Politics with Michelle Grattan 16/12/19

December 16, 2019


SUBJECT: Mid-Year Economic and Financial Outlook

MICHELLE GRATTAN: And now to Jim Chalmers. You say these figures destroy the Government's credibility, but there are global headwinds and a local drought. Aren't there local factors affecting the numbers that are, in fact, totally beyond the Government's control?

JIM CHALMERS: The reason that I say that these numbers destroy the Government's credibility is because they went to the election and their defining promise was that they'd make the economy even stronger. What we see instead in these numbers is that the economy's become even weaker on their watch. They’ve got downgrades to growth, to wages and unemployment. Business investment has been downgraded. On the numbers themselves, they've failed their own tests. That’s why it's such a big hit to their credibility.

You're right that they point to other issues. They're always looking for an excuse for their failures on the economy and today is no different. The problem with that is whether it's Deloitte Access Economics, the Reserve Bank or other credible institutions, they've pointed out that our economic challenges are largely home-grown. They're primarily home-grown. Even if you take some of the examples that you've just used in your question on global conditions, there's only a small write down of growth in the US and China in these numbers today, but there's quite a big write down in Australian economic growth. Our problem is bigger here than elsewhere. They say that it's about the drought but today's figures show only something like 0.1 per cent difference because of the drought. So those global issues are troubling. The drought is obviously troubling, but neither of those things are the primary reasons why the economy has been underperforming so badly, especially since the election.

GRATTAN: Labor's been arguing for some time that the policy settings should be adjusted. What should be done now and what should be left for the Budget?

CHALMERS: With growth much slower, wages growth much weaker, business investment the worst it's been since the early 90s recession, retail the worst it's been over the same period. Something extra needs to be done to boost the economy. There are tax cuts in the system which are helping, but not enough. There are interest rate cuts in the system which are helping, but not enough. Something additional needs to be done. We’ve been pretty constructive and said here's a menu of things that the Government should be considering. It's not for the Opposition to manage the economy, unfortunately. I would like to have my hands on the levers, but that's not the case. It's up to the Government. We've suggested to them any combination of changing the timing of the second round of their tax cuts, a responsible increase to Newstart, some additional infrastructure investment earlier, a business tax incentive would be helpful. The absence of a wages policy is hurting ordinary Australians. The absence of an energy policy is a handbrake on growth. If the Government were serious about turning the economy around, they'd pick up and run with any of those suggestions. They should have done that by now. In the absence of that, they'll need to look to some of these things in the budget.

GRATTAN: Do you think that there would be any case for a mini budget early next year?

CHALMERS: That’s the big missed opportunity from the mid-year update. The mid-year update could have been a comprehensive plan for growth, wages and employment in the economy. Instead, it's just become, effectively an accounting exercise. That is a missed opportunity. The big test for the update was whether or not the Government had the ability to fess up and say yes, the economy is much weaker than we said it would be and here's what we're going to do about it. They did the first part of that. They confessed that the economy is much weaker, but they still didn't have a plan to do anything about it.

GRATTAN: You're not the Treasurer running the economy but on the poll figures before the election, we thought that Labor would be running the economy. Don't these figures vindicate the Government's argument that Labor's higher taxes would have, in fact, been counterproductive for the economy?

CHALMERS: I'm happy to go to tax in a moment, but there is absolutely nothing in these numbers today which vindicates the Government's approach to the economy. Quite the contrary. Everything in here, all of the downgrades to growth, wages and business investment, absolutely torpedoes the Government's economic credibility. We will put the work in to come up with an agenda for the economy at the next election. We’ll take our time to do that. The policies we took to the last election, we've said repeatedly that we won't take an identical set of policies to the next one that we took to the last one. I think that's self-evident. My job as the Shadow Treasurer, working with my colleagues, Katy Gallagher and others, is to make sure that the agenda that we take to the next election is best calibrated and best suited to the economic and budget conditions of the times. That's the task that we take very seriously and we'll take our time to get there before we start announcing our policies.

GRATTAN: I understand that about the future, but you've said that the Government should admit its error. Shouldn't Labor concede that maybe it did not have the right sort of policies, I'm not talking about political terms here, but in economic terms for the economy as it stands?

CHALMERS: The thing about the big number that the Government quotes, the 300-billion plus number that the Government quotes includes not proceeding with tax cuts five years down the track. I don't accept for a minute that there would have been some hit to the economy had Labor been elected. I think that if you look at what was being proposed, it's nothing like what the Government is alleging. So that's the first point. The second point is it matters where the tax changes impact. Our criticism of the Government is because they have been so bad on wages policy and all that sort of thing that it's hitting people on middle and low incomes the hardest. They're the ones who are most likely to spend in the economy. When you're proposing tax changes it depends where the impacts are felt. We've learned the lessons from that last election. We went through that whole review process that you would have watched closely. We've learned the lessons. We're looking to the future. My job is to come up with the best possible set of policies, including tax policies, which deal with the big challenges that have been exacerbated by the Government in recent months.

GRATTAN: Do you think that the economy is likely to get even worse over the coming year than appears in these numbers?

CHALMERS: It remains to be seen. A lot of the smart forecasters and the smart analysts expect that the Australian economy will continue to bump along the bottom. We won't see spectacular growth in their view nor will things go substantially backwards. That's why what we're calling for is not to throw the kitchen sink at what's going on right now. It's not like the GFC 10 years ago. But it does warrant some measured, proportionate and responsible investment in the economy to get things going again. It remains to be seen what the economy looks like in 12 or 18 months but what is very clear from the mid-year budget update is that not doing some of the things that we've been calling for has meant that ordinary people are paying a very heavy price. We've seen that in the downgrades to wages and the rest of it.

GRATTAN: One element in all this, of course, is confidence. Do you think an Opposition has a responsibility here to be careful that it doesn't contribute to talking the economy down?

CHALMERS: I hear that said sometimes, Michelle, and I think that greatly overestimates impact of an Opposition.

GRATTAN: People aren't listening?

CHALMERS: They’re listening but I think that our job is to be upfront about the challenges in the economy. The alternative to talking about these big problems that have emerged under the Liberals is to pretend that they aren't there. That's been the Liberals approach. That's been a recipe for slowing growth, weak wages and rising unemployment. We don't want to go down that path. We need to be upfront about what's wrong with the economy. We need to be upfront about the sorts of things that can be done to help turn it around. If we don't do that, then we're doing a disservice to the Australian people. They expect us to point out where Australia can be doing better. One of the big tragedies of this year is that the Australian economy is floundering and it needn't be. It’s floundering because we've got a government which had a plan to get themselves through the election to talk about the stronger economy but they don't have a plan to actually deliver it.

GRATTAN: And just finally, we're only a few days out from Christmas. What's your message to households now? Should they be spending or in light of the uncertainty should they be taking particular care with their dollars?

CHALMERS: I'm reluctant to give financial advice to people. Either of those things are good things for an individual family. If they are employers, they should make sure they try and hold on to staff and pay them well. If they're ordinary families working through their budgets, I recognise that things are tough, that their wages haven't been growing as fast as they were led to believe they would be. People will make their own decisions about how they spend those tax cuts. The economy could do with a bit more consumption. Consumption has been really weak and retail has been really weak. They'll make their own decisions. What the economy needs is for people to support each other, to support small or medium sized businesses, and that will be good for the whole place.

GRATTAN: And you'll be doing your Christmas shopping with an open mind?

CHALMERS: Yeah, I'm halfway through the Christmas shopping. Some of that happens in Brisbane and some of that happens in Adelaide where the in-laws are, so I'll be doing my bit for the Queensland and South Australian economies.

GRATTAN: Jim Chalmers, thank you very much for talking with us today. Have a good Christmas.