THE HON JIM CHALMERS MP
TREASURER
MEMBER FOR RANKIN
E&OE TRANSCRIPT
RADIO INTERVIEW
RN BREAKFAST
THURSDAY, 2 JUNE 2022
SUBJECTS: Energy prices; National Conversation About The Economy; Wellbeing Budget; Pacific Partners
PATRICIA KARVELAS, HOST: As large parts of the country are gripped by an early cold snap, the price of heating your home is set to soar this winter. Australia is on the verge of what some experts say could prove to be the worst energy crisis in half a century, with gas prices rising, slamming homes and businesses. It’s unwelcome news for a freshly sworn-in Labor Government, which is now warning of major economic challenges. Jim Chalmers is the Treasurer and our guest. Treasurer, welcome.
JIM CHALMERS, TREASURER: Thanks very much, Patricia.
KARVELAS: You were swept into government on a promise to help the cost of living. You’re now warning about a perfect storm in the energy market, but saying there’s not much you can do in the short term. Did you make a promise you couldn’t keep?
CHALMERS: No, of course not, Patricia. We’ve been upfront with people before the election, and after the election, that there’s a cost of living crisis in this country. The most pressing element of that now is these challenges in the energy market - whether it’s gas, electricity, liquid fuels as well - and that’s putting extreme pressure on industry, but also on households right around Australia. We’ve been upfront with people and said these are some of the challenges that we’ve inherited. We’ve got an opportunity in the October Budget to hand down and to implement a cost of living package that makes child care cheaper, and medicines cheaper, starts to implement our plans for cleaner and cheaper energy and to get real wages moving again. Those are the challenges before the Government. But in the immediate sense, obviously, we’re already being briefed on these very, very serious challenges in the energy markets in particular. I’ve already had a conversation with Energy Minister Chris Bowen this morning about it. We’ve engaged with the Resources Minister Madeleine King, and with industry, who’ve got their own views about this. But I need to be upfront with your listeners this morning Patricia, and say that these challenges are a consequence of some near-term pressures and some international pressures. But sitting over the top of that, these are the costs and consequences of almost a decade of energy policy chaos, which hasn’t got enough certainty in the market, hasn’t got that cleaner and cheaper energy in the market, hasn’t sorted out transmission. That’s part of the reason why we’re dealing with this now.
KARVELAS: Well, gas is key here. The regulator has already imposed price limits amid forecasts that wholesale prices could spike to 50 times normal levels. There are growing calls from industry groups, as you know, for you to intervene and force exporters to keep more gas in the domestic market. Are you actively considering that?
CHALMERS: We will obviously engage with those parts of industry who are making that call. We’ve got a respectful relationship with the groups and the businesses who are in the papers today putting that suggestion forward. So, between Madeleine and Chris and I, we will obviously engage with those parts of our economy who are most seriously affected. I don’t want to pre-empt any discussions and deliberations about the various levers that governments have. You’re right that the energy…
KARVELAS: Well, can you outline to me what your levers are that you are looking at now to intervene?
CHALMERS: Well, as you rightly point out, the Energy Market Operator has already imposed a cap at the urging of the New South Wales Government. That’s an important step that happened earlier in the week. There is, of course, the so-called trigger, which is about domestic supply. We need to recognise that even that potential policy lever has its own challenges and is not necessarily immediate, when you consider all the processes that lead up to relying on it. Our most important responsibility is to try and inject the sense of certainty, to inject the cleaner and cheaper energy, to get transmission right. That will take some time. But the absence of that work over the last decade is why we’re in this position. That’s our overarching responsibility. If there are near-term steps that we can take as well, we will discuss and deliberate on them, and engage with industry, and do our best to make the right decision.
KARVELAS: So, you’re saying in terms of pulling that trigger, what would have to happen to convince you to do that? Because you say there’s consequences? What are they in your view, and what is the delay too, when it would have a consequence on our domestic market?
CHALMERS: First of all, it involves a whole range of considerations around contracted prices and spot prices. It involves a heap of considerations around impact on the energy market. Also, it involves a heap of consultation and a heap of processes which are understandably put in there to make sure that a decision like that is taken in the best interests of the Australian people and their economy. So, we wouldn’t take a decision like that lightly. The reason why I’m not pre-empting that or suggesting we might go down one path or another, is because it’s appropriate that we discuss and deliberate over these issues, and some of the other issues in the energy market as well. But I do genuinely want to be upfront with your listeners Patricia this morning - and with Australians everywhere - and say we shouldn’t pretend that there is necessarily a quick fix to this challenge. It’s been building for a best part of a decade. The only solution in the medium-term is a decent energy policy, and we are working hard to implement it.
KARVELAS: Okay, so you’re saying there’s no quick fix, but there are some options available. Is your point that if you do go down those roads, the consequences in terms of prices will not be noticeable enough for people? Why are they – you know, in terms of the quick fix - I just want to get, kind of, really drill down into that. What are you really saying?
CHALMERS: The issues around supply - whether it’s new sources of supply, whether it’s issues of the mix between domestic use and exporting - all of these issues are not easy decisions to make. What I’m trying to do in a respectful way, is to not pre-empt discussions with industry or with the relevant ministers, because if there was an easy fix to these challenges it would have already been implemented. This situation is so serious for parts of our economy, so dire, that we shouldn’t pretend that flicking one switch or another will fix things overnight when they won’t.
KARVELAS: Okay. Have you spoken to the big gas providers? Have they given you any guarantees about getting more gas into the domestic market?
CHALMERS: We’ve had some general conversations with them over the last few months. But on this matter specifically, the first step is for Chris Bowen and Madeleine King and I to get our heads together and to engage with those parts of industry who are under the most pressure. Obviously, part of our discussions will involve the gas companies too. Nobody wants to see this extreme price pressure on employers, and on Australians everywhere, damage our economy the way that it risks doing. So we can work together, and we will work together, to see what we can do to address it.
KARVELAS: It’s not just gas that’s a problem. Last month, almost a third of coal-power capacity in the National Electricity Market was offline. Origin Energy CEO Frank Calabria says the Government needs to help fix that. What’s going wrong with coal-fired power, and will you do anything to help there?
CHALMERS: First of all, that’s just one of the issues. It’s an important issue, but it’s just one of them. We’ve also got the cold weather. It means that there’s more demand in the system as well. We’ve had some changes in our domestic market. We’ve got the pressure from Russia-Ukraine. There are a range of factors feeding into these challenges in the energy market, and so fixing one or addressing one will not necessarily address the whole situation. The only thing that will do that - which will require some patience and will take some time - is to give Australia the energy market that it needs and deserves. That means implementing our Powering Australia Plan - better transmission, cleaner and cheaper energy, inject some certainty into the energy policy landscape so that people can invest with confidence. In the medium-term, that is the only way to address these challenges.
KARVELAS: Okay. I don’t feel like I got an answer on coal-power capacity. Do you think there needs to be an intervention there from your Government?
CHALMERS: Well, even if that was to occur, that would not have immediate effect. That’s the point I’m making. This is a multi-facetted challenge, and even if there were steps taken down that path that have been proposed, that would not necessarily address the four or five issues that I just ran through. The only thing that will do that is a decent energy policy. We have one, and we’ll implement it.
KARVELAS: Yesterday we got new GDP data. Despite the devastating floods in New South Wales and Queensland, and the spread of the Omicron variant, the economy grew in the March quarter. So why are you talking the economy down? Why are you saying you’ve been left to clean up a mess, given economists are saying these are good results?
CHALMERS: The economy is growing, but so are the challenges associated with it. I’m not doing what you’ve just suggested. What I am doing, is saying that we’ve got some things going for us. We’ve got strong demand in the economy. We’ve got a tight labour market. But we also have high and rising inflation, which is leading to interest rate rises. We’ve got falling real wages. And our ability to deal with these challenges is constrained by the fact that we’ve inherited more than a trillion dollars of debt in a Budget heaving with Liberal rorts and waste. I’m not going to be the kind of Treasurer that says to the Australian people - who are falling further and further behind in this cost of living crisis because their real wages aren’t keeping up - that everything’s fine in the economy when it’s not. I want to be upfront, honest with the Australian people. There’s no use pretending away these challenges or trying to tiptoe around them. We’ve got a serious set of economic conditions, which we’ve inherited from our predecessors, which we have to acknowledge if we’re going to work together to address them. I will always acknowledge the things that are going well and the difficult parts in the economy. We’ve got strong demand. We’ve got a tight labour market. But we’ve also got these other challenges, which I have been focused on in my time as Treasurer. A number of those challenges have gotten much worse since the March National Accounts, and even the growth figures that were in the National Accounts yesterday - which in ordinary times might look on the surface like they were relatively strong - are well short of what the former Government budgeted for in their Budget just before the election. The growth number of 0.8 per cent was well short of the 1.8 per cent that the former Government assumed in their last Budget. So, we need to be upfront about that as well. If we’re to deal with these challenges, we need to acknowledge them.
KARVELAS: Okay.
CHALMERS: I think that there’s an appetite around the country to work together to deal with these challenges that we’ve inherited. That begins with being upfront about them.
KARVELAS: Now, Treasurer, you’ll release a Budget in October. It’s going to include a greater focus on wellbeing. That could include measures like education levels and health outcomes alongside economic data. It’s a really solid and interesting idea. But how will you use it? Will it lead to really policy reforms and responses by the Government?
CHALMERS: One of my personal obsessions is that we need to get better at measuring what matters. In addition to the really important economic data that we already collect – in addition to that, not instead of that – we should be measuring progress in this country more effectively, so that we can have a proper national conversation about what really matters to us and what matters in an intergenerational sense as well. What I’ve committed to is a program of measuring what matters. There’ll be elements of a Wellbeing Budget. There’ll be a better, more effective, less political, Intergenerational Report. And there’ll be other steps that I want to take as well. What I’m hoping to do in the October budget is to get the ball rolling on that, so that we can have proper consultation with a lot of people who are interested in this. When I first floated it a couple of years ago that we intended to go down this path, I was overwhelmed with interest from Australia and around the world - people who are very interested in getting this right. I want to get it right as well. I’ll say something around October about it and then I’ll hope to finalise something based on consultation with people during the course of this term.
KARVELAS: Just on another issue before I let you go. Foreign Minister Penny Wong is in the Pacific again today, Samoa this time. It’s all part of a diplomatic game of cat and mouse with China as tensions rise in the region. Since you’ve come into office, have you spoken to any of your Chinese counterparts, and if not, will you try to soon?
CHALMERS: No, my engagement internationally so far has been with the Indonesians - with my counterpart and a great friend of Australia, Sri Mulyani, the Finance Minister of Indonesia. The reason I began there is because Indonesia is the host of the G20 this year. I hope to be able to get to the Finance Ministers meetings in July in Indonesia, and so that’s where my focus has been. But Penny Wong, Anthony Albanese of course, we’ve all got an interest in security and stability in the Pacific. Penny is doing an absolutely incredible job engaging with our important friends and partners in our neighbourhood, and the rest of us, in one way or another, will engage in that fashion as well. But for me, it’s begun with the Indonesians.
KARVELAS: Thank you so much for joining us, Treasurer.
CHALMERS: Thanks, Patricia.
ENDS
