THE HON JIM CHALMERS MP
MEMBER FOR RANKIN
TUESDAY, 7 JUNE 2022
SUBJECTS: Gas Prices; Interest Rates; Cost Of Living Pressures; Inflation.
DAVID KOCH, HOST: After just a fortnight in office, the Albanese Government is facing a major crisis. Australia is in the midst of a gas shortage. With energy prices soaring, major manufacturers are warning thousands of jobs are also at risk unless gas is held back from being exported. State, Territory and Federal Government Ministers will meet tomorrow to discuss possible solutions. Joining me now, Treasurer Jim Chalmers. Treasurer, morning to you. It is weird; we’re one of the biggest gas exporters in the world, aren’t we? And we’re running short at home?
JIM CHALMERS, TREASURER: It’s a big challenge we’ve got, Kochie. The gas market, the gas supply, is absolutely crucial for our economy and we’ve got this perfect storm of conditions. We’ve got a combination of some international factors. We’ve had some flooding. We’ve got some issues around supply, but over the top of that we’ve had almost a decade now of energy policy uncertainty so our energy markets weren’t as resilient or as robust as we’d like them to be. You’re right that the State ministers will be meeting with my colleague Chris Bowen tomorrow to consider whether there’s any near‑term steps we can take. I’ve also asked the ACCC to make sure they are recommending to me any regulatory changes they see fit after a proper examination of what is going on in prices. So there’s a range of steps that we can take, but your viewers should know there’s not an easy quick fix to this really difficult situation that we’ve inherited. It’s been brewing for some time and it’s been turbocharged by a combination of factors right now as well.
KOCH: Because remember some years ago was it Brian Burke in WA that said to the gas exporters there, “You’ve got to keep X amount for locals and at a reasonable price”? Is it practical to do that, to put that sort of restriction on gas exporters?
CHALMERS: Well, Western Australians have done a good job. I think it might have been Alan Carpenter, I think, in about 2005. But I could be wrong there, Kochie, I’d have to check that. But they did put some restrictions on their domestic market. Nationally we’ve got this thing, which is called “the trigger”, which is about making sure that we can intervene in gas markets to keep enough of it here. The issue with the gas trigger, unfortunately, is that even if we were to pull that trigger today, it wouldn’t come into effect until the middle of next year. Again, not a quick fix, but there are some things we can do on pricing.
The regulators have already taken some steps with some price caps and some guarantees and those steps have been welcomed, and if there’s further steps we can take in the near term, we will take them, but the most important thing is a good long‑term energy policy and that’s what we’ll be implementing.
KOCH: It’s going to be an expensive winter, isn’t it, because is it 25 per cent of the coal-powered power stations at the moment are offline? So, the rest of electricity prices are going to go up even further.
CHALMERS: That’s the issue we’re confronting, Kochie. That’s spot‑on, unfortunately. We’ve got a lot of outages, whether planned or unplanned. We’ve got some flooding, which is having an impact but also some maintenance; a whole range of issues, unfortunately, coming out at once so it will be a difficult winter, it will be an expensive winter. We are in the midst of a full-blown cost‑of‑living crisis and electricity prices and gas prices are, unfortunately, part of that pain.
KOCH: And then petrol prices going up because of oil prices going up overseas, so inflation is going to skyrocket. How are you going to ease that cost‑of‑living pressure on average Australian families?
CHALMERS: Well, first of all, Kochie, you’re right that inflation is going to get higher before it gets better. That’s the unfortunate reality. There’s no point mincing words about that. Our job as the Government is to make sure that after some of this near‑term cost‑of‑living relief runs out that was in the last budget, that it is replaced by responsible long-term sustainable cost‑of‑living relief in areas like medicines and child care, getting power bills down over time, getting real wages moving again. These are all important things we will be doing as a Government. I will be handing down a Budget in October, and some of those things that I just mentioned will be part of a cost‑of‑living package in that budget.
KOCH: Right. Okay. Can’t wait for that. And then at 2.30 this afternoon, Reserve Bank board meeting – definitely an interest rate increase; it’s just a matter of how much. So, that’s going to see mortgage repayments go up. We should put it in perspective, though. They’re putting interest rates up because the economy is so good. They want to slow it down and slow inflation.
CHALMERS: Well, the market expects them to increase interest rates because we have got an inflation problem in the economy. Rising interest rates were something that the Reserve Bank Governor flagged before the election. That’s the trajectory that we’re on. Just because these interest rate rises are expected won’t make them any less difficult for people who are already confronting cost‑of‑living pressures. The average mortgage at the moment is $330,000; a 25 basis point increase would be about $43 extra a month that people have to find at the same time as they’re finding money for higher petrol and electricity prices.
So, it will make life more difficult, but this is the trajectory that we’re on. Interest rates will be rising, according to the Reserve Bank Governor, for some time yet, and I think Australian families need to brace for that reality.
KOCH: Treasurer, appreciate your time. Thanks for joining us.
CHALMERS: Thanks, Kochie.