CANBERRA, ACT, Nov. 3 -- The Treasurer of Australia issued the following transcript:
Sally Sara:
The Reserve Bank is widely expected to increase interest rates for the fifth time this year later today in an effort to pull down inflation to its target range between 2 and 3percent. The central bank's decision comes after annual headline inflation rose to 4.3percent in September, up from 4percent a month earlier. Another hike would likely take the cash rate to 4.85percent, which will be the highest level in 18years.
Jim Chalmers is the federal Treasurer and joins me now. Treasurer, welcome back to the program.
Jim Chalmers:
Thanks very much, Sally. How are you?
Sara:
Very well, thank you. Are property prices falling further than you anticipated?
Chalmers:
There's certainly been a lot of volatility in the housing market that began before the Budget, as you and I have spoken about on a number of occasions now. One of the big drivers of that, as you rightly anticipated in your introduction a moment ago, is that people are very worried about interest rates.
Sara:
Did you underestimate the impact?
Chalmers:
The forecasts, or the assumptions, in the Budget from the Treasury around house prices are about the next couple of years, not the last couple of months. We were already seeing a fair bit of volatility in the housing market; there are a number of reasons for that. We've seen house prices come off more than half a dozen times in the last couple of decades. But the assumptions-
Sara:
But this is steep and significant now, isn't it?
Chalmers:
This year we've seen a whole bunch of volatility, and the assumptions that you're asking me about in the Budget from the Treasury are about the next couple of years, not the last couple of months. If you look at some of the private-sector forecasts for housing, they expect house-price growth to continue from next year.
Sara:
Let's look at rates. If the RBA raises interest rates later today, will it change anything about the way the government is approaching the mid‑year budget update in December?
Chalmers:
First of all, I'm obviously not going to pre‑empt the decision that the Reserve Bank takes independently today, or to give them free advice as they continue their deliberations today. I think it is true that a lot of Australians are bracing for a difficult decision from the Reserve Bank today. People are under substantial pressure already and, obviously, if rates go up today that will make things much harder especially when there are already a number of rate rises in the system and their full effect hasn't been felt yet.
When it comes to the government's responsibilities, regardless of the decision that the Reserve Bank takes independently this afternoon, we know there is more work to do to make the Budget as tight as it can be, weighing up all of the considerations and all of the pressures that we're dealing with right now- whether they be global pressures or domestic pressures. We do have an inflation challenge in our economy and it is made much worse by the war in the Middle East. The responsibility that we accept, the responsibility that we embrace, is to do in our ninth budget update what we've done in the first 8, which is to find responsible savings where we can which respond to the economic conditions that we confront together as Australians.
Sara:
Why can't you guarantee that the government will find net savings in the budget update to try to take some inflationary pressure out of the economy?
Chalmers:
That work's underway right now and I don't like to pre‑empt the outcomes of the discussions that I have with my colleagues. That work for a December budget update typically happens in November. We are currently working our way through the spending pressures, the economic forecasts, and the savings options to come up with the best, most responsible budget update that we can.
There have been savings in all 8 of our budget updates so far, there will be savings in the ninth as well. That work typically happens in November for a December update. That's why we convened the ERC yesterday, the Expenditure Review Committee. It will meet again tomorrow. We will do a heap of work throughout the course of this month. I don't want to pre‑empt those discussions by giving you a final outcome of the budget update when it isn't finished yet.
Sara:
If the government doesn't find net savings in the Budget, will that be a result of deliberate calculation that borrowers can shoulder more pain via rate hikes rather than government spending cuts?
Chalmers:
First of all, it's a hypothetical obviously, but the budget position is determined by a whole range of factors. The economic forecasts play a big role and we'll update them in the same way that the Reserve Bank will update theirs today, so there's that. There are spending pressures, including some pressures beyond our control, like borrowing costs, which come from an increasing global bond yields around the world. There are those pressures to weigh up too. When it comes to policy decisions, as the Secretary of the Treasury said last week at estimates in the Senate, it depends on the nature and composition of the spending as well as the overall numbers.
We will weigh all of that up. As I've said a couple of times now, we've had savings every time we've updated the Budget and in the last 2 budget updates, the policy decisions that we've taken, in net terms, have made a positive contribution to the budget. But we will weigh up all of these pressures- spending pressures, economic pressures, pressures on people right now- and come up with the most responsible budget update that we can.
Sara:
You're listening to Radio National Breakfast. My guest is the Treasurer, Jim Chalmers. Let's talk about superannuation. After a review of 45 super trustees, the corporate regulator ASIC has warned that super funds are failing to deal properly with complaints. Is this sort of issue something that will be improved under the previously announced mandatory service standards for the super industry?
Chalmers:
Yes. First of all, we support the important work of the regulators. The funds need to do better here because the proper and fair resolution of complaints is an essential part of a proper functioning system. We recognise that. That's why we are introducing those mandatory standards for funds that you've just referenced for the areas where there are the most complaints. That work is already underway. My colleague, Dan Mulino, and I work very closely together on that because we do know that the standards need to lift, we do know that funds need to do better. I think the contribution from ASIC yesterday was really important in that regard.
Sara:
When does the government want to have the super industry service standards in place?
Chalmers:
We're consulting on that now. Ideally, we would have them in place as soon as we can, but we're consulting with the sector to make sure that we get it right. We are focused on a handful of areas in super where the complaints have been most prevalent- member communications, death benefit claims, insurance claims and reporting. That work is underway right now and we'll get it done as soon as we can.
Sara:
Just finally in the United States, in your view, what effect could the midterm elections in the US have on the US dollar and on inflationary pressures here in Australia?
Chalmers:
I think in times which are as volatile as these, people will be hanging off every word from the US President. They will be watching very closely all the various races in the House and in the Senate as well. That's because there are potentially big economic consequences of these midterms, particularly when it comes to any implications for the war in the Middle East.
Obviously, not being a commentator on US politics, I think it's self evident that the Americans are dealing with a lot of the same issues that we are, whether it be inflation or these other pressures on people. The difference between us and the Americans is that they have a say when the war ends and we don't. If it was up to me, from an economic point of view, the war in the Middle East would end today because Australians are the cost‑of‑living casualties of decisions taken in D.C. and Tehran.
These midterm elections do seem like they have the whole world watching, for good reason. That's because the global environment is very volatile. The war in the Middle East is a huge part of that volatility. The politics as they play out in the US, to the extent that they have consequences or implications for the war in Iran, people will watch that very closely. I'll be watching it very closely.
Sara:
Treasurer, thank you for your time this morning.
Chalmers:
Thanks so much, Sally.
Disclaimer: Curated by HT Syndication.
