JIM CHALMERS MP
SHADOW TREASURER
MEMBER FOR RANKIN
 

E&OE TRANSCRIPT
RADIO INTERVIEW
RN BREAKFAST
THURSDAY, 3 FEBRUARY 2022

SUBJECTS: RBA interest rates decision; Costs of living skyrocketing as real wages go backwards; Labor would welcome an election fought on economic management; A cabinet minister wants Australians to know the Prime Minister is a ‘psycho’ and went missing during the bushfires.

PATRICIA KARVELAS, HOST: Homebuyers are being urged to build in extra buffers to cope with higher loan repayments, with an increase in official interest rates now on the cards for this year. Reserve Bank Governor Philip Lowe says a rate rise in coming months is plausible, given falling unemployment and rising inflation. Shadow Treasurer Jim Chalmers joins us now from Brisbane. Jim Chalmers, welcome.

JIM CHALMERS, SHADOW TREASURER: Good morning, Patricia.

KARVELAS: Given house prices are sky high, how much will an interest rate rise hurt?

CHALMERS: It would have a significant impact on people's family budgets. If you think about the average mortgage in New South Wales, I think even a 25 basis point rise would be about $100 a month in extra payments, for the average Australian mortgage something like $75 a month. That would sting, people would certainly feel that coming out of their family budgets.

I think the message from the Reserve Bank Governor yesterday was unsurprising in lots of ways. He said that interest rates can't stay near zero forever, but he's in no rush. The RBA Board, which is independent, doesn't seem to be in a rush to raise rates. The other important point, at no point does he say that it's dependent on who wins the next federal election, these sorts of issues that he's been talking about are independent of who might be in power. The Prime Minister has been keen on a scare campaign on interest rates before but I think these pretty obvious statements from the Reserve Bank are clearly not anything to do with who wins government at the next opportunity.

KARVELAS: The markets on the other hand have already priced in four rate rises this year, even if Philip Lowe talks about patience. Where do you see official interest rates by the end of the year when you could potentially be Treasurer?

CHALMERS: I think it's important that the Treasurer or the alternative Treasurer doesn't get into pre-empting the decisions of the Reserve Bank Board. We have the Reserve Bank Governor's words to go on. He says, again, it's entirely conceivable that rates will go up in the not too distant future but he's not in a rush to raise rates. He's made some comparisons with the situation overseas and concluded that people should expect a rate rise at some point but perhaps not anytime soon. That's his view, that's the view of the independent RBA Board, but I don't really want to get into the game of predicting interest rate rises.

KARVELAS: Households have accrued a massive $245 billion during the pandemic, many have used their savings to pay down their home loans, which are now on average four years ahead on repayments. Will that be a big enough buffer do you think to mitigate the financial shock of higher rates?

CHALMERS: It remains to be seen, Patricia. That's a sensible strategy that people have had in their household budgets, obviously if you can afford to build a buffer that's a good thing to do, but not everybody can afford to build that buffer. That's because for a lot of people they’ve had these stagnant wages for a long time now and in the Government's Budget this year real wages actually go backwards. Some people have been able to build a buffer, a lot of people haven't been able to do that, and that's because the costs of living are going through the roof at the same time as people's real wages are going backwards.

KARVELAS: Interest rates have to go up eventually, everyone accepts that. Won't a rate rise this year be a testament to the strength of the economic recovery, right? Especially the extraordinary fall in unemployment, which will soon be below 3%, and doesn't it play to the Government's advantage on economic management?

CHALMERS: No, of course it doesn't. It's just simply a reflection - if and when interest rates go up at some future point - it's a reflection that they can’t be at or near zero forever. Those are extraordinarily low interest rates, historically low interest rates, and no sensible person thinks that they will always be at that level. The Government can't take any credit for that of course. When it comes to employment, obviously we want the unemployment rate to be as low as possible but it doesn't tell the full story of the labour market, which is defined by stagnant wages, and job insecurity, and the fact that no matter how hard people work they just can't seem to get ahead.

KARVELAS: There are always trade-offs in the economy, wouldn't most people accept high interest rates if it means having a job?

CHALMERS: Obviously there are trade-offs but I don't think people quite see it that way. The best thing we can do in the context that we find ourselves in now, we've still got some serious economic challenges - and not just pandemic related ones. For most of the last decade we've had that job insecurity, that wage stagnation, issues with investment, issues with productivity. So we've got our share of economic challenges at the same time as we want and expect the economy to recover strongly from this pandemic, but it needs to be a recovery that works for everyone.

We've got two responsibilities, which the Government is largely ignoring. The first one, is to make sure that workers and small businesses aren't unnecessarily sacrificed to the Government's complacency and incompetence when it comes to things like rapid tests and a the like. And secondly, to build the right kind of economic growth into the future.

The Reserve Bank Governor was talking about human capital yesterday and how we adapt and adopt technologies being really crucial, and we have the same view. We want to grow the economy the right way, so it's stronger after COVID than it was before. That's why we've got policies for investment in cleaner and cheaper energy, to turbo-charge the NBN, to deal with the skills shortages in the economy, to make childcare cheaper and more accessible, to invest in advanced manufacturing and the care economy. These are the sorts of things that you need to do if you want the right kind of long-term economic growth with low inflation and decent wages growth in the future.

KARVELAS: Jim Chalmers, you mentioned wages, and wages growth is still stagnant. The Reserve Bank is only predicting a slight pick up to 2.75% this year. How far does unemployment have to fall below 3% before workers will finally see a decent pay rise?

CHALMERS: To their credit, the Reserve Bank and the Governor have been saying for a long time now - even before the pandemic - that this is one of the defining challenges that we have. We've had this stagnant wages growth, the reason we've got it is because job insecurity is undermining the foundations of that wages growth. The usual relationship that you've seen historically between lower unemployment and higher wages growth has been strained, if not broken, because we've got all this job insecurity.

If you want to deal with wages growth you have to deal with the job insecurity. The problem we've got is we've got a government that says that low wages growth is a deliberate design feature of their economic policy. They've made something like 55 wages growth forecasts in the life of this Government and been wrong 52 times, so expecting wages growth from this Government would be the triumph of hope over experience. They don't want wages growth, they don't understand the pressures on working families from skyrocketing cost of living. 

Yes, we need the unemployment rate to get as low as possible, that's part of the story of wages growth, but it hasn't been enough of the story in the last decade or so. We need to deal with jobs insecurity as well, that's why we've got policies around labour hire, same job same pay, the Fair Work Commission, the gig economy, and all the rest of it, because you won't get that wages growth unless and until you make people more secure at work.

KARVELAS: The Government wants the coming election to be a contest on the economy, the Prime Minister said essentially, explicitly, right? It's already whipping up a campaign against possible Labor tax rises on multinationals and family trusts. Is that something you're prepared for and is that ground that you are willing to fight on?

CHALMERS: I'd be absolutely delighted to have an election about the economy, because the Government doesn't have a plan for the future of the economy. We heard nothing from the Prime Minister about this at the Press Club during the week. They've got no plans for the future. They've got these skyrocketing costs of living while people's wages are going backwards.

KARVELAS: He talked about the economy very much in his Press Club address, and he talked about the driving down of the unemployment rate as being the Government's vision for trying to get to this point. I mean, do you think that's going to be a difficult contest for Labor?

CHALMERS: Not at all. The Government's been reduced to this kind of grab bag of scare campaigns and slush funds and political panic buying. They don't have a plan for the future of the economy, to deal with some of these really important issues that you and I have been talking about this morning. I'd welcome a contest on that. I think people are working this government out, they've got all the spin about economic management but none of the substance. People are doing it really tough and not just because the pandemic.

KARVELAS: Let me just sneak in a last question. Yesterday, we saw a parade of cabinet ministers denying that they were the one responsible for saying in a text message the Prime Minister was a complete psycho and a fraud. Should the culprit out themselves?

CHALMERS: Look, it's a matter for them. The Government's disintegrating. The Government's falling apart before our eyes.

KARVELAS: Are they? It's an old text message, right, during the bushfires. It's not even a contemporary text message.

CHALMERS: We're talking about a cabinet minister wanting the world to know that the Prime Minister is a ‘psycho’.

The truth is that any Australian could have written that text message. Every Australian knows that this Prime Minister goes missing when we need him most, he plays politics before looking after the people, and he's temperamentally incapable of taking responsibility and exercising leadership. Australians would agree with that assessment from that cabinet minister. It's up to them whether they out themselves or not. The Government is disintegrating; a cabinet minister wants Australians to know that the Prime Minister is a ‘psycho’ and went missing during the bushfires.

KARVELAS: We're out of time. Shadow Treasurer Jim Chalmers, thank you.

CHALMERS: Thank you, Patricia.

ENDS