreme if I limited my choices for the PC Chair to people who have only used the exact same language to describe our economic challenges. There might not be anyone, first of all. But I have the highest possible respect and regard for Danielle Wood, and I take the views that she puts forward very, very seriously, and that's why I think this is a terrific appointment. Now we wouldn't have had an identical view about everything, including some of those things that you mentioned. You wouldn't expect us to, and it wouldn't be much use if we did. And so I am entirely comfortable, completely, entirely comfortable with the views that Danielle has expressed in the past on the public record. I haven't agreed with everything that she's said in the past, I wouldn't anticipate I agree with absolutely everything she says in the future. But an absolutely top shelf appointment and I'm very proud of it.

JOURNALIST:

Do you agree on taxes though, should they be higher?

CHALMERS:

Well, we've made it clear that when it comes to multinationals, when it comes to the PRRT and when it comes to high balance superannuation that there are changes to be made there to make the tax base more robust.

JOURNALIST:

The Prime Minister revealed yesterday in Parliament that he did not know of the Qatar decision when it was made on July 10. Can I ask you whether you were consulted about that decision before it was made?

CHALMERS:

No, I wasn't.

JOURNALIST:

As a response to the inflation reduction the outgoing Productivity Commission Chair said that increasing the proportion of the economy in manufacturing, he doesn't think that's the most logical, rational response to the IRA, what do you think is the best response to the IRA?

CHALMERS:

Well first of all I thank Michael Brennan for his service to the PC and I've been clear on a number of occasions that the Government is grateful for his period of service on that important economic institution. I think as the Intergenerational Report made clear, and I've made clear on other occasions, the composition of our industrial base will change over time. We'll need to accommodate big growth in the care and support economy and within parts of our economy the nature of it will change. In manufacturing, a shift towards higher value advanced manufacturing. In resources obviously the composition will change as we grab this once in a century opportunity around critical minerals. So I think it's self evident that the composition of our industrial base will change over time. The Government is obviously considering any additional steps that we need to take in response to the Inflation Reduction Act. We are engaged in that work as we speak. Our objective there, our aspiration there, is to make sure that Australia can be beneficiaries, Australia can be a beneficiary of the policy changes that the Americans are making and the broader trends and transitions in the global economy more broadly. And so, you can expect to hear from us, our response to the Inflation Reduction Act which recognises that we have strengths here in Australia. We want to do more value adding in the manufacturing sector. We've got an immense opportunity here and we intend to grab it.

JOURNALIST:

On Danielle Wood, on the Productivity Commission, firstly was Danielle interviewed in the earlier round? The other question is about the PC. You want to renew, refocus, revitalise it. What will that mean? Will it mean a change to the legislation? Probably not. Will it mean a statement of expectations? Will it mean a rearrangement of the sort of organisational chart? What do you have in mind?

CHALMERS:

So, in reverse order, I would expect a statement of expectations and we will work it up in one form or another. We will consult obviously closely with Danielle as she takes up this appointment. She won't take up the appointment immediately, there'll be acting arrangements while she tidies up the great work that she's been doing at the Grattan Institute. But we will work with her closely on that. We will communicate and make available to you the changes that we expect to see at the Productivity Commission.

JOURNALIST:

Probably this year?

CHALMERS:

I would like to do it sooner rather than later, but it will take months. It will take months rather than weeks and so we'll see how we go. We've got a pretty full book, Employment White Paper and a few other important things. So, we will make clear how our changes to the PC relate to the work that Danielle does, and we'll come to a view on how that's best expressed, but something that looks a bit like a statement of expectations I think is our goal. It’s to be determined whether we need legislation to put in place the changes that we want to see. I've been working closely with Treasury who have been consulting widely on possible reforms to the PC, and I hope to make that public at some point but again I want to work closely with Danielle on finalising that advice that I get from Treasury.

The process, yes. Danielle Wood was involved in the very robust merits based process. And as part of that the two names that came forward to us were Chris Barrett and Danielle Wood. That's why it's been possible to move relatively quickly to make this announcement today, to take it through Cabinet and to make this announcement today, because we knew we had someone of character and calibre to take up this really important role. And again, in case it hasn't been clear, I think that this is going to be an absolutely terrific appointment. I might just take you three and then we're done.

JOURNALIST:

Thanks Treasurer. Just on another appointment, you've got to make a decision about the Deputy Governor of the Reserve Bank. Would you expect to make that before the next Board meeting, or do you think there'll be acting arrangements in place for the next Board meeting?

CHALMERS:

It's to be determined. I want to do that appointment as quickly as I can, but I want to make sure that I get it right. And having Michel  Bullock in place is obviously the most important piece of that puzzle and we want to make the Deputy Governor appointment, and no doubt Michele will want to make the Assistant Governor Economic appointment in relation to the new leadership at the Reserve Bank. I have been interviewing potential Deputy Governors and I've been weighing up all of the considerations you'd expect me to weigh up. We will make a decision public when we can, but it won't be immediate. We've got a bit more work to do.

JOURNALIST:

Treasurer, will you be signing the Respect for Referendum pledge ahead of The Voice?

CHALMERS:

I will be engaging in the referendum campaign in a respectful way, and I've made that clear already. I'm prepared to make it clear in other ways. But I think it's really important that we conduct ourselves in this Voice referendum campaign in a way that we can be proud of and I'm not sure every contribution so far would satisfy that test. Now when it comes to the Voice I think the most important thing right now is for Peter Dutton to explain why he thinks we should have two referendums rather than one. Now Peter Dutton has said, "Vote no in this referendum so that we can have another referendum". And I think a lot of Australians who might be hearing that for the first time would be scratching their head and saying, "Why does Peter Dutton want two opportunities to practice his usual nasty, angry, divisive politics?" Now we can get this done in one. We can get constitutional recognition; we can listen better and get better outcomes. Or we can do what Peter Dutton wants, to have two referendum campaigns.

Now I'm not sure he's had to explain his position adequately and I'm not sure the Australian people yet understand that Peter Dutton's policy is to have two referendums on The Voice. And that's because from his point of view the more opportunities to practice his nasty, angry, divisive politics the better.

I think the country deserves better than that. The country is capable of better than that. We can grab this generational opportunity to do the right thing, recognising the constitution, listen better and get better outcomes.

JOURNALIST:

Treasurer, new Liberal Senator Maria Kovacic has given a maiden speech and you saw the comments where she's called for tax reform to address the housing crisis, namely capping the number of properties that can be negatively geared. Obviously the history on this is well known. Are you [inaudible] changing sentiment and are you prepared to have a conversation about it?

CHALMERS:

That's not on our agenda. Obviously I read that with some interest. That was not what I was expecting from that particular first speech, but I saw it reported. I think a number of you reported that. That's not on our agenda. Our agenda is PRRT, high balance superannuation, multinational tax reform. We want to make progress on that through the Senate. And if there are senators who support making the tax base more robust so we can fund our priorities and the cost of living and Medicare and all of these sorts of things, then we would welcome their support on that. Thanks very much.