E&OE TRANSCRIPT
TELEVISION INTERVIEW
SKY NEWS THE LATEST WITH LAURA JAYES
WEDNESDAY, 3 AUGUST 2016
SUBJECT/S: Interest rates; Government’s lack of economic leadership; Housing affordability; Unaffordable Company Tax cut; Investment in education
LAURA JAYES: Joining me now is the Shadow Finance Minister, Jim Chalmers, joining me from Brisbane this evening. Mr Chalmers, thanks so much for your time. Now we seem to see this charade all the time, the banks didn’t listen to Labor when it urged the banks to pass on these interest rates cuts, they’re not listening to the Coalition, but isn’t this the reason we have an independent RBA and independent banks?
JIM CHALMERS, SHADOW MINISTER FOR FINANCE: Well look when the RBA cuts interest rates, it’s supposed to be a multibillion dollar boost to the economy, not a multibillion dollar boost to bank profits. That's the first point. The issue is for Scott Morrison, and what makes the last couple of days so farcical from his point of view, is that it was only in recent months that he was pretending with all of his tough talk and all of his chest beating, that the banks were somehow going to take him seriously when he said they shouldn’t do it, and of course they are not going to. When it comes to the Prime Minister who has had a bit to say today about the issue today as well, and when it comes to the broader economy, now that I think of it, what Malcolm Turnbull and Scott Morrison say and what they do are two very different things. Malcolm Turnbull’s real view of the banks is revealed by the fact that he is not only preventing a Royal Commission but he is also proposing to give them a $7 billion tax cut and a bit of a pat on the back, despite all the allegations that are around about banking behaviour and when it comes to interest rate pass through. Of course, he’ll say all the tough words at a press conference, but I think the Australian people know that whether its’ Turnbull or Morrison they are both soft on the banks. More broadly on the economy -
JAYES: The banks ignored Labor though as well Jim Chalmers, that’s a fair observation isn’t it?
CHALMERS: We put in place quite a substantial suite of banking competition policies in response to some of this sort of behaviour and I think that elements of that package were successful when it came to things like price-signalling and the like, and always there is more to be done to make sure that the banks are doing the right thing by their customers. But really, in recent months, Scott Morrison pretended that he had some say in the matter. Chris Bowen and others have made it very clear that in the last couple of days he shouldn’t’ have pretended he had some influence over it. Whether it’s this or other issues in the economy, what Scott Morrison and Malcolm Turnbull generally do is talk a big game, but when it comes to economic leadership, they’re generally cowering in the corner.
JAYES: Let’s look at what the banks have done, they’ve passed on this rate cut in pass, but should the banks, or do you have any praise, for at least three of the big banks that have lifted rates on term deposits? Is that a good thing, particular for, you know, self-funded retirees?
CHALMERS: Look we do want to see good deals for people when it comes to term deposits and some of the other more responsible investments that people can make, so yes, some of that news yesterday was welcome. But I think it’s also fair to say, Laura, that those initiatives yesterday were really the exception rather than the rule. The experience -
JAYES: But it is the first time big banks have done that in recent history, really for decades, so are you saying -
CHALMERS: That’s really my point though, Laura.
JAYES: Are you saying it’s more of a PR move more than any kind of economic strategy from the banks?
CHALMERS: Well no doubt public relations would play some part in it; you’d have to ask them how big a part in it. My point really is that it’s the exception rather than the rule. The consequences for people, particularly self-funded retirees of which there are about 1.5 million of them in Australia and almost half of them are completely self-funded, so when rates are cut generally it is a bad news story for them. Not just because their returns are lower, as important as that is, but also because it discourages people from getting into term deposits and getting into bonds, and then chasing some of the riskier investments or maybe being overweight in the share market and all of those sorts of things. It does have very serious consequences. You’re right, that a couple of isolated incidences yesterday were something that people in the community might welcome, but generally that’s been the exception rather than the rule.
JAYES: OK, the RBA Governor yesterday also effectively declared the housing bubble over. Now during the election campaign you sold that Labor’s negative gearing policy was really a housing affordability policy, but it’s not as big an issue as it was two years ago, and actually some parts of Australia house prices are falling or at least stagnating, so do you think you might need to tweak this policy some what?
CHALMERS: Housing affordability is still a massive issue in this country, that’s not inconsistent with what –
JAYES: But not everywhere, so can there be a blanket policy?
CHALMERS: What we say about housing affordability is not inconsistent with what RBA Governor Glen Stevens said yesterday, that’s the first point. You are right though that the housing market is always varied around the country, that’s been the case forever; that there are different pressures on the housing market in different parts of the country, and there has been research on that in the last couple of days. I don’t think it’s in dispute at all that young people find it hard to get a toe-hold in the housing market and that’s why our proposal on negative gearing was so important in the last term of government, and why it’s so important in this term of government.
LAURA JAYES: But your policy is a blanket policy, not geared towards young people; this will affect all Australians. So are you concerned about those, in North Queensland for example, who do have declining house values or stagnating as I say?
CHALMERS: Well the expert modelling that was done on this issue, I think I’ve spoken to you about it on various programs, Laura, over the last few months, has shown that we still expect to see more sustainable price increases in the housing market, but what we’re really doing is trying to level the playing field between the investors and the people, principally young people, trying to get into a home that they own for the first time.
JAYES: Mr Chalmers, the RBA also talked about the desperate need to stimulate business investment in this country. Now the Government would argue the way it’s trying to do that is by a cut in company tax rate, both big and small. Why is that not the best way to stimulate business investment?
CHALMERS: Well there are a couple important points about that, Laura. The first one is that the RBA can’t boost economic growth in this country on its own. We do need to have monetary policy, which is interest rates, working hand in glove with fiscal policy, which is the Government’s Budget. What the Government has proposed, really they have a slogan rather than a strategy, but their one proposal they have on the table is a $50 billion tax cut for big business. When the most reputable economists in the country were asked about this, compared to our plan to invest in education in this country, two out of three of the most reputable Australian economists said that our plan would be better for growth. In the nearer term, you are right to point to people’s concerns, including the Governor’s concerns, but ours as well, about business investment. But not just business investment, declining living standards; we’ve got unemployment at near GFC levels; we’ve got paltry wages growth; all of these challenges in our economy. The best thing you can do in the circumstances we find ourselves in, is to make the economy more productive; you invest in your human capital, and you invest in your hard, physical capital like infrastructure and you make sure to the extent that you can, that growth in this country is inclusive; that we get the right kind of economic growth that people actually have a stake in. Nothing that the Government’s -
JAYES: Sorry to interrupt, but many economists would argue that the best way to stimulate and ensure growth in the short-medium term is to cut company tax rate, and actually give business that certainty over a decade. Now we can both sit here and cherry-pick which economist support which policy -
CHALMERS: There were two out of three.
JAYES: Sure, but I haven’t actually seen that survey, so I’ll take your word for it.
CHALMERS: I’ll send it to you. I’ll tweet it to you after this.
JAYES: OK, please do. But are you really saying that the best way to improve business investment now is just Labor’s education policy – investing in education. Is that really the only plan you’ve got on the table?
CHALMERS: No infrastructure is a big part of that too Laura. There were cuts to infrastructure funding in the last Budget – exactly the wrong time to cut infrastructure funding. There are important projects like the M1 southbound in Brisbane, which would boost productivity in the economy and boost growth, and create the right kind of jobs and the right kind of inclusive growth. So, there are a whole range of things.
JAYES: This is slightly on a different issue though, but when we talk about education, we’ve seen the NAPLAN results today, and yes, I know that Labor’s argument that this does need time to work and many experts do agree with you, but already the Government has spent $3 billion on this needs based funding over the last two years and there has not been one single improvement in these tests, across any of the testing areas.
CHALMERS: Well a bit like the housing market, in that the results have been patchy around the country. The Queensland result was quite good today, but I do take your broader point ,and it’s really what you said – it needs to be given time to work. In my experience, spending a lot of time in schools in my local community, people are ready just getting going when it comes to hiring the teacher-aides that give the personal attention to students. We need to see the full implementation of a proper needs based funding model. We need to give schools the certainty. We need to make it a long term plan and if we do that, as you say, the experts are confident, as I am confident, and we are confident, that we will get the better results we need as a consequence of that better, individual attention our kids need and deserve.
JAYES: I just want to ask you one final question on the company tax cut because if you look at the comparisons around the world – comparable nations like the United Kingdom and Hong Kong - they are two that come to mind. They have half the company tax rate that we do, so surely that is a short to medium term impediment to increasing business investment in Australia?
CHALMERS: That’s just one of the factors that businesses take into account. They also want well trained workforces; they want terrific infrastructure; they want stable government; they want good regulation – all of those sorts of things - they all combine.
JAYES: Surely the level of tax is near the top of the list for them though?
CHALMERS: It’s one of them, but when you are making a Budget, Laura, it’s about priorities. The country cannot afford a $50 billion tax cut, and it especially cannot afford a $50 billion tax cut AND proper investment in our schools. We choose schools, we make no apology for that, we’ve said it a thousand times over the last few months. That is our priority, and that should be the nation’s priority as well.
JAYES: Shadow Finance Minister, Jim Chalmers, first time we have talked to you in your new role, but as always, thanks so much for your time.
CHALMERS: Thank you, Laura.
ENDS
