ABC News Breakfast 07/06/22

07 June 2022

SUBJECTS: Interest Rates; Energy Policy; October Budget.





SUBJECTS: Interest Rates; Energy Policy; October Budget.

LISA MILLAR, HOST: We’re joined from Brisbane by the Federal Treasurer, Jim Chalmers. Good morning to you, Treasurer. Thanks for coming on the program.

JIM CHALMERS, TREASURER: Good morning, Lisa. Thank you.

MILLAR: You must feel like you’re just delivering more bad news every day for Australians at the moment?

CHALMERS: It’s certainly a difficult period for a lot of people. We inherited this full‑blown cost‑of‑living crisis, which includes rising interest rates, and the Reserve Bank Governor indicated before the election when interest rates started to go up, that that would be the first of a number of interest rate rises. That’s certainly what the market expects. We don’t pre‑empt decisions of the independent Reserve Bank, but it is universally expected today that it will be a difficult day for a lot of homeowners who are already facing rising cost of living elsewhere in the household budget, and they’ll need to find a little bit more for this, to service their mortgage.

MILLAR: How long do you think they’ll stay patient? You promised them that you’d be able to help with the cost of living. What do you sort of give yourself time‑wise with voters saying, “Okay, deliver”?

CHALMERS: We’ve tried to be really up‑front with people, Lisa, and say that, a lot of these cost‑of‑living pressures, certainly falling real wages and stagnation of wages, has been a problem for almost a decade now and will take a little while to turn around. But what we’re going to do is when this near-term cost‑of‑living relief in the current budget runs out, I’ll hand down a budget in October and a key part of that will be a cost‑of‑living package around child care and medicines, trying to get power bills down over time, trying to get real wages growing again, because this is an entrenched challenge in our economy.

Inflation is expected to get worse before it gets better. All of the market analysts are expecting interest rate rises to keep going up for some time now. So, our responsibility as the new Government, surveying this inheritance, this cost‑of‑living crisis that we have inherited from our predecessors, is to do what we responsibly can in the context of a budget, which is heaving with a trillion dollars in Liberal Party debt, to do what we can to make it easier for people, and that’s what we intend to do.

MILLAR: Well, between now and then is what’s likely to be a very cold winter and some more difficult days for Australians. So, what are you saying to them when gas prices and electricity prices are going up? I know you’ve written to the ACCC. You’ve asked them about – you’ve got price questions about things but what are you looking at right now to try to help people?

CHALMERS: When it comes to the energy markets, there’s a range of things going on at once, unfortunately, a perfect storm of conditions, whether it’s the fact that some of the generators are offline; we’ve had some flooding; we’ve had some international difficulties, of course. But sitting over the top of that is the cost and consequences of almost a decade now of energy policy chaos, and what we want to do by implementing our Powering Australia Plan is to introduce some certainty and resilience into the energy markets so we can get cleaner and cheaper energy into the system and get power bills down over time. That’s our responsibility.

But in the near term, whether it’s empowering the ACCC to dial up their monitoring of any dodgy behaviour here to make sure that we’ve got the right regulations to deal with that based on evidence, whether it’s the meetings that the Energy Minister Chris Bowen is having with his State and Territory counterparts, whether it’s the price caps and the guarantees that the regulators have been implementing in welcome ways – these are all the sorts of responsible near‑term steps we can take, but in the medium term what we really need is a decent energy policy in this country, and that’s what we will be implementing.

MILLAR: Will you look at further rebates or one‑off payments? I mean, it is going to be a tough winter for a lot of people.

CHALMERS: There’s no use mincing words about it, Lisa. It’s going to be difficult for a lot of people. We’ve got high and rising inflation, rising interest rates, falling real wages, and our ability to deal with some of these in a meaningful way is constrained by the fact that the budget we’ve inherited is in such poor condition. So, we’ll do what we responsibly can. We’ve tried not to limit our options, but we’ve been up‑front with people as well. If you could just flick a switch and make this cost‑of‑living crisis disappear or flick a switch and make a trillion dollars of debt disappear, we would have already done that. A lot of this requires decent responsible methodical working through the issues in the lead‑up to our October budget, and that’s what we will be doing.

MILLAR: All right. Just how bad is inflation going to get?

CHALMERS: What I’ll do Lisa is when the Parliament returns at the end of July, I intend to update our forecasts for inflation. But it’s clear already that inflation will be significantly higher than the 5.1 per cent it is currently. Inflation will get worse before it gets better. That’s the trajectory that we’ve inherited. So, I’ll update those figures when the Parliament returns as part of trying to lead a big national conversation about our economic challenges. Then, of course, in the October budget there will be further updates as well. But we expect inflation to be significantly higher than the 5.1 per cent it was when the numbers came out most recently.

MILLAR: All right. Jim Chalmers, thanks for your time.

CHALMERS: Thank you, Lisa.