CANBERRA, ACT, Jan. 28 -- The Treasurer of Australia issued the following transcript:
Note
Subjects: inflation, private investment and private spending, interest rates, the Budget, National Party leadership spill
Kieran Gilbert:
Let's go live now to the Treasurer Jim Chalmers. The inflation number higher than you would have liked. You were asked about government spending repeatedly in the news conference today. Can I ask you though in simple terms if the government reduces spending, doesn't that take a bit of pressure off the RBA?
Jim Chalmers:
Hi Kieran. Look, a couple of things about that. First of all, if public spending was the primary determinant of interest rate changes in Australia, we've got to remember we've just had over the course of the last 12months or so 3 interest rate cuts.
Second point is if you look at the public commentary from the Reserve Bank, they haven't identified public spending as a factor in its recent thinking. In fact, the Reserve Bank Governor has said on a number of occasions now our budget is better than a lot of other countries, and that a change in fiscal policy wouldn't necessarily warrant a change in their approach to monetary policy.
I know that there'll be a lot of political commentary about government spending. Today's inflation number, which did come in higher than we would like, is a reflection of a recovery in the private sector and private spending, not public spending, and that's really clear.
Gilbert:
There is political commentary, there's also economic commentary, and I know Harry Clarke, my colleague, asked you about the comments of Shane Oliver. He was on- the AMP Chief Economist- he was on with me this hour. He also said- the other thing that he said was excessive government spending leaves less room for private capacity. Isn't that true?
Chalmers:
You're right that Harry did ask a bunch of questions about Shane Oliver's view. And I tried to respond to that in a pretty comprehensive way, in a factual way and the summary of that is this, Kieran- what we saw in 2025, in fact the main story in our economy in 2025, was that public demand was retreating, making room for a recovery in the private sector. That's one of the most important things that happened over the course of the last year or so.
If you look at the contribution from public demand, that was shrinking. The contribution from private demand was growing quite quickly, particularly in those most recent national accounts.
And so the situation that Shane is describing in theory has been happening in our economy, and that's why I think the commentary -
Gilbert:
Does it need to happen to a greater extent?
Chalmers:
The Reserve Bank Governor has not identified public spending as a factor in their consideration. And so public demand has been making room for private demand. We've seen a big recovery in private investment and private spending. If you look at these numbers today, there are some temporary factors in these numbers, like the unwinding of the electricity rebates, there are some more persistent pressures, and those persistent pressures are in areas like housing and market services, not government spending.
Gilbert:
What does it mean though this number for your budget? I know you're already turning your attention to it, it's only a couple of months away. Will you seek to reduce spending further to take a bit of heat out of the economy?
Chalmers:
We found savings in all of our 7 Budgets and budget updates. Really a defining feature of this Labor government is the responsible approach that we take to the budget, and it's meant we've found $114billion in savings, including $20billion in the December update. We've banked most of the upward revisions to revenue, delivered a couple of surpluses, and so we've been getting the budget in much better nick.
If your question is do these numbers impact on our thinking for the budget, of course they do- all of the data that we get about the economy shapes our thinking in the lead up to all of our budgets, including this one. And the 3 defining influences on the budget that Katy Gallagher and I will hand down in May, are these persistent inflation pressures, the long‑standing productivity challenge in our economy, but also this global economic uncertainty that we're confronting at the same time.
Gilbert:
Is the increase in the public sector with- in the jobs market particularly- is it crowding out the private sector to an extent, and therefore feeding into inflation as well? Or do you reject the notion that government spending is crowding out private capacity in any way?
Chalmers:
I do reject that in our circumstances, Kieran, because as I've explained to you and to Harry before you, the public sector has been retreating and the private sector has been responsible for most if not all of the growth in the economy in recent times. And so that's really clear, that's in the data, that's not an opinion, that's not a partisan view, that's a fact that the public demand has been making room for a substantial increase in private demand, private investment, private spending in last year's economic figures. So that's a really important thing to remember.
Now you'll hear our political opponents say that this is all about government spending. Remember they just took to the election a policy for bigger deficits and higher income taxes and more debt to pay for nuclear reactors which would make electricity prices higher, not lower. And so you will see a lot of partisan commentary.
The best way that I can respond to that partisan rubbish that you'll hear from my opposite number and others over the course of today and coming days, is that what we've seen in our economy, which has been highlighted by the OECD and others, is what's known as a soft landing because the public spending is making way for the private spending. We've been able to maintain very low unemployment, historically low unemployment, we've seen inflation come down very substantially since we came to office but we do acknowledge, and we are upfront about the fact that it's higher than we'd like and there's almost always more work to do.
Gilbert:
Yeah, and it looks like more work for the RBA with at least a rate rise next week, maybe more to come. Do you concede that that's the trajectory now as we are into 2026?
Chalmers:
Oh look, there are good reasons why treasurers of both political persuasions don't make predictions or try and pre‑empt decisions taken independently by the Reserve Bank in the usual way. Obviously the market will react to these inflation numbers today, but I don't intend to add to that speculation.
Gilbert:
Can I ask you about the story in the Financial Review today, a $60billion budget blow‑out? It seems no one, even the independent PBO, can explain why that's the case. Can you explain to our viewers what's gone on there, and were you aware of it before the election?
Chalmers:
Of course I can explain it, Kieran. What's happened here, and this is what we told the journalist yesterday and a version of what we said when we released the numbers, is that the medium term outlook, the decade outlook, is broadly consistent with the numbers that were released at the election time. It says that I believe on page 57 of the mid‑year update that we released in the middle of December, that the forecasts are broadly in line with what we saw in the 2025 pre‑election outlook.
To the extent that there is a small deterioration, that is largely explained by receipts, not by spending. Largely explained by receipts. That's the point that we made yesterday, and the Treasury made yesterday as well and where there is some extra spending over that 10‑year medium term period, a key part of that is the sensible provision that we made for the deal that we hoped to strike with the states and territories on hospitals funding.
If you look at the transcript from the press conference on that day that we released the mid‑year update in the middle of December, a few weeks ago, I said then that one of the changes in the medium term outlook was that provision that we're making for the hospitals deal in the hope that we can strike one. So we've been very clear about it. I was upfront about it on the day, upfront explaining it to the journalist yesterday. The Treasury explained it as I understand it yesterday as well nut unfortunately you get these sorts of stories from time to time.
I note that it was a story created by the Liberal Party, by my opposite number and repeated on the front page of the Financial Review today. I think we explained it yesterday and I explained it in December as well.
Gilbert:
Finally, you might have seen Colin Boyce, the Nationals MP, call a spill last hour on News Day. I don't expect you to put your pundit hat on politically but as rates go up it doesn't help that there's- well, it doesn't hurt you that there's a distraction on the other side of politics.
Chalmers:
Well, we're not distracted by it. This is a guy who was telling people he was going to leave the National Party and now he's telling people he wants to lead it. I think this is just another illustration of the complete and utter farce which is the former Coalition parties.
We've now got 3 political parties of the extreme far right in this country. They're all engaged in this kind of unedifying contest to be a paler shade of orange but I assure your viewers, Kieran, I assure you the government is very focused on the cost of living and housing and issues that matter to real people in real communities right around Australia.
The former Coalition is disintegrating. It is a bin fire of internal party politics and personality politics and when they engage in this kind of behaviour, ordinary Australians don't get a look in, but we're focused on ordinary people, confronting these consistent price pressures, trying to build more homes for people, and to deal with the bigger challenges in our economy.
Gilbert:
Treasurer, thanks for your time, I appreciate it as always.
Disclaimer: Curated by HT Syndication.
