SATURDAY, 26 OCTOBER 2019
SUBJECTS: The economy is floundering on the Liberals’ watch; US-China trade war; Responsible; measured and proportionate stimulus; Tax cuts and household debt.
HARRY SPICER: Shadow Treasurer Jim Chalmers isn't backing down from his call for economic stimulus. Mr Chalmers told me the Government can't blame weaker growth on soft global conditions.
JIM CHALMERS, SHADOW TREASURER: There are obviously challenges in the global economy, and those have been reflected in the downgrades by the International Monetary Fund, but it still remains the case that our challenges here in Australia are primarily home-grown. They've been hanging around since before the trade tensions really spiked and they'll be hanging around after too if the Government continues not to have a plan to deal with things in our own economy, like the slowest growth in a decade, stagnant wages, and all of those sorts of things.
SPICER: The US and China were slightly more optimistic about a potential breakthrough with a trade agreement. Just how important is it for Australia that they sort that out?
CHALMERS: It's crucial that the Chinese and the Americans get together and come to some kind of acceptable resolution. It remains to be seen whether some of the limited progress made in the last week or two will make a real difference. I think it needs to be more than that. There needs to be a proper coming together between the two biggest players in the global economy, certainly the two biggest players in our region, because it does impact on us. But the Australian economy is slowing because the Government doesn't have a plan, not just because the global conditions are uncertain.
SPICER: The Treasurer's accused you of talking down the economy. Would you describe Labor's actions as robust criticism or talking down the economy?
CHALMERS: We are stating the facts as they are. The alternative to doing what we're doing is to do what Josh Frydenberg does, which is to pretend that everything is hunky dory in the economy. That's news to people facing stagnant wages, declining living standards and record household debt. We are just expressing the facts as they are, and the facts are that the Australian economy is growing at its slowest pace for a decade. We do have record household debt, we've got stagnant wages, declining living standards, declining productivity, business investment is the lowest it's been since the early 1990s recession. There's no point pretending those challenges aren't there. The Government pretends those challenges aren't there as an excuse not to come up with a plan to turn things around. The Australian people need and deserve a Government which understands what's going on in the economy, doesn't try and pretend that there's nothing wrong, and actually hands down a plan to responsibly, in a measured and proportionate way, stimulate an economy which is floundering on the Liberals' watch.
SPICER: Now we come to your call for stimulus. Labor has often stressed the importance of the Rudd-Swan stimulus in saving us from the perils of the Global Financial Crisis and economists largely agree that that was a good program that helped us out. But the Treasurer makes the point that one of the things that allowed us to reach so deep into our pockets to stimulate the economy was that the Government ran surpluses leading up to the GFC. Is that a valid point?
CHALMERS: The main reason why Australia was so successful during that period is because we had a Government which was prepared to act when the economy was at serious risk, and hundreds of thousands of Australians faced the prospect of unemployment. The Government stepped in in a way that you rightly identify has been applauded around the world for one of the best programs of stimulus during that time and a key reason why Australia grew throughout that period, while most of our peers went backwards. The situation is a bit different now. This is not the same as ten years ago. There are different causes for our economy slowing. They are principally domestic reasons, home-grown reasons, and I mentioned them already. The Reserve Bank and others have mentioned them too - principally stagnant wages, weak consumption, and weak economic growth. We're not calling for a re-run of what the Labor Government did 10 years ago; we're calling for a responsible, proportionate and measured stimulus. The business community, the Reserve Bank, and most of the reputable economists are calling for the Government to do something which doesn't jeopardise the surplus necessarily, but which gives the economy a chance to grow more strongly than it is right now.
SPICER: If we just go to what the stimulus would involve, obviously you've called for infrastructure projects to be brought forward. Do you accept that there could be problems working out the nitty gritty or the details of the stimulus? I mean, last time there was obviously the criticism about the home insulation program and the school halls, that some of the projects were bungled or selected incorrectly. How would you go about making sure that, you know, this stimulus is done correctly?
CHALMERS: When it comes to infrastructure - and this is something we've been saying for a long time, as has the Reserve Bank and many of the peak business groups - the Government boasts about having a pipeline of infrastructure investment but unfortunately, most of it is off on the never-never. All we're calling for here is for some of that, where possible, to be brought forward to have a positive impact on the economy, on jobs, and on economic growth. If the Government's already got it on the books, they can bring it forward in a responsible way. But there are other things the Government can do, too. They could look at increasing Newstart, which would boost consumption in the economy. They could look at bringing forward some of their tax cuts, which at the moment don't come in until 2022. They could have a wages policy; an energy policy, the absence of which has been a brake on economic growth for a long time. They could have a tax break for business investment like the one that Labor took to the last election. We've played a constructive role. We've made some suggestions about what the Government might do. If the Government does the right thing, we'll support it. What we won't support is a Government in denial about the weakness in the economy on their watch; a Government unprepared, unwilling, unable to do anything to turn it around; a Government which doesn't have a plan for the economy. That's why the economy is floundering. It's a bigger reason for the weakness in the economy than all of the global turbulence that we're seeing in our nightly news.
SPICER: In Estimates the head of Treasury has come out and talked about the tax cuts. He says at the moment they're being used to reduce personal debt, but he's confident people will boost their spending once they get their debt under control. Do you think that's going to happen?
CHALMERS: A couple of important things about that. First of all, the point about household debt. Household debt has actually never been higher in this country than it is right now. We have record household debt, which is a big problem for people and a big reason why people feel like no matter how hard they work, they can't get ahead because they're servicing more debt than they ever have in the history of this country. That's the first point. The second point about the tax cuts is really important. The tax cuts and the interest rate cuts are helping in the economy but they're not helping enough. They're not doing enough to shift the needle on economic growth because we still have some quite weak outcomes in the data. We supported the first round of those tax cuts. We understand that the Reserve Bank is doing their bit to cut interest rates so that we can have some more consumption in the economy and some more investment in housing and the like, but more needs to be done.