Treasurer, welcome to the program. Thanks very much David.
Let's start with your thoughts on this by-election result. No repeat
of what we saw in Aston a few months ago for Labor. What do you put this result down to?
Firstly, congratulations to Cameron Caldwell, the new member for Fadden. I acknowledge him
and the work of his team and also thank Letitia Del Fabbro, who is this wonderful local community
champion who ran for us and we're very grateful she flew the flag for us there in Fadden in what's
been historically very difficult territory for us. We are neither surprised nor troubled by
the outcome in Fadden. It was entirely what was expected. If anything, the LNP underperformed
against the historical average, that’s after spending more than half a million dollars on
the seat which we think was probably at least ten times what Labor spent on the seat. Unsurprising,
untroubling, congratulate the new member. This was entirely what we expected.
Was there any message, do you think, for the Government on cost of living?
Look, we already understood before this by-election in Fadden, that people are
under the pump. That's why the primary focus on my two budgets, the Government's economic plan,
the primary focus of the Government, is in providing cost-of-living help so we can take
some of the edge off the pressures without adding to inflation. That was true before
Saturday. It's true after Saturday. It remains our focus. Similarly with the seat itself,
this was a safe blue ribbon, LNP seat with a double-digit margin before Saturday. It will
be all those things after Saturday. We were aware of the pressures on people before the
by-election. That's why it's our primary focus. You could say Queensland generally is safe LNP
territory, a bit of a blue wall. Does Labor need to make better inroads in your home state?
Of course we do. It's been hard yards for us in Queensland for some time, and obviously,
we need to do much better in Queensland than we have for the last decade or so. There are
opportunities for Labor here in Queensland. I think Queenslanders do respond well to the type of
leadership that Anthony provides. This was hardly Labor heartland, this seat on the northern Gold
Coast, which has been very, very difficult for us for a really long time. I think more broadly,
there are opportunities for Labor in Queensland. We do need to perform much better here at
the federal level. Obviously, as resident Queenslander, I'm very focused on that too.
Let's turn to the Reserve Bank. Did your decision not to extend Philip
Lowe's term as Governor have anything to do with his handling of interest rates?
The decision we took to make this historic appointment of Michele Bullock to be the 9th
governor of the Reserve Bank was much more about what how we take the bank forward into the future
rather than any one decision or another that's been taken in the past. I cherish the Reserve
Bank's independence. I'm looking to invest in that independence rather than undermine or diminish it.
So, this was never about really one person or really any of the decisions taken in the recent
past or any of the commentary in the recent past. It's because Michele Bullock, I think,
has the best combination of attributes to take the bank forward. She's an outstanding economist,
a respected leader. I'm really proud of the appointment point we made on Friday.
We know after the last interest rate rise, you said yourself Treasurer, that Australians would
find it difficult to understand, difficult to cop. Are you saying it's wrong to interpret
your decision to replace the governor as any sort of reflection on his performance?
My decision, which was announced on Friday, my recommendation to the Cabinet and the
Cabinet’s decision was all about how do we make the Reserve Bank the best version of
itself? That's the motivation for the Reserve Bank review, that’s the motivation for the
appointment that we made. I've gone out of my way to say I have a mountain of respect
for Philip Lowe. I mean it. I've worked closely with him, I’ve known him for a long time. He has
carried himself with characteristic dignity and professionalism throughout, including, by the way,
saying that Michele Bullock's appointment was a first-rate appointment. I appreciate that as
well. This is more about the future than it is about the recent past. Michele Bullock,
I think, as the outgoing governor has said, is a first-rate appointment.
You respect Philip Lowe. We hear that. Did you respect his last interest rate decision though?
Well, the point that I made then and I'm happy to stand by it, is that people who are under pressure
want to understand why these decisions are being taken. I know that my responsibility is to explain
and sometimes defend the decisions I take in the context of the Government's economic plan and the
budgets that I hand down. But not the Reserve Bank?
Similarly, the Reserve Bank has an important role to explain the decisions they take. That's
the point I made at the time. I don't think that's an especially controversial point.
Would you understand if Michele Bullock as governor were to lift rates?
Clearly the existing Reserve Bank governor and the new Reserve Bank governor when she
takes up the position around the middle of September, they will take the decisions
independently. They will weigh up all the evidence in the economy. They will explain
that decision and sometimes they will have to defend that decision. That won't change
when the Governor of the Reserve Bank changes. Let's talk a bit more about Michele Bullock.
She hasn't given a lot of public speeches. For those who are trying to get a better
understanding of what approach she's likely to take, you talked about her leadership, her
experience. What about when it comes to the core role of tackling inflation. What can we expect?
You can expect someone who is fiercely independent, who carries a lot of respect
and regard. You rightly acknowledge in your introduction, David, that her appointment's been
welcomed across the board - economists, business, the head of the union movement - the Opposition,
in the end. The outgoing Reserve Bank Governor, all consider this to be a good appointment. That's
because Michele is an outstanding economist, she is a respected leader. I think that she will run
the Reserve Bank in a really inclusive way and she will run it with gravitas and with heft
and drawing on that substantial experience and expertise she has accumulated over a long time.
You have spoken to her obviously more than we have seen publicly as part of this decision. Did you
talk to her about her approach on inflation? Well,
I talk to really, all of the senior members of the bank at different times. Certainly, Governor Lowe,
I’ve had a number of conversations about inflation and with the deputy governor Michele Bullock,
that's again part of my role as Treasurer to confer with senior members of the Reserve Bank,
that's been happening already and will continue to happen after this leadership change.
What can we expect for home buyers - the big question, is anything going to change from
the old governor to the new governor? You know better than the rest of us. What can we expect?
I tell you what won't change. I won't all of a sudden because we’re getting a new governor
change the approach that I’ve established which is not to pre-empt decisions they might take, not to
second-guess the decisions either. I will continue with that approach. Governor Bullock, when she
takes up the role and replaces Governor Lowe, she will be a person of immense experience and
expertise, an outstanding and leader and she will lead a Reserve Bank that weighs up the economic
conditions as they face them at each meeting. Can we expect a similar approach,
a consistent approach on tackling inflation? Well, again, I'm not going to pre-empt the
decisions that Michele Bullock might recommend to the board. I think that's really important.
This is a long-standing and cherished feature of the Reserve Bank, that it is independent.
Michele Bullock is fiercely independent. She will undertake this task with professionalism
and diligence, drawing on all of that experience and expertise that she has.
In a speech she did give a few weeks ago, Michele Bullock said, "The economy would
be closer to a sustainable balance point if the unemployment rate were at 4.5%." Do you agree?
Well, there's obviously debate amongst the economists what full employment is,
whether it's 4.5 or a little lower than that. That's been more or less a perennial feature of
the economic conversation for as long as I can remember. The point that Michele Bullock was
making in that speech, which, again, I think is relatively uncontroversial, is that as the
Reserve Bank forecast and the Treasury forecast, have inflation moderating over the coming months,
they do have a tick-up in unemployment as well. I've been upfront about that. The challenges in
our economy are substantial, global and domestic. I think the slow-down in our economy is expected
in those forecasts to be significant. That will have implications for the unemployment rate, which
is the point that Michele Bullock was making. Do you agree the economy would be at a more
sustainable point with an unemployment rate of 4.5%?
I use different words to describe it. Our expectations in the Treasury forecasts is
that unemployment will tick up. It is at 3.6, which is pretty remarkable. We have
an incredibly resilient labour market, it’s one of the big strengths that we have going
into this period of global economic uncertainty. There will be a debate
amongst economists about what full employment looks like in their definition. We’re expecting
it to tick up a bit as the economy slows as a consequence of higher interest rates
and global economic uncertainty. Do you think it's possible to get
inflation back to the target zone without driving unemployment higher?
Remains to be seen. Clearly the Reserve Bank's twin objectives, price stability and full
employment - that's deliberate. That's something I'm very keen to maintain after we implement the
recommendations of this review. The Government has a similar approach. We're taking the edge
off these cost-of-living pressures without adding to inflation at the same time we invest
in the right kind of workforce into the future. That's because whether you are the Reserve Bank
or the Albanese government, we want to see as many people in jobs as we can but we have
gotta get on top of the inflation challenge, which is the primary challenge in our economy.
The primary challenge no doubt about it. For the Government's part, we have heard you talk
about what you have done in the budget. Is there any more you think the Government
can or should do to put downward pressure on inflation or do you think you've done enough?
Well obviously at every budget, you make sure you are aligning your plan and policies with
the economic conditions as you confront them. What we have rolled out so far has been textbook fiscal
policy in the circumstances. Moderating inflation but higher than we’d like, global uncertainty,
and we’ve done a range of things which are very important. We've got the budget in much better
nick, not at the expense of providing cost of living help but in addition to doing that,
our cost-of-living help is targeted in areas like out-of-pocket health costs, electricity,
rent and some of the other particular pressure points. We found $40 billion of savings over two
budgets compared to zero dollars in savings in the last Liberal budget. So all of those things
are about getting the budget in much better nick at the same time we provide help for
people to get them through through a difficult period. As Governor Lowe has acknowledged,
our budget is actually taking the edge off inflation rather than adding to it,
which is important. If down the track we need to do something differently or we need
to do something extra, of course we contemplate that down the track. Right now, we're rolling
out what people would consider to be textbook fiscal policy in the circumstances we confront.
If inflation remains stubbornly high, isn't getting down fast enough,
you are prepared to do more rather than just leave it to the Reserve Bank?
We have always acknowledged that we have got a role to play. That's why we have the first
surplus in 15 years, our predecessors were unable to do that. We have done that because
we have banked so much of the upward revisions to revenue. We found $40 billion in savings we
are still providing cost-of-living relief. All of those things are important. If our economic
plan and our next budget in May needs to take into consideration a different set of economic
conditions, obviously we will do that, too. You are travelling today to India for a
G20 Finance Ministers Meeting. Philip Lowe is heading there as well. What are
you hoping to achieve there, Treasurer? A couple of things. This is an important
opportunity in Gandhinagar in India to confer with my ministerial counterparts
and for Governor Lowe to confer with his Central Bank governor counterparts as well.
Understanding what is happening in the global economy is absolutely central to making sure
that our economic policies and plans are aligned with these sorts of conditions we
are talking about. What is happening right now is the pressures coming at us from around the
world are being felt around kitchen tables. We need to understand that. A big part of it is
understanding how we can best align our policies here with what is happening around the world. We
want to make progress on sustainable finance with investing in the energy transformation.
We want to make sure the Pacific is front and center in the world’s considerations about
climate change and other things. We want to make progress on multinational tax reform. All these
issues are important. They will be part of the discussions over the next couple of days in India.
How worried are you about some of the weaker data out of China at the moment?
It's critical for the Australian economy. It's been a focus. I'm not going to pretend
otherwise. There's been some developments out of China that we are monitoring incredibly closely.
The global economy is a pretty precarious place right now. The Americans are proving
to be resilient, the Chinese economy has shown some worrying signs. Europe is in
recession and others as well. As always we try to take into consideration, this really quite
substantial economic global uncertainty, it is having implications here. Combined
with the impact of these rate rises, it's one of the reasons we do expect the Australian economy
to slow quite considerably. Good luck with the trip,
thanks for joining us this morning. Appreciate it David, thanks very much.