Today 20/07/22

20 July 2022

SUBJECTS: Reserve Bank of Australia review, Reserve Bank of Australia modelling, energy prices.

The Hon Jim Chalmers MP

E&OE Transcript

SUBJECTS: Reserve Bank of Australia review, Reserve Bank of Australia modelling, energy prices.

KARL STEFANOVIC, HOST: Well, with the dire prediction of more super-sized rate hikes forecast for the coming months, the Treasurer has ordered a review into the Reserve Bank. Jim Chalmers joins us now. Treasurer, good morning to you.

JIM CHALMERS, TREASURER: Good morning, Karl.

STEFANOVIC: Well, it looks like a witch hunt. It smells like one. What are you conjuring?

CHALMERS: No, it's nothing of the sort, Karl. On the contrary. What we like to do is to give our Reserve Bank the best set of arrangements, the best mandate objectives, the best board that we can, so that it can make good decisions into the future about Australia’s interest rates. I'm not interested in an exercise in taking pot-shots at the bank or taking pot-shots at the Governor. I'm really forward looking and trying to make sure that we learn from recent experience to improve the Reserve Bank into the future.

STEFANOVIC: So, you don't have a Philip Lowe voodoo doll?

CHALMERS: No, not at all. I think the world of Phil Lowe. You know, I work closely with him, but the Reserve Bank is independent. He's capable of defending the decisions of the board himself. I work closely with him. I've come to these arrangements today that I'm announcing about the review in a collaborative way, working with him and working with others and briefing the Opposition, because I want it to be the right kind of forward-looking exercise and not a backward-looking, second-guessing exercise.

STEFANOVIC: Okay, you're not going to take pot-shots, but I will. How would you describe their forecasting models?

CHALMERS: Well, that's one of the things we want to look at. We want to make sure that the decisions that they make, which are often difficult decisions, it's not easy right now to make monetary policy here in Australia and around the world.

STEFANOVIC: They couldn't have got it more wrong.

CHALMERS: Well, we want to make sure that they get it right in the future. And part of doing that is to make sure they have the right kind of institution that gives them the best chance to get the forecast right, to get the decisions right. But also, that we recognise that the Reserve Bank can't do some of this difficult, heavy lifting in our economy on its own - there's a role for government too and I'll be speaking about that through the course of the day as well.

STEFANOVIC: I find it vexing. I could get greatly annoyed. Even yesterday, the Reserve Bank's second most senior central banker, Michele Bullock, said businesses and families are in a good position to withstand more rate hikes. I mean, how out of touch can you get? How disconnected? And they've got a credibility issue anyway with the public.

CHALMERS: I think we do need to recognise that people are doing it really tough.


CHALMERS: And I think the point that Michele was making is that some people have been able to build a buffer in their home loans. Which is true of some people. But I think in the main people will find it really hard to find room in their household budgets for these interest rate rises at the same time as they're paying the skyrocketing costs of electricity and petrol and groceries at the same time.

STEFANOVIC: Okay, let's move on. What are we going to do about the nation's energy crisis? Look, we've got, obviously, gas being redirected from Queensland now to Victoria. When you look overseas, Germany is going back to coal, Europe wants more gas - can't find it, and the renewables aren't quite cutting it. What are we going to do to solve this crisis in the short-term and how are we going to get those bills down?

CHALMERS: It's a big part of the inflation challenge that we've got right now here in Australia and right around the world. It's partly a story about Russia's invasion of Ukraine, but not completely that. It's also a story of a wasted decade of missed opportunities on energy policy. And so, we're doing a number of things at once in my portfolio. I'm working with the ACCC to make sure that we are highlighting any bad behaviour that might be going on in pricing. Chris Bowen has been working with his state colleagues on the various regulators and caps and guarantees. Madeleine King in our team is working on updating and reforming the various issues in the gas market. So, there's a lot of things that we should be doing and we are doing because we recognise that this is one of the big pressure points in our economy right now.

STEFANOVIC: Look, you said yesterday also, people are out there getting ripped off by petrol companies and the price of fuel at the moment is going through the roof as well. I mean, hold the phone. Finally, someone who's prepared to say it, and you did, but what are you going to do about it?

CHALMERS: I think what people get really filthy about, Karl, is when the price goes up internationally, the price gets passed on quick smart. And when the price goes down internationally, it takes too long for those savings to get passed on. People are really dark about that and I think for good reason. There's a role for the ACCC here, but there's also a role for public pressure and for shopping around. Some petrol stations might be prepared to do the right thing. If servos are prepared to do the wrong thing and not pass on these savings, then people should keep driving right past them and find a better deal.

STEFANOVIC: Treasurer, good to talk to you. Thanks for your time today. I appreciate it.

CHALMERS: And you Karl, all the best.