Interview with Kieran Gilbert, Sky News
KIERAN GILBERT:
Treasurer Jim Chalmers, thanks for your time. We're here in the Treasury bunker, it's a busy period for you. You've been through many budget processes though, as a senior staffer, what's it like as Treasurer?
JIM CHALMERS:
I think this will be the 16th lock‑up that I've been involved in, next Tuesday. And we are where most of the action is right now, as we put the finishing touches on the Budget here in the Commonwealth Treasury. I'm pretty calm about it, we've done a lot of work. And I think I also recognise, perhaps a bit better than my recent predecessors, that this is a big collective effort. One person reads out the speech on Tuesday night, but it's a combination of the work of hundreds of officials, a really terrific expenditure review committee, a Cabinet that's really engaged in these sorts of issues. So it's a collective effort, I'm looking forward to handing down the Budget, there's a lot of work that goes on between now and Tuesday night, particularly here in the Treasury. But I'm looking forward to it, and I'm pretty calm about it.
GILBERT:
Is it now signed and sealed, if not yet delivered, the Budget?
CHALMERS:
A few things are still moving around. One of the big things that we've had to factor in, in the course of the last week, is to make sure the Budget has some understanding of the impact of what's happening with these natural disasters, with the flooding that we're seeing, particularly in prime farmland. Obviously that has the potential to impact on the economy, certainly on the Budget. And so what we're trying to do today, in real time really, in this building, is to see if we can include a bit of an assessment of that. It's very early days, we don't know the full impact. But if we can get a bit of a sense of that in the Budget, we're going to try to.
GILBERT:
Have you been able to adjust the inflation number accordingly?
CHALMERS:
Those sorts of discussions are happening right now. The important thing to understand about the inflation number is that these floods will push up inflation, the cost of groceries in the supermarket aisle will go up ‑ that's our strong expectation. But since we last released the inflation number in July, some other things have come off a bit. Petrol has come off a bit ‑ for example I think in some places, 40 or 45 cents off the peak of what it was in July ‑ it's come off a bit. So all of these numbers have swings and roundabouts. Yes there will be additional pressure from groceries, particularly out of these prime agricultural, growing and producing areas. But you need to make sure you're interacting that with all of the other changes in the economy as well. We're doing that work right now. We don't have a final understanding of it, but if I can include a bit of that in Tuesday night's Budget, I'd like to.
GILBERT:
Do you think it'll go over eight per cent now?
CHALMERS:
It remains to be seen. Again, it's a consequence of how those different swings and roundabouts net out, so I can't tell you that yet. We're still finalising those numbers. Obviously, more broadly, the primary influence on the Budget that I'll hand down is inflation. It's got the global element from the war in Ukraine, it's got the domestic element from the flooding, and the issues in supply chain. It colours how we approach cost‑of‑living relief, it colours how we approach investment in the economy, and it colours how we manage the budget more broadly.
GILBERT:
I've had just one industry ‑ dairy farmers ‑ reach out to say that sadly, in northern Victoria, a number of farmers are having to tip out perfectly good milk on a couple of days throughout this week, as roads have been cut off by the floods. That's one industry alone, where clearly that will have an impact at the checkout.
CHALMERS:
And it breaks your heart, doesn't it? I think Australians have a real affection for farmers and for primary producers‑they know that life on the land in Australia, with our harsh conditions is really difficult. So when you hear stories about that, I think people really feel it. They'll feel it in their household budgets and in supermarket aisles. But I think they also have a lot of sympathy for what's going on in some of the world's best farmland. It will have consequences for the economy and for the Budget. But I think most people are primarily focused on the human tragedy, that is these natural disasters.
GILBERT:
It certainly is a human tragedy, no doubt, and almost a seasonal one in the sense of this emergency. One long term challenge ‑ and you've pointed this out in your various comments in news conferences ‑ is energy. A big input into that is gas. And it looks like from what your Government is saying, is that gas producers are being put on notice basically, haven't they?
CHALMERS:
We've got work to do on the gas market. I think it's really clear that the gas market right now is a problem for a lot of our industries, particularly for manufacturing, I think others have made that point. And ministers right across the board understand that when you've got high prices for gas, and it smashes our local industries, we need to see if there's something that we can do there, to make things a bit easier. We have to do that in a responsible way, conscious of the investment that people have made in their international contracts and international relationships. But I think we should be looking for ways to do more to soften the blow, particularly for local industry. And so once we get this Budget battered down over the course of the next few days, I think a big part of our work for the rest of the year, with Ministers Husic, King and Bowen and with others, and with industries, is to see if there's more that we can do.
GILBERT:
Indeed, and on the NDIS, one of those big five spending growth areas that you refer to, report about regularly, $8.8 billion blowout across the forward estimates. As a Labor figure, as someone committed to this scheme, you would recognise that something needs to be done with this review, clearly being announced this week.
CHALMERS:
We want to put people at the centre of the NDIS. We're proud of this creation. It's doing important work for some of the most vulnerable Australians and part of putting people at the centre is making sure that we get maximum value for money. It is increasing very quickly when it comes to the cost of the NDIS but it's providing value as well and we don't want to lose sight of that. Minister Shorten has a review that he's set up that he's engaged the Cabinet on over a period of time, which is making sure we get maximum value for money, that we've got the best type of scheme that we can. We can't ignore the fact that the Budget will account for something like $8.8 billion in extra spending. It will be $50 billion a year in a couple of years’ time so we can't ignore that. Now more broadly when it comes to managing the Budget, we do have those five fastest growing areas but within the five, the two fastest growing are the interest that we pay on the trillion dollars of debt we've inherited ‑ that's going through the roof because interest rates are rising ‑ and secondly, the NDIS. So within the five big pressures, the two biggest are borrowing costs and the NDIS. That's one of the reasons why what we'll see in the Budget, we'll see a near‑term improvement from some of those commodity prices but in the medium term, we'll see extra pressure, growing pressure on the Budget, which will have implications for the bottom line because of the NDIS borrowing costs and some of those other pressures.
GILBERT:
Before I drill down into those numbers, specifically on the NDIS itself ‑ as a Labor person, do you think this government is best placed to try and make it sustainable, to put it on a sustainable footing?
CHALMERS:
Of course, because we understand that the NDIS is about people first and foremost. It's about the people and their families –
GILBERT:
You want it to survive?
CHALMERS:
We want it to survive, we want to succeed, we want to be world's best practice. And that means making sure we get value for money, that people are the centre of our considerations. That's why Bruce Bonyhady and Lisa Paul will be doing in their view, it's what Bill Shorten and I are committed to as well.
GILBERT:
So in the near term, on the broader numbers, a bit of an improvement, but then medium, longer term, those challenges. Can you drill into that for us? Why are we seeing that beyond the growth in those costs?
CHALMERS:
In the first couple of years of the Budget, as I've said before, we do expect we're getting good prices for gas, for example, and for thermal coal. The prices that people pay for our exports does have an impact on the Budget. We're getting relatively good prices. Right now, it's come off on iron ore and met coal, but some of these other resources, the prices are very strong and so we'll see a bit of an improvement in the near term, but nowhere near enough to make up for these five big persistent structural pressures on the Budget. So in the near term, we hope to see an improvement of sorts but the pressure on the Budget beyond that is much greater than the uptick that we get from the prices we're getting currently for our exports.
GILBERT:
You've had talks just in recent days in the United States with your US counterparts. Is a US recession inevitable from what you've picked up?
CHALMERS:
What I said in Washington DC ‑ and I think you've discussed on the on the show with Andrew ‑ is that people around the world think that that's a risk in the United States and the administration themselves have made that point. Secretary Yellen and others, some of the big investment bankers that I've spoken to think that that is a risk. It's not an inevitability, which is what President Biden was saying. What we'll do in the Budget is we will substantially revise down our expectations for growth in the US, the UK, Europe, and China has slowed as well ‑ and that has obvious consequences for us.
GILBERT:
And does it make a recession obviously possible here, but would you say it's probable?
CHALMERS:
No, I wouldn't. Treasury's expectation is that our economy will continue to grow, but so are our challenges. Our forecasts that I release in the Budget on Tuesday night will show the Australian economy continuing to grow, but threatened by the global downturn, threatened by rising interest rates and some of the other uncertainties that we're navigating at the moment.
GILBERT:
Finally, as you wrap up your preparations, what's your mindset going in, as you said, 16 Budget lock‑ups but the first time at the despatch box being broadcast around of the country, what will be your mindset heading into that?
CHALMERS:
I'm looking forward to it because I feel like the country is ready for a pretty honest conversation about our economy and about our Budget. I've never really subscribed to the view that the Budget is some kind of individual vanity exercise where you pull rabbits out of a hat or anything like that. What people can expect to see from me on Tuesday night as a result of all of this collective effort is a Budget which is solid and sensible and suited to the times. And I'm looking forward to leveling with people about the challenges that we have, but also the opportunities. You've known me a long time, you know that I'm fundamentally an optimist and I continue to be an optimist about the Australian economy, but we've got some tricky terrain to navigate in the next few months.
GILBERT:
Treasurer Jim Chalmers, I appreciate your time in a massive week for you. Thanks for making the time.
CHALMERS:
Thanks for making the time, Kieran.
