Press conference, Blue Room, Canberra
JIM CHALMERS:
The world is inflicting price pressures on Australians and we are doing the best we can to ease them. And what we've seen today is another moderation in annual terms in inflation in our economy. For the third consecutive quarter, we've seen a moderation in annual inflation this time, from 6 per cent to 5.4 per cent. The quarterly figure is more volatile as we'd expected, but still at 1.2 per cent, much lower than the 2.1 per cent that we inherited from our predecessors from the March quarter in 2022. Petrol, as we expected, is the major part of this inflation story in the quarter just gone. And this is a consequence of decisions taken by oil suppliers on the global market to wind back supply and that's had implications for Australian motorists as well, we see that in the figures before you today. As I've said to you before, we expect some of these price pressures at the bowser to be potentially exacerbated by what we're seeing in the Middle East right now as well. Of course, these CPI figures predate the escalation of the conflict in the Middle East.
It's really important to recognise that the annual inflation number that we have received today is in line with expectations, it's in line with the Treasury forecasts in the most recent budget, and it doesn't change the Treasury's expectations for when inflation will return to the target band. So consistent with expectations, consistent with forecasts, and consistent with our expectations going forward as well. I think those are really important points. Inflation is still much higher than we would like, and it will be for longer than we'd like. But what we see in these numbers today is some evidence that the Government's cost-of-living plan is taking some of the edge off these pressures that Australians are feeling. Our highest priority is rolling out this $23 billion in cost-of-living relief, which has been carefully calibrated and methodically designed to take some of the edge off these inflationary pressures without adding to inflation in the economy.
The ABS has shown today in a number of ways that the Government's efforts are working to take some of those pressures off people that they are feeling in our communities around Australia. Let me give you three examples. When it comes to electricity, electricity prices went up 4.2 per cent in the quarter, without our energy relief, they would have gone up 18.6 per cent according to the ABS – so instead of 18.6, 4.2. The cost of childcare went down 13.2 per cent in the September quarter as a consequence of our cheaper childcare plan. In the absence of that, the ABS says prices would have gone up 6.7 per cent. So instead of an increase in childcare costs of 6.7 per cent because of our cost-of-living plan, childcare costs went down in the September quarter by 13.2 per cent. And when it comes to rent, because of the biggest increase in Commonwealth Rent Assistance in three decades, instead of a two and a half per cent increase in rents in the quarter, we saw a 2.2 per cent increase in rents in the quarter. Now we know that people are still under pressure, but these are encouraging numbers when it comes to the impact of our cost-of-living plan. And this is not the government saying that our cost-of-living plan is working, this is the Australian Bureau of Statistics saying that the Government's cost-of-living plan is taking some of the edge off these cost-of-living pressures, particularly when it comes to electricity and childcare and rent in today's figures.
Now, today is the one-year anniversary of the first budget that Katy Gallagher and I handed down, the first budget of the Albanese Labor Government. And we made it clear then, we made it clear again in May, and every day in between and after those budgets, that our biggest priority is easing cost of living pressures where we can at the same time as we invest in the future of our economy and get the budget in much better nick. We know Australians are still doing it tough but across all three of those areas we're making some welcome progress. Inflation is still too high, but it would be higher still, without the cost-of-living plan that we're rolling out as our highest priority. At the same time, as we're rolling out their cost-of-living relief, we've seen the creation of more jobs for a new government than any other government on record in its first term, and we're only halfway through the term – well over half a million jobs created on our watch. The first surplus in 15 years, the budget in much better nick, even as some of the medium-term pressures intensify rather than ease. We've got a very unpredictable, volatile global economy but what we have been able to do in the year since that first budget is build some of our buffers against that global economic uncertainty, we've been able to take some of the sting out of these cost-of-living pressures, we've got the budget in much better nick, and we've created well over half a million jobs. And so we confront these uncertain global economic times from a position of genuine economic strength. We would like inflation to be lower, we would like some of these other indicators to be better, but they are much better than they would otherwise be because of the economic plan that we have rolled out in a considered and methodical way.
JOURNALIST:
According to the ABS, this was the largest quarterly rise in petrol prices since March 2020. Will you consider reintroducing a cut to the fuel excise?
CHALMERS:
Our priority is rolling out the cost-of-living measures that we've already announced and budgeted for, tens of billions of dollars in cost-of-living help, which the ABS says today in their release, is helping to take some of the sting out of these cost-of-living pressures. So that's our priority. Petrol prices were higher in the quarter, largely as a consequence of decisions taken by suppliers on the other side of the world but impacting Australian motorists here at home. We recognise that, that's why we're rolling out this cost-of-living help and it's why we are encouraged to see that it is working.
JOURNALIST:
There have been questions in Estimates about the role of competition in the supermarket sector and how this is impacting consumer prices, would you consider a referral of the supermarket sector to the ACCC for investigation?
CHALMERS:
First of all, we expect all supermarkets and all the retailers in the grocery sector to treat their customers fairly. When some of their input costs were going up, their prices were going up, we want to see their prices come down when some of their input costs come down on the other side of the peak – we've made that clear on multiple occasions. The ACCC has the powers to look across the whole economy, including the supermarket sector. We keep that under constant review, I speak to the ACCC chair regularly to see if there are any other powers that she needs. I've also made sure that when it comes to the competition review that I've begun with Andrew Leigh, and with a panel of experts that cost of living is front and centre when it comes to the competition review as well. We've also got a review of the Food and Grocery Code to make sure that everything is working as it should there. The primary driver of these pressures is petrol rather than groceries, but we've seen inflation in the grocery sector as well. We want to make sure that retailers, particularly supermarkets, are treating their customers fairly.
JOURNALIST:
Given inflation is proving to be a bit sticky and the global situation is so uncertain, should borrowers now expect interest rates to remain higher for longer?
CHALMERS:
Well, as you'd expect, Eliza, I'm not going to make predictions or pre-empt decisions taken independently by the Reserve Bank Board. The Reserve Bank Governor has made her own views clear in a couple of public engagements over the last week or two, including last night and the independent Reserve Bank Board will speak for themselves. What I would say is what we're seeing today in these numbers is consistent with expectations, it's consistent with the forecasts that I put in the Budget – the Treasury forecasts – and it's also consistent with our expectations for inflation going forward. The Reserve Bank looks for material changes in the inflation outlook – what we've seen today, and they will obviously assess these numbers in their own way – but what we've seen today is consistent with our expectations, it doesn't materially change the inflation outlook going forward. And what we've been able to do, and I missed this stat earlier when I was introducing today's numbers, is something like half a percentage point has been taken off inflation as a combined consequence of our cost-of-living policies. So the Government is doing its bit to take the pressure off inflation with our cost-of-living plan, getting the budget back into surplus, investing in the productive capacity of our economy as well. We're doing our bit. I'll leave it to the independent Reserve Bank to assess how it goes about its work.
JOURNALIST:
Treasurer, you mentioned the petrol prices and given these numbers are for the third quarter, it doesn't include the current conflict in the Middle East. Does that mean that we can expect another quarter of sticky inflation next month, possibly even higher figures?
CHALMERS:
Well, I do think we can expect some volatility in the quarterly numbers and of course, in the monthly numbers. And you would have all noticed that the composition of our inflation challenge has been changing over time – in the two years or so that we've had this inflation challenge, ever since that quarterly peak before last year's election – the composition of our inflation challenge has changed and that introduces an element of volatility to the numbers that we see. The global economy is a bumpy place and so the moderation in inflation from quarter to quarter could be a bit bumpy, as well and most recently, the escalating conflict in the Middle East risks putting upward pressure on global oil and therefore petrol. And so, it remains to be seen what the future trajectory is, but nothing in today's figures change the way that we expect inflation to moderate in the coming months and years. The composition of that, the bumpiness of that is to be determined still.
JOURNALIST:
You said with regards to cost-of-living relief, you're focused on the measures that you've already announced. But on the issue of fuel, there would be a lot of Australians out there looking to the example that was set by your predecessors and cutting the fuel excise temporarily. Even if you're not focusing on it in the initial instance, have you at least looked into how you might be able to do that, if indeed that's a path you go down in the future, how much it would cost, the mechanics around it?
CHALMERS:
No, it's not something that we've been focused on. Our focus, as I said – I think to Amanda's question, or it might have been Poppy's – our focus is rolling out this $23 billion cost-of-living plan which the ABS says is working. That's been our focus, obviously, in future budgets, May and subsequently, we'll contemplate what measures are necessary in our economy, consistent with our really strict approach to fiscal discipline, but it's not something that we've been working on now.
JOURNALIST:
Treasurer, Governor Bullock last night mentioned that five per cent of variable mortgage rate holders are effectively going backwards, inflation in mortgage interest rates are going up faster than their incomes, and 25 per cent of those who are highly leveraged. Do you think those people could afford another increase in mortgage rates?
CHALMERS:
Well, I see what you're trying to do there, Shane, I'll say what I've said before. The fact that interest rates started rising before the election, and we've had a dozen of them now, is a key reason why our economy is slowing so substantially. We see in the consumption figures, we see in some of the retail data, we see in other indicators, that our economy is slowing, as we expected, but really quite substantially, and the interest rate rises are playing a big role in that. And so it is for the independent Reserve Bank to assess future movements in interest rates, in either direction. My job is to roll out this cost-of-living relief, to get the budget in better nick, to invest in the drivers of growth in our economy. We're doing all of those things and we're making some welcome progress.
JOURNALIST:
The CPI figures have indicated just a really strong increase in insurance on an annual basis. Is the government concerned about characteristics and structure of that increase and costs? Obviously, things like climate change are also going to be a risk?
CHALMERS:
This is a perennial challenge, but one which is made harder to crack by the fact that – because of climate change, and other factors – we're seeing more frequent natural disasters. I work closely with Stephen Jones on insurance, he's done a heap of really valuable engagement with the sector to see what, if anything, can be done to make it easier for people to insure themselves and I work closely with Murray Watt as well to try and shift the government's approach so that there's a greater emphasis on mitigation and not just an emphasis on the rebuild as important as that is. There's no easy answer when it comes to inflation of insurance costs, insurance premiums but there are a range of things that we're doing which we hope will make a meaningful difference. When people are under pressure, we don't want people substituting out of insurance, particularly in the most disaster prone areas, including the north of the greatest state in the Commonwealth and so we want people to be able to afford insurance, we'll do what we can on the mitigation front, we're engaging with the sector to see what if anything else can be done but there's no easy answers there, I've got to be up‑front with you about that.
JOURNALIST:
So the inflation figures show that underlying inflation is quite strong, it's got quite a pulse. Services inflation is pretty sticky and that's what the RBA targets. A lot of that's actually driven by domestic factors, including in labour intensive industries. Are we starting to see the effect of some of the Government-endorsed wage increases from the Fair Work Commission flowing through to that? How would you respond to those suggestions that some economists make?
CHALMERS:
Well, I have to remind myself, John, but my memory is that the services inflation was not a big part of today's story. And you might correct me on that if you'd like to, but the drivers of inflation in the quarter were largely those things that I've already mentioned, especially petrol. We don't think we've got an inflation problem in this economy because low-paid workers and especially women are being paid too much – I really couldn't be clearer about that. We've got to get out of this kind of reflexive, retro view that the only thing that can drive inflation is people on low incomes getting a decent wage increase. I've said that in all kinds of different ways over the course of the last 18 months or so and I really believe that. Inflation is not because people in the care economy are being paid too much, not because the minimum wage is too high. Inflation in this quarter is because there's been a petrol price spike driven by decisions taken on the other side of the world.
JOURNALIST:
If we accept what you've just said in response to John's question, where the wage price index currently is though, do you accept that that puts pressure or the where it currently is is too high to bring inflation back to the target band of two to three per cent?
CHALMERS:
I don't think wages are too high in our economy, no.
JOURNALIST:
You were just saying that this CPI number today hasn't had a material impact on how you see inflation or Treasury sees inflation but economists think that the RBA will now hike on Melbourne Cup day, increasingly so after today's inflation number, they think the RBA will see a material change in the inflation outlook. I know this is a hypothetical, but presuming we get to this point, we've got another rate hike on Melbourne Cup Day, inflation outlook does look harder, would you then be open to considering further cost-of-living support, targetted measures, fiscal measures aimed at helping the RBA bring inflation back under control? At that point, do you have to start rethinking your approach to what the government can do to help the RBA?
CHALMERS:
Well, first of all, we are already helping the Reserve Bank in it's important task. We've taken half a click off inflation because of our cost-of-living measures – the ABS has said that today, that's not us saying it, it's the ABS saying that – across some of those really sensitive areas, early childhood, rent, electricity. Prices would be much higher without our actions, so that's the first thing. Secondly, we've handed down and delivered the first surplus in 15 years, got the budget in much better nick where those inflationary pressures are most acute so that's helping the Reserve Bank as well and we're also investing in the energy transformation and a more productive economy and the human capital pieces that I outlined for you in the Employment White Paper – all of these things are helping with this challenge that we've got in the economy and therefore helping the Reserve Bank with the difficult task that they have weighing up all of these sorts of figures. Again, I'm not going to pre-empt or predict what the Reserve Bank might do. Obviously, I've seen some of those market expectations, those market expectations have not been always right, particularly the last 12 months, they've been wrong on a couple of occasions from memory, so you need to be careful with those as well. They will come to their own assessment, their own judgment about the future trajectory, but the decision will be taken independently by the RBA Board. I will do my job, they will go about their job in a diligent way under Governor Bullock as well.
JOURNALIST:
Treasurer, just bouncing of Pat's question – so business is telling you the IR changes will make life more expensive and maybe even cost jobs, we've got credible signs that net immigration now is running at half a million a year so that's adding to demand for services for things like housing and you're blaming foreign factors like petrol. These things have come up since all of your past actions, does that mean you should really be focusing much more on fiscal restraint rather than – the alternative is that households cop this in the neck yet again.
CHALMERS:
You know, Jake, the easiest thing in the world would have been to spend this upward revision to revenue that we've had over the last couple of budgets and what we did instead was we banked almost all of it and as a consequence of that, the budget in the near term is in much better nick than it would have been if we had adopted the approach taken by our predecessors and so this government has been defined by responsible economic management. The way that we've designed the cost-of-living package, the way that we've banked upward revisions to revenue, the way that we've tried to reorient the budget from wasteful spending to productive spending – this is all the most responsible course of action and if you look at the way that the international economic institutions, the way they advise governments, what we've done has really been textbook across those areas. Obviously, there is a difference of opinion in some parts of the business community about our industrial relations policies, we've been up‑front about that, we didn't expect nor did we get unanimity when it came to those changes, but we can't have another decade of wage stagnation. We need job security, we need decent wages growth, we need to make sure that that is associated with a more productive, more dynamic, more competitive economy as well – some of the themes we dealt with at length in the Employment White Paper. When it comes to migration, clearly the return of students and working holiday makers has been stronger than was earlier anticipated and you see that in the services, exports numbers, education, tourism – that's been really clear, it was clear in the budget as well but the students and the tourists have returned faster than anticipated, we'll update those figures in the usual way in the MYEFO.
JOURNALIST:
Treasurer, I mean, just on migration, on rents and electricity and acknowledging what the Treasury has done to hand out relief on that. Are you concerned that things such as dialing up migration, allowing those numbers to expand as well as some would say pushing net zero faster than it perhaps should be is making life more difficult in those two areas, therefore leaving you to then have to go and backfill with payments. Would it be easier to slow down on some of these fronts and take the pressure off inflation on these two key drivers of the numbers?
CHALMERS:
I appreciate the question because we are taking some of the pressure off those drivers that you nominated. We're rolling out billions of dollars in investment in housing – it beggars belief in the context of those net overseas migration figures that the Opposition voted against more housing supply in our economy, but we got that through. We're taking some of the edge off rents with the biggest increase in Commonwealth Rent Assistance in 30 years, the ABS tells us that that's having a positive impact as well. We understand that there's pressure on the housing market, that's why we're acting. We understand there's pressure on renters in particular, and that's why we've acted. We understand that there's pressure on electricity, that's why instead of an 18.6 per cent increase in power prices, we've got a 4.2 per cent increase in power prices and the Opposition voted against that too. So what we're doing here is we're investing in the necessary transformations in our economy – human capital, data and digital, the energy transformation, we're doing that at the same time as we're addressing the near term pressures that people are under and I understand when people are under as much pressure as they're under right now that we need to be doing whatever we responsibly can and that's what we're doing across these 10 ways, these 10 areas where we're rolling out $23 billion in help.
JOURNALIST:
Just on the NOM, I mean, do you see [inaudible]. Do you see that there's a need to pull back the NOM target in years to come [inaudible].
CHALMERS:
Well, the change in the composition of the migration system has come about because obviously the student market dried up substantially over COVID and students have come back faster than anticipated – I pay tribute to Clare O'Neil and Jason Clare who have put a lot of work into making sure that that student intake is in our national interest, not just in terms of numbers, but in terms of the composition of that intake as well and obviously, through all the other things I've talked about in response to James's question, we are trying to address some of the pressures that are on our communities right now. The net overseas migration number is driven by demand programs and so what we can do is we can look at constituent parts of that, like we have with international education and make sure that the program is the best version of itself but overwhelmingly, one of the reasons why our economy has been resilient, as resilient as it has been is because our international exports, particularly services exports have been so strong and so we need to consider that as well. Thanks very much.
