RN Breakfast 04/05/22

04 May 2022

SUBJECTS: RBA interest rates decision; Labor’s Economic Plan; National Anti-Corruption Commission.




SUBJECTS: RBA interest rates decision; Labor’s Economic Plan; National Anti-Corruption Commission.

PATRICIA KARVELAS, HOST: Jim Chalmers is the Shadow Treasurer. Jim Chalmers, welcome.
JIM CHALMERS, SHADOW TREASURER: Good morning, Patricia. 

KARVELAS: RBA Governor Philip Lowe couldn't have been clearer. Emergency monetary settings are no longer needed. Aren't rising interest rates a testament to the underlying strength of the economy?

CHALMERS: The Reserve Bank Governor also said yesterday that there were some issues in the domestic economy which required our attention and that's our view too. That's why our Economic Plan is all about growing the economy without adding to these inflationary pressures, which are absolutely punishing Australians right around the country, but also getting real wages moving again, and trying to have something to show for this Budget which is heaving with a trillion dollars in Liberal debt. These are the challenges that are before us. We've been realistic and we've been responsible about the causes of this interest rate rise. The reason that the Prime Minister's credibility has been shredded is because in November last year, and subsequently, he tried this big scare campaign about interest rate rises and petrol prices, and both of those scare campaigns have blown up in his face. That's why his credibility has been shredded - not just by the interest rate decision that was taken yesterday, but this full-blown cost of living crisis on his watch, which is all about falling real wages, prices which are absolutely skyrocketing out of control, and then you get the interest rate rise on top of that to add to the pain. That's why consumer confidence this week has plummeted.

KARVELAS: Homebuyers will have to find an extra $85 a month to service an average $600,000 home loan, but haven't they reaped the benefit of record low interest rates for a while now, the increase will be coming off a very low base?

CHALMERS: That's self-evident Patricia. Interest rates have been low during the pandemic and low before that as well for a whole range of reasons. I think, as you just said to your previous guest Minister Ruston, the Government can't claim all of the credit when things are going well but then take none of the responsibility when times are tough. We've seen that again in the course of the last 24 hours. This Government has an excuse for everything and a plan for nothing, but you can't pay your mortgage and you can't pay your bills with Scott Morrison's excuses.

KARVELAS: Households have built up savings and a buffer of more than about $250 billion. The ANZ Bank says about 70 per cent of borrowers are ahead on their repayments. That's a really high rate. Some people with high debt levels will of course feel the pinch but overall could you be catastrophising the situation?

CHALMERS: We're pleased that some people have a bit of a buffer, but we shouldn't lightly dismiss the millions of Australians who are doing it incredibly tough and don't have that kind of buffer. The other important point to make - which is a point that economists have been making in the last half a day or so - is that that buffer will quickly disappear if we are going to see these multiple interest rate rises that the Reserve Bank Governor mentioned yesterday and flagged yesterday. The issue with the Governor’s statement yesterday is - as important as that first interest rate rise was, as devastating as it will be for a lot of people who are on the edge, who are on the margins, who are doing it tough - is that the Reserve Bank Governor also said that inflation is high but it's going to get even higher. He said that the economy will grow quite slowly next year, something like 2 per cent. So there are a range of challenges which didn't get all the attention that perhaps they deserve in that, because the decision to raise rates was such a significant one, twelve years since the last time interest rates went up. There are a range of challenges in the economy and what we're saying is, our issue with the Prime Minister isn't that he doesn't take responsibility for all of this, it's that he takes responsibility for none of this. That's the difference between him and Anthony Albanese. There are things that governments can do to try and manage the economy in the context of high inflation and in the context of rising interest rates, and that's what our Economic Plan is all about.

KARVELAS: You keep talking about this triple whammy that people are facing, but if you look at what the RBA Statement says, it talks about rising wages. Do you accept that wages are on the rise and that that pillar of your argument is collapsing?

CHALMERS: No, I don't accept that, because we've had too many false dawns when it comes to wages growth. I desperately hope that we are about to see some wages growth in this economy after almost a decade now of record low wages growth.

KARVELAS: The RBA says it's happening.

CHALMERS: Well, the last wages data we have has wages a bit over 2 per cent, which is nowhere near inflation at 5.1 per cent. We'll get some more data on wages in a couple of weeks time, and I genuinely hope that real wages begin to pick up because even with that unemployment rate coming down in welcome ways we're not seeing the real wages growth we need for ordinary Australians to keep up with the skyrocketing costs of living, and that's why they're falling further and further behind. The Government has made 55 wage projections over the course of their almost decade in office, they've been wrong 52 of those times. It's a Government notorious for overpromising and underdelivering on wages, and we can't see that again.

KARVELAS: The RBA had forecast interest rate rises for 2024. I have been inundated by text messages this morning from listeners saying that that's how they'd factored this in, that they thought 2024 was when this would happen. Has the RBA let people down?

CHALMERS: I'm not going to get into that sort of commentary Patricia. I think there's…

KARVELAS: Do you think people planned around that prediction?

CHALMERS: …well, if that's what they're telling you about their own circumstances, I've got no reason to not believe them.

KARVELAS: Is that the feedback you're also getting though?

CHALMERS: The feedback that I get, overwhelmingly, is about that combination of skyrocketing costs of living and falling real wages. Clearly, interest rate rises are now part of that pain as well. I think people see this cost of living crisis in broad terms. They see the Prime Minister's failures on inflation and real wages in broader terms than the interest rate rise on its own, but the interest rate rise has turbocharged the pressure that ordinary families are under. I think there's an important convention when it comes to politics and the Reserve Bank, that we don't second guess, we don't prejudge the decisions that the Bank might make. It's for Governor Lowe to explain his own communication to the Australian public. He has been doing his best to keep people across the change of thinking in the bank. Our beef is with the government, which has dropped the ball on inflation and spent almost a decade now deliberately attacking wages and job security in our economy, a deliberate design feature of their economic policy in their own words. That's where the focus should be.

KARVELAS: The RBA is forecasting as you've mentioned inflation will touch 6 per cent this year despite the high cash rate, is the inflation genie now out of the bottle? What will it take to get it back within the RBAs target band of 2 per cent to 3 per cent?

CHALMERS: Inflation under this Morrison Government is out of control, it is skyrocketing to extraordinarily high levels.

KARVELAS: But if you look at the reasons the RBA is outlining, international factors are genuinely part of the reason.

CHALMERS: We've never said they're not part of the reason Patricia, what we have said is that they're not the entire reason. The Reserve Bank Governor made the same point yesterday. The economic jargon talks about capacity constraints, what that really means is whether or not the economy can grow strongly enough without adding to these inflationary pressures. And the key issues there are, are you training people to deal with skill shortages? Are you reforming child care so that more people can work, more and earn more? Are you dealing with issues around infrastructure and the digital economy? Are you investing in new secure well paid jobs? Those issues are absolutely central to our Economic Plan. The Government's got a plan to get themselves through an election, we've got a plan for a better future with a stronger economy at its core.

KARVELAS: You said the Government has no plan for the economy and they say the same about you. Where's Labor's plan? The Economic Plan you released last week only went to cutting the number of consultants the Government pays and a whole review into funding rorts. How's that going to fix the cost of living?

CHALMERS: That characterisation of that plan – Patricia, I'm sorry - is completely and utterly untrue. The plan that Katy Gallagher and I released last week is all about how do we grow the economy without adding to inflationary pressures? How do we ease the costs of living pressures on Australian families? How do we get real wages growing again? And how do we have something to show for a Budget which is heaving with a trillion dollars in Liberal debt? That was what our Economic Plan was about. Those issues that you raised are one part of our Budget Strategy, which is part of our broader Economic Plan And I'll tell you what, I encourage your listeners to read our Economic Plan, because it is all about the challenges which have been neglected for the best part of a decade now. It is exactly the sort of plan that we need in the context of out of control inflation, real wages falling, consumer confidence plummeting, and now an interest rate rise as well. Our Economic Plan is broad, comprehensive, and considered, and it is perfectly calibrated for the diabolical economic conditions - particularly as they relate to cost of living - that we would inherit if we win the election.

KARVELAS: Jim Chalmers, just 30 seconds, but I really want to touch on this, a National Integrity Commission. The Prime Minister has told the Nine papers that it would lead to Australia becoming a public autocracy, sweeping powers would be handed to unelected officials. Does that kill off the National Integrity Commission if the Coalition is re-elected?

CHALMERS: Sounds like it, doesn't it? It's like that song True Colours. The Prime Minister's true colours are emerging now. He's pretended for three years to care about a National Anti-Corruption Commission.

KARVELAS: Are you quoting Cyndi Lauper on Radio National?

CHALMERS: I am, I thought you might like a bit of Cyndi Lauper.

KARVELAS: Yes, we have the same birth year.

CHALMERS: This is what he really thinks, and he's been lying about wanting a National Anti-Corruption Commission this whole time. The only way to get one is to support Labor at the election on the 21st of May.

KARVELAS: Okay, I'm going to listen to Cyndi Lauper all day now.

CHALMERS: You should play it Patricia, you should play it next.

KARVELAS: Jim Chalmers, thank you.

CHALMERS: Thanks, Patricia.

KARVELAS: The Shadow Treasurer, Jim Chalmers.