CANBERRA, ACT, March 11 -- The Treasurer of Australia issued the following transcript:
Note
Subjects: economic impact of the Middle East war, productivity and tax reform in the May Budget, superannuation reforms
Melissa Clarke:
Good morning, welcome to AM. I'm Melissa Clarke in Canberra, coming to you from Ngunnawal Country and acknowledging other custodians.
The US Defense Secretary says today will be the most intense day of the military campaign against Iran so far, his comments coming a day after President Donald Trump said it was very complete. It comes as Israel's bombardment of Lebanon continues to escalate, displacing nearly 700,000 people. More on those developments shortly.
Meanwhile, the war in the Middle East is causing global markets to whipsaw, given the uncertainty about how long it will last and the extent of its impact on supply chains. That volatility has extended to Australian markets.
The federal Treasurer is Jim Chalmers, and he joins me now. Treasurer, good morning. Thanks for your time.
Jim Chalmers:
Good morning, Melissa.
Clarke:
Markets are jittery, there's increased expectation of inflation accelerating again and interest rates rising. Should Australian households be preparing for tough times?
Chalmers:
Well, I think it is the case that we're seeing a lot of volatility play out on these global markets. The escalation of the conflict in the Middle East has been dramatic, and so has its impact on the global economy and the way that people see energy markets in particular.
So to give you an example of that, in the last couple of days we've seen the oil price up around $120, this morning it was trading briefly in the low 80s, now it's in the low 90s, and so you can see from that really how extremely volatile the situation is on global markets and particularly markets for energy.
And so, we won't be immune from that. We're not complacent about it. But we're also really well placed in Australia to deal with what's coming at us from around the world. Our economy's been growing more strongly than the major advanced economies, we've got a good, well‑regulated financial system, we've got low unemployment, we've got less debt compared to the major advanced economies, and so we've got a lot going for us even at the same time as we've got a lot coming at us.
Clarke:
So, given that position, should households be relaxed about the current state of the Australian markets, or should they be factoring in potential for inflation to be rising further?
Chalmers:
I think clearly, you know, we had an inflation challenge in our economy already, and this risks making it worse. That's clear. And we've been upfront about that. In the preparations for the Budget in May, we've got these 3 big challenges: inflation, productivity and global uncertainty, and at least 2 of those 3 will be pretty substantially impacted by what we're seeing in the Middle East.
I think Australians understand that we're not immune from what's happening on the other side of the world, at the same time as we've got a lot going for us; we do have better economic foundations than a lot of other countries. They're already seeing impacts at the petrol bowser, for example, and we've made sure that the ACCC is empowered to monitor those markets and police those markets and issue fines if that's necessary. So, there will be more pressure on Australians, but overall, our economy is better placed than most to deal with it.
Clarke:
What about the Budget that you're preparing for May? What impact will this, you know, inflation that's likely to go up, likely more interest rates, we're seeing a lot of movement on the bond markets. The government already spends a lot of money servicing debt. Are you preparing for that figure to be much larger in the years ahead than had been anticipated?
Chalmers:
Well, first of all, we've got the debt down substantially, about $176billion less debt than what was forecast when we came to office, and so that's put us in a better position than we would otherwise be. You know, to this point, we've saved about $60billion in interest costs because of our efforts to get the budget in better shape, finding those savings and delivering those surpluses.
Clarke:
Servicing debt still costs, what, 20, $25billion a year, it's still a substantial amount, and that would increase given the uncertainty, I would expect.
Chalmers:
It is a substantial amount to service that trillion dollars in debt that we inherited when we came to office. We've got that down a bit. Obviously, when there are movements on debt markets, global debt markets, bond markets, then that has implications for our own forecasts and our own Budget.
We're in the process of updating that. You'd expect that 2months and oneday out from the next Budget that we're crunching all of those numbers. We're a little ways off finalising our forecasts for the economy, for inflation, but also for things like debt servicing costs. But you could expect that when the cost of debt around the world goes up, that has implications for our own Budget, too.
Clarke:
You mentioned the energy markets and the volatility there. That includes prices for LNG going up globally. Australia's one of the biggest exporters of LNG, and now some of the major competitors in the Middle East can't export right now. Will that mean a windfall for the budget from the industry along the lines of what we saw at the start of the Ukraine War?
Chalmers:
Well, I think it remains to be seen. I mean, one of the factors there is obviously the duration of this conflict - the longer it drags out, the more substantial the economic implications in both directions. What we're seeing is - you're quite right to point out that what we're seeing is changes in the gas price globally, even as our own East Coast gas price has stayed relatively low.
And so we will work through all of that. It's not quite clear yet. We wouldn't necessarily bank a big change in revenue for those companies until we would understand better how long this thing will drag out.
Clarke:
Do you think that will be clear in the next 2months before you hand down the Budget?
Chalmers:
Well, clearer. It will be clearer between now and when the Budget's handed down, obviously. But there's a lot of uncertainty here in all of these forecasts. There's typically a fair bit of uncertainty when you forecast in the economy with all of this global volatility, but obviously what's happening in Iran makes that more difficult, not easier, and we'll do our best to come up with the best set of forecasts from the Treasury, and we'll base a lot of decisions on the economic circumstances as we confront them, and obviously what's happening in the Middle East will weigh very heavily on our Budget considerations.
Clarke:
With that uncertainty, does that then mean you need to be more circumspect with your plans to implement productivity and tax reforms?
Chalmers:
I wouldn't see it exactly that way. I mean, obviously, we've got the reform task, and I've indicated a willingness to be ambitious on productivity. We've already got a lot of movement on that front, a lot of changes underway already, and we're prepared to consider more in the context of the Budget.
When it comes to tax reform, our big focus is cutting income taxes 2 more times for 14million Australians, you know that already. But we also need to factor in what's happening on the other side of the world. As I said, the consequences could be quite substantial for the global economy, certainly, and for our own economy, probably -
Clarke:
And that would limit your ability -
Chalmers:
- and that has implications for us.
Clarke:
That would limit your ability to introduce reforms if those - the larger those impacts are. Is that a fair assessment?
Chalmers:
Not necessarily. I mean, in every budget you weigh up the economic circumstances - we've done that in our first 4, and we will do that in our fifth as well. But the reform task is still pressing and still urgent, and you know, obviously, you don't want to do anything that makes it harder to deal with challenges coming at us from around the world, quite acute challenges at the moment, but the task of reform is important regardless.
Clarke:
Is there anything you can tell us about the current status of members of the Iranian women's soccer team and the officials? Can you confirm if any more players or officials from the team have sought asylum?
Chalmers:
Well, there are developments this morning that I'm reluctant to go into because Tony Burke, the Minister, will be up later this morning to give people a proper sense of that; I don't have full visibility on those developments this morning.
But I think, like a lot of Australians, I'm really proud that we've been able to issue 5 humanitarian visas already, proud of the work that Minister Burke and the PM and their officials have been putting into this, because I think a lot of Australians have been really moved by the plight of these brave women.
It is a tribute to their bravery and to the work of the officials and the ministers that we've been able to issue those 5 visas already. As I understand it, there are more discussions this morning, and Tony Burke will have more to say about that later in the day.
Clarke:
All right. We'll see how that unfolds. On another matter, the parliament has now passed your reduction of tax concessions on superannuation accounts with balances worth more than $3million and changes to the low income tax offset. The Greens say they supported these changes as a down payment of goodwill in expectation that you'll deliver substantial tax reforms in the May Budget. Does their support for this bill encourage you to be bolder in your reform plans?
Chalmers:
I think their support for this legislation that passed last night was a very good thing because it means a fairer tax system from top to bottom, it means bigger super balances for people on low incomes and more sustainable tax breaks for people who've got tens of millions of dollars in their super; that's the focus of the legislation. We know that we can't pass anything through the parliament on our own, not through the Senate anyway, and so their support is appreciated.
Now, when it comes to broader tax reform, I've indicated a willingness on a number of occasions to consider next steps, but the next steps in tax reform would be a matter for our Cabinet to determine and not for the Greens to determine.
Clarke:
All right. Jim Chalmers, thank you very much for speaking to me on AM this morning.
Chalmers:
Appreciate it, Mel, all the best.
Disclaimer: Curated by HT Syndication.
