CANBERRA, ACT, Sept. 2 -- The Treasurer of Australia issued the following transcript:
Jim Chalmers:
I've put out a detailed statement on today's National Accounts but let me just touch on a few elements and take your questions. As you know, growth is 0.4 in the quarter, 2.1 through the year with the revisions, and 2.4 annual. This is a robust result in really challenging international circumstances. The Australian economy is robust, it is resilient in the face of global uncertainty and conflict, and that's the main takeout from these National Accounts.
People are still under pressure, but we can see in these National Accounts that incomes are growing, housing investment picked up, there's a solid pipeline of business investment and the private economy is driving the growth. When it comes to international benchmarks, our annual growth is as strong as the US and much stronger than every other major advanced economy. Despite that growth, you can still see the impacts of the war in these figures, particularly in consumption and the build‑up in fuel inventories - less fuel, less travel, more EVs, more fuel inventories - and that shows the impact of the war in the Middle East.
Household consumption grew in the quarter, but it slowed in annual terms, and the really important element of that consumption figure is that around two‑thirds of it was spending on EVs. Once again, that is at least in part a consequence of what's happening on the other side of the world.
A really heartening part of the figures was dwelling investment growth, which picked up and broadened in the quarter. It's up 1.6percent in the quarter and 5.8percent through the year. Both stronger than the quarter before, stronger than the Treasury forecasts, and remember that that measure was going backwards by 3.6percent annual when we came to office. I'm really heartened to see this dwelling investment growth in our economy, particularly when you see that trend building approvals were up again in yesterday's data as well. I think from memory, for detached housing, the trend approvals was at a five‑year high. There are a number of factors playing out in the housing market, as you know. But it is encouraging to see dwelling investment growing and building approvals up in today's and yesterday's data.
There's volatility in the business investment numbers quarter to quarter, but up 10 and a halfpercent through the year. That means that business investment is now 12.7percent of GDP, which is the highest in a decade. You'll see that the investment pipeline has just been revised up very substantially by the ABS as well.
Private business investment has now grown at an average of 4.9percent a year under us, remembering the average was -1.3percent under the Coalition. If you look at these numbers, the private demand versus public demand, you can see that the private sector is doing the heavy lifting on growth. In annual terms, 4 of every 5 dollars in domestic growth is from private demand.
Real incomes are growing in the National Accounts as well. The living standards measure is up 0.3 in the quarter and 0.9 through the year. That number was -1.3 when we came to office in that quarter. The wages measure in the National Accounts was up, and it means that the wages share of national income is now 54.3percent compared to 49percent when we were elected. That wages share of national income is the highest it's been in around a decade.
The Australian economy has obvious strengths, but we can still see in these numbers our 3 primary challenges: inflation, productivity and global volatility. We know that each of these puts pressure on people. The growth story in these National Accounts compared with our peers, the upticks in housing investment and incomes are very encouraging. We know that people are under pressure. We know that there is more work to do. We know that people will try and find the worst elements of these National Accounts as part of an effort to talk our economy and our country down. But these are the National Accounts of an economy which is robust and resilient in uncertain times. There is no shortage of challenges but there are a number of strengths, and we see them in the data released today.
Journalist:
Treasurer, we're seeing house prices decline in capital cities since the Budget. Do you stand by Treasury analysis that house prices will continue to grow over the next couple of years but by 2percent less than otherwise, or do you concede that the Treasury and the government underestimated the impact of the tax changes?
Chalmers:
First of all, the Treasury assumptions in the Budget are over the next couple of years, not the past couple of months. It would be unusual to compare outcomes or forecasts from the first couple of months and compare that with the Treasury assumptions over a couple of years. That's the first important point.
Journalist:
[Inaudible]
Chalmers:
If you just let me finish my answer to your question, Greg, I'll go through each part of it. That's the first point, Treasury assumptions are over a couple of years, not the first couple of months.
The second thing is it's wrong to attribute softness in the housing market or auction‑clearance rates to any one factor. House prices and auction‑clearance rates were already softer before the Budget and that's because, as a number of people have pointed out from outside the government, a key driver of that is interest rate movements as well as developments in the economy more broadly.
The next point is this: the assumptions in the Budget, as well as the decisions people take about investment in housing - investment in housing is a longer term proposition. People are in a rush to draw conclusions about the next few years based on the last few months or, indeed, movements in prices or auction‑clearance rates before the Budget as well.
It's not actually unusual over the last couple of decades to see house prices come off a bit. Even though we've had extraordinary price growth since the turn of the century, by our count there have been at least 7 occasions in the last 2 decades where house prices have come off a bit. If you look at the 2years to May 2019, house prices in Sydney fell 13percent. They fell for 15 consecutive months, which is the longest consecutive period of decline since the records began in 1980.
I know that people are in a rush to reach conclusions about a Treasury assumption which is to play out over the next couple of years, not the first couple of months. But I think all of those elements are important bits of perspective when it comes to the housing market.
Before I go to Shane, a couple of additional points about that. Prices have risen for 15 of the past 20months. They are still up in annual terms, and they're up almost 25percent over the past 5years. And so the housing market has softened. It was softening before the Budget. You can't attribute that softening to any one factor or another, and it's not unusual in the last couple of decades for prices to come off a bit.
Journalist:
Does that mean yes or no?
Chalmers:
I think I've answered your question very comprehensively.
Journalist:
Just following on from Greg's question, just in terms of building approval figures yesterday showed you're about 210,000 for the past 12months, which is well down on what you need to reach your 2.5million target. The spending on the new housing data, these figures also, the construction phase, doesn't take in the full effect of 3 rate rises and the tax changes. Do you think you will not get anywhere near the 1.25million because rates and your tax changes -
Chalmers:
How many million?
Journalist:
1.25million, that's your target, isn't it?
Chalmers:
1.2.
Journalist:
Yep. Will that combination of rates and the tax changes kill the lift in housing investment that you actually need to reach the target?
Chalmers:
First of all, let's not skate lightly over the fact that dwelling investment is up in these National Accounts. In fact, one of the most important features of these National Accounts is the way that dwelling investment has picked up and broadened in the quarter, and it's coming in higher than what was forecast in the Budget.
Similarly with building approvals, if you look at the trend annual figures, they were up 11.7percent. When we came to office, they were going backwards by 22percent; 22percent they were going backwards. Now in trend annual terms they're up 11.7percent. So a bit like the analysis on prices, people want to draw a conclusion in September of 2026 about a housing target that runs until 2029. There are some very encouraging developments in these National Accounts today and in the building approvals numbers yesterday. We know we've got challenges in the housing market. We know the war in the Middle East is pushing up construction costs, for example. But this is a government which is doing everything it responsibly can to build more homes and to make the housing market fairer for more Australians. There are some encouraging developments in the last couple of days of data.
Journalist:
Treasurer, can I follow that up, please?
Chalmers:
Sure, if that's all right with Tom.
Journalist:
Thank you, Tom. Around budget time, voters were told that house price growth would slow by 2percent. Now you're saying that's just a look at these particular measures that the government put in place, not the whole economy. So were you hiding the potential for a drop in prices from the public, or did you not forecast correctly?
Chalmers:
I don't agree with any of those elements of -
Journalist:
You don't agree that in the Treasury documents it said that house price growth would slow by 2percent?
Chalmers:
Over the next couple of years, that house prices would continue to grow, but 2percent slower than otherwise. That's the published Treasury assumption. But all of the other elements of your question obviously I wouldn't agree with. The point that I would make to you is the same point I made to Greg, which is that you shouldn't draw conclusions, final views, about an assumption period which runs for 2years based on the last couple of months. We have seen house prices come off before in our economy -
Journalist:
What are the latest forecasts then? If people are worried about the value of their house, is there an updated forecast?
Chalmers:
We don't update the assumptions from week to week. Even if you -
Journalist:
It's been a significant period since the Budget.
Chalmers:
It hasn't really. I mean, it really hasn't. It's the first week of September, and the Budget was in the second week of May. We don't update our forecasts from week to week. I mean, that's just a fact. If you look at the Commonwealth Bank forecasts - again, they are forecasts - and even the Commonwealth Bank still has prices growing next year. I know that there's a particular rush to draw final conclusions about a Treasury assumption over the next couple of years based on the last couple of months, but I would urge caution on that front. Even the Commonwealth Bank forecasts have house prices growing next year.
Journalist:
Are you sticking with that assumption, though, the 2percent?
Chalmers:
I've answered your question in some detail, Greg, and now multiple times.
Journalist:
Treasurer, you mentioned productivity as one of the top priorities going forward. That, as well as living standards, are pretty flat or going backwards. Is that a concern for you? When do you expect the worm to turn on that and people see the benefit?
Chalmers:
First of all, living standards grew in these National Accounts. Obviously we need them to grow more strongly. But the relevant real wages measure in the National Accounts grew, and the relevant living standards measure grew in these National Accounts. Clearly we need that to grow more strongly, and part of the story there is productivity. You're right to point to the particularly flat productivity outcomes in these National Accounts.
Productivity is a very substantial challenge in our economy. We acknowledge that almost every day. We acknowledged that with the broadest and deepest productivity package in the Budget for at least decades. Because we do understand that whether it's inflation, whether it's productivity or global volatility, we do have a number of very serious challenges in our economy. You can see that in different parts of these National Accounts. We don't pretend them away. On the contrary the productivity package in the Budget, which is all about cutting compliance costs and getting approvals moving more quickly, is about acknowledging and acting on a very serious challenge that we have.
Journalist:
Treasurer, why was Treasury not tasked with modelling the impact of the tax changes on either an annual or biannual basis, and do you think home owners would have more confidence had they had this information?
Chalmers:
The Treasury's published assumptions about the next couple of years, and that's because it's appropriate to look at developments in the housing market in the same way that Australians do, which is not month to month or week to week or day to day. Housing is a long‑term investment. We've seen extraordinary growth in house prices over the last couple of decades, but even within that there have been at least 7 times where house prices have come off. People are trying to draw long‑term conclusions from data and forecasts which come out week to week.
The point that I have made to your colleagues and the point that I would make to you is that the impact of our policies, the impact of interest rate changes, the impact of bigger developments in the economy as they play out in the housing market are best assessed over a period of a couple of years and not just over a period of the last couple of months.
Journalist:
Chanel Contos is speaking at the Press Club today. She's been long calling for an opt‑in algorithm. Do you agree that government intervention is needed, particularly in algorithms, to protect young men?
Chalmers:
I think like most Australians, and I think particularly most Australian parents, I find it really disturbing the rubbish that is fed to our kids, and to our population more broadly, with these algorithms. Now, obviously my focus is on the National Accounts today. I will try and catch up with her speech at the Press Club, and the questions and answers at the Press Club. I know that Anika and Anthony and others in our government are very focused on these challenges.
But I think it's self‑evident that social media, and particularly the way that these algorithms work, are not doing us a lot of good. Whether it's about the issues being canvassed today at the Press Club, whether it's more broadly about the way that our community is being deliberately divided and polarised, it's hard to mount a credible argument that what we're seeing with social media algorithms is a force for good in our community or in our country. So, I share the concern that a lot of people have. It's not my key focus today because of these National Accounts, but I'll work with any part of our Cabinet and anyone who wants to consider whether we can do better here.
Journalist:
Treasurer, just on the issue of AI paper that you've distributed earlier in the week, I was just reading the submission of the Tech Council to the parliamentary committee on skilled migration. They say they've got 90,000 workers in this country, half of them are migrants. As you say, AI presents plenty of opportunities. Is this really a good time to be talking about reducing migration? Don't we need more migrants to be able to drive these new industries?
Chalmers:
As always, it's a question of balance, making sure that we have a robust migration program that serves our economic objectives and our broader national interests and making sure that migrant labour is never a substitute for training Australians, but complementary to that. There are some sectors that have very real and pressing skills shortages, even at a time when our unemployment rate is ticking up a bit. The labour market is softening a bit around the edges and there are still pockets of our economy where there is a real need to address skills shortages. Like every element of our migration program, it's a question of balance and making sure that we're coming up with the right decisions for the right reasons - economic and social reasons rather than political reasons - and taking the time to get that right.
On AI more broadly, the reason I shared that substantial piece of Treasury work with all of you is because this is going to be a central feature of the Intergenerational Report later in the month. This is probably the most transformational economic development of our lifetimes. I'm confident that we can maximise the economic upside and minimise the risks, but it will take work. That's why the whole cabinet under Anthony's leadership is very focused on AI. I wanted to give you a sense of the type of advice that I was receiving in some of these important areas.
Journalist:
Treasurer, average Australians might be a bit confused by the messages today that growth is above comparative economies, which sound like a good thing, household consumption is up, so there's confidence in spending, yet both those things put supply and demand out of whack. They're above the RBA's speed limit to the economy now, and so average families are looking at another interest rate rise before the end of the week - the end of the year, sorry - according to all the banks. Things aren't all that crash hot, are they?
Chalmers:
I think it's possible to acknowledge that there are serious challenges in our economy without ignoring the big advantages that we have as a country. The fact that our growth is as strong as the US and stronger than other major advanced economies is a good thing. The fact that we've seen dwelling investment come up, the fact that wages are up again - real wages, the living standards measure - these are bright spots in our economy. But our economy has its share of challenges like every economy around the world, particularly at a time of war.
These numbers, like every set of numbers we get, there are challenges and there are bright spots. It's important that we don't forget we have a lot going for us as a country and in our economy as we deal with these big challenges of inflation and productivity and global economic uncertainty.
Journalist:
In global bond markets today, the Australian Government borrowing rate has hit a 15‑year high of 5.2percent. How much will that potentially add to Australia's financing its deficits, and doesn't this sort of put the onus on the government to really try and get the budget back closer to a balance or in balance so we're not spending $20billion‑plus a year on interest costs and potentially more than that now?
Chalmers:
Our responsible economic management means that Australia is saving about $70billion in interest costs. From budget update to budget update, obviously we take into consideration the prevailing market pricing of our debt. When it comes to our debt, we need to remember that Australia's debt‑to‑GDP is lower than any major advanced economy, and in most cases very substantially lower. The ratings agencies issued not that long ago a glowing report card about Australia's debt levels. We have made some very substantial progress in getting gross debt‑to‑GDP down. It's expected to peak now a bit over a third of our economy at 35.8percent. That's 9.1 percentage points lower than the forecast when we came to office.
We've made some progress but we understand that budget repair and responsible economic management requires our ongoing attention. That's why the last couple of updates have had a net improvement in the budget position. I could go through all of the numbers that you're familiar with, John.
I saw, or I was told about, a story you had today, John, about the Coalition and the trillion dollars in debt. I want to make this really clear: more than $600billion of Australia's trillion dollars in debt was racked up by the Coalition. If you look at that period - 19 or 20years - they governed for less than half of that but they racked up more than 60percent of the debt. I saw in that piece, or I was told about in that piece, that they were giving lectures to us about debt. I'm not taking lectures from them.
Don't forget, their policy at the election was for bigger deficits and more debt. Their policy now is for bigger deficits and more debt. They've made more than $110billion in commitments over the next 4years, and more than half a trillion over the medium term. They racked up most of the trillion dollars in debt, their policy at the last election was for bigger deficits and more debt, their policy at the next election is for bigger deficits and more debt. I won't be taking lectures from them either directly or via your piece.
Journalist:
Just back on housing, Treasurer, Matt Thistlethwaite has been out today and he says there's no doubt that our policies are part of the suite of reasons that house prices are falling. Is Matt Thistlethwaite correct? Will you, like him, concede that your policies are playing a role in driving down house prices?
Chalmers:
That's consistent with what we've said for some time, which is that it's not the only factor playing out in the housing market. We've said today and on other occasions that there are a number of factors. That's one of them, but it's not the only one.
Journalist:
Your policies are driving down house prices?
Chalmers:
We've said on a number of occasions that that is not the only factor. It's a factor but not the only factor. The evidence of that, which is too frequently ignored, is that house prices and auction‑clearance rates were softening before the Budget. That's because of movements in interest rates and developments in the economy more broadly. There is more than one thing playing out in the housing market. Matt has mentioned that today, I've mentioned that today and on a number of other occasions, as have the private sector economists who have been analysing this really important part of our economy.
Journalist:
One of the few times Paul Keating admitted he got something wrong was when he reversed his abolition of negative gearing. I'm just asking, how set in stone is your party? If we get a year or 2 down the track and it's not going according to expectations, are you prepared to tweak or change some of those measures when it comes to housing or the effect on business investment, you know, if it doesn't do what you think it's going to do?
Chalmers:
I wouldn't anticipate that at all. I think it would be strange to try and compare the housing market of the 1980s with the housing market of the mid‑2020s. I obviously have a lot of respect for Paul and talk to him pretty frequently, but the idea that the circumstances and situation of the mid‑80s is the same as the mid‑2020s, I think that would be a strange conclusion to draw. I'm not anticipating having to go down that path.
The big difference is when the big change was made at the turn of the century, it locked too many young Australians out of housing. We could have let that situation endure. It would have been politically easier, but it would have been wrong in policy terms. And so I'm prepared for the usual predictable partisan scare campaign, and commentary around house prices and the housing market more broadly, if that's the price we pay for doing the right thing. Doing the right thing in this context is recognising that the housing market is broken, the tax system has been part of the problem rather than part of the solution, and that's why we're acting here. There are a number of factors playing out in the housing market. Our objective here over the course of the next couple of years is to give first‑home buyers a fair crack in a housing market which has locked them out for too long.
Journalist:
Sorry, Treasurer, I don't mean to be rude, but can you talk to why first‑home buyers, the target of all these measures, are not buying houses? And when will they start moving into the market?
Chalmers:
First of all, it's only been a couple of months and we're talking about a generational change in the housing market. Nobody, I think, was anticipating that everything would change overnight. People make long‑term, considered decisions in the housing market and that's what we'll see in the coming years and the coming decades.
The second point is there have been some indications about a rebalancing in the housing market towards first‑home buyers. There have been some indications and there has been some commentary about that, including on the AM program this morning, which I would recommend to you. If you look at that lending data from a couple of Fridays ago, if you look at the data that we got in the last few days, there is the beginnings of a sense that the housing market is rebalancing. But, again, I would encourage people not to draw conclusions about the next couple of years from the last couple of months.
Journalist:
Just back on social media, just how strongly do you feel about the potential negative impact of algorithms? The government, for instance, gives money to Meta for advertising. Members of the government advertise on Meta. Is this something that could be reconsidered?
Chalmers:
I'm reluctant to go deeper into the policy space because Anika and Anthony and others - Michelle Rowland and other colleagues - do a heap of work on this. Tanya Plibersek as well, on Sunday, made some important points.
From a personal point of view, I think one of the challenges we have in this country is the way that social media deliberately polarises, and -
Journalist:
Yet the government gives it money through advertising?
Chalmers:
The reality is that more and more people get their information, for better or worse - for you guys in particular - from sources which are designed to deliberately polarise people and divide people and set them against each other and promote violence. From a personal point of view, if you made a short list of the biggest problems that we've got in our society, I think the role of social media would be on that list. That's my personal view.
I see it in my work. I see it in the way that you guys increasingly have to churn out these kind of ridiculous clickbait headlines in order to get it shared. I think what President Obama said not that long ago, which is social media has become about affirmation rather than information, is a really neat way of describing what we're up against as a country, what you're up against as journalists, and what we're up against as a government. It's so divisive and it's so violent.
Whatever the policy considerations for other ministers with my support, I think it would be hard to conclude objectively that we don't have a big problem here. Every country has got it. It's not a problem unique to us and we're doing more than other countries when it comes to things like the age limit - really important reforms that other countries are copying, which is a tribute to Anika's work and Michelle's work. But it is a huge challenge. Our society, our social cohesion, the way that we come at big problems including in my part of the shop in the economy is hampered, not helped, by the way that algorithms are dominating people's day.
Journalist:
Just for the context first for this question. Matt Comyn was talking about people digging into offset accounts that haven't been that big for many years. In that context, household consumption this quarter and last quarter, they've grown about the same level. That's fair, isn't it? So, like, if there's been no real change in household consumption but yet there's been a fall off a cliff in real disposable incomes, even real disposable incomes per capita - we're negative this quarter - why is there such a big discrepancy with those 2 numbers? Like, they're spending the same, but their real incomes have dropped off a cliff.
Chalmers:
Real household gross disposable income per capita grew 0.3 quarter on quarter and 0.9 through the year.
Journalist:
Real net national disposable income per capita, down 0.4.
Chalmers:
People are under pressure and that pressure has a number of sources. We saw in the most recent inflation data the impact of the fuel spike from the ongoing war in the Middle East. We know that the interest rate changes earlier in the year are playing out, including in these National Accounts. We acknowledge that people are under pressure and we're acting on that - with tax cuts that our opponents voted against, cost‑of‑living help and all the other parts of our economic plan which recognise that people are under pressure.
When it comes to consumption, there's some strange elements to today's consumption data. You would have seen that around two‑thirds of the quarterly consumption growth was EVs - a consequence at least in part of what's happening in the Middle East. But overall, overwhelmingly the story of these National Accounts and beforehand is an economy that's performing better than most but with no shortage of challenges, particularly around inflation and productivity and international volatility.
The government doesn't just acknowledge that, we're acting on that - with a big productivity package in the Budget, fuel security package, cost of living and tax cuts, budget repair. All of this is about recognising the very serious challenges that we face without ignoring or denying that we've got a lot going for us as well.
Journalist:
Treasurer, just on the war. Given that diesel prices are anything up to $2.60 a litre and petrol prices are increasing as well, do you envisage that the government may need to cut excise again?
Chalmers:
I wouldn't have thought so, no.
Journalist:
If I can ask on the Treasury advice you received earlier this week, AI seems to be the big thing to drive productivity in the short and long term. Considering its importance to the economy broadly, is this something that the government should be taking a direct hand in investment and infrastructure, and does the government have a social licence to do so?
Chalmers:
There are a couple of important elements to that. First of all, the government is taking a leadership role. I thought that speech that the Prime Minister gave at the University of Sydney was a really important way of demonstrating that leadership. Whether it's the standards, safety centre, the way that we've put it at the core of government, the way it's central to our productivity work as you acknowledged, and the way that it's central to the work that I'm doing with financial regulators on better regulation, the investment story, natural resource management. It's becoming a bigger and bigger part of what we do as a government. So, we are showing leadership.
On the role of AI and productivity, it's going to be a really important driver but not the only driver, and it's not the only thing that we're focused on. We're cutting tape by over $10billion a year, $4billion in tax cuts for businesses and start‑ups, the R&D program, the National Competition Policy - all of that is about making our economy more productive and more dynamic and lifting the speed limit on our economy. But increasingly, AI will be a bigger and bigger part of the story and it's going to be a big part of the Intergenerational Report that I release in a few weeks' time.
Journalist:
Treasurer, can I just get your view on the Bathla Group construction issue in Sydney? I understand there's about 2,000 homes under construction at the moment. Do you think that your policies have had any impact at all on the fortunes of the Bathla Group? And is there a potential for, in your mind, government intervention given we have these targets for housing construction and this looks like a negative?
Chalmers:
First of all, our thoughts are with the workers and also the families looking forward to turning their key on a new home built by that company. That's the first thing. Obviously, we're monitoring the situation very closely. I get briefed on it. There's important work that ASIC is doing, and so we're engaging with ASIC and other regulators about these developments.
It's a major developer. It's got a really fragmented business model. There are complex financial arrangements that will take time for the regulators to work through. I know that Premier Minns has indicated that he is also engaging and working through some of these issues, and we welcome that as well.
In terms of the causes of what's happened here, as I understand it, this specific company has been having difficulties for some time. I don't want to get into the details of that or interfere with the important work of the regulators, but I think it would be a mistake to conclude that what's happening there is a consequence of policy changes in the last few months. I think some of these challenges have been longer standing. Some of them are common to the construction sector more broadly, and some of them specific to the company.
Thanks very much, everyone.
Disclaimer: Curated by HT Syndication.
