MIL-OSI Australia: Interview with Haidi Stroud-Watts, Bloomberg

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Source: Australian Treasurer

HAIDI STROUD‑WATTS:

Treasurer, it’s such a pleasure to have you with us.

JIM CHALMERS:

Thanks.

STROUD‑WATTS:

You know, as I mentioned, you’ve got unemployment rising, you’ve got growth, anaemic at best, and quite a lot of stickiness when it comes to key parts of inflation. Is there any worry for you that we’re headed towards even a mild form of stagflation, 70s style?

CHALMERS:

That’s not our expectation and we do have a remarkably resilient labour market still and that’s one of the big differences here. We’ll learn more about our labour market tomorrow when we get our labour force data. We have had slower growth but we’ve had inflation moderating to almost half what it was 2 years ago, more than half what it was – less than half what it was at its peak. So, we’ve got moderating inflation, we’ve got a resilient labour market, we’ve got relatively weak growth and in all of these circumstances, it was really important in our Budget that we carefully calibrated our fiscal settings to respond to those economic conditions and those economic challenges. And I’m confident, but not complacent, that we can achieve a soft landing here in Australia on that narrow runway that our Reserve Bank Governor has described.

STROUD‑WATTS:

And the energy rebates obviously were a core part of your Budget recently. Do you expect that’s going to give the room for the RBA to start cutting?

CHALMERS:

Well, it remains to be seen and I try not to predict or pre‑empt decisions taken by our independent central bank. My job is to focus on the fight against inflation, we’ve made welcome and encouraging progress on that front but as we’re seeing around the world, inflation doesn’t always moderate in a perfectly straight line, it zigs and zags, we’re seeing that in the US and elsewhere. And so overall, inflation has moderated considerably, but we need it to moderate further and faster. Our Budget will help play a role in that by the way we’ve designed our cost‑of‑living help to take the pressure off inflation and also the responsible way that we’re managing the budget. The bottom lines in our Budget are substantially stronger than they were a couple of years ago and that’s important too.

STROUD‑WATTS:

You just referenced the zigs and zags that we’ve seen. When it comes to kind of the structural uncertainty that have been paid out for inflation, how fine is the balance of risks for policymaking?

CHALMERS:

Oh, there is a balance that needs to be struck responding to these risks in the economy. As you said before rightly, we’ve had slowing growth. Consumption is especially weak when it comes to discretionary spending. Our labour market is a little bit softer, but still remarkably resilient. So, we need to balance all of these considerations, all of these factors and influences including global influences, China and the US and around the world and in doing that, what we’re trying to do and what I’m confident we are doing is we are fighting inflation without smashing our economy. We’re achieving that balance pretty effectively so far, but there are no shortage of challenges in the economy, global and domestic, and we’re cognisant of those too.

STROUD‑WATTS:

Is it a risky time to be running a procyclical campaign policy at this point? Does that make it sort of harder potentially, if there is a risk of a downturn?

CHALMERS:

I don’t see it the way that you’ve described it and our Reserve Bank Governor was before the Parliament last week and said the fact that we had turned 2 very big deficits into 2 substantial surpluses was helping in the fight against inflation. We’ve made really quite substantial progress, historic progress in Budget repair and that’s helping in the fight against inflation and our overall approach which has been responsible, the way we’ve designed our cost‑of‑living help, our budget is taking the edge off inflation rather than adding to it. The Budget is not the only influence, obviously, on our monetary policy, on our interest rate settings, or indeed on our trajectory of inflation but it does have a role to play, and we are doing our bit.

STROUD‑WATTS:

Do you think this is a time where we need to see more revenue raising by Australia? Would you see at some point a broadening of the tax base, for example?

CHALMERS:

I think in any budget you need to do a combination of things. You need to make sure the revenue base is sustainable and we’ve done a number of things over the first 3 budgets of our government to make the tax base more sustainable, to pay for aged care and disability care and pay for the debt, the interest on our debt, pay for defence and healthcare, these big pressures, structural pressures in our Budget. We are making our tax system more sustainable to help pay for that but we’re also finding savings in our Budget, almost $80 billion in savings. We’re also banking the majority of the upward revisions to revenue to make sure we’re getting the budget into much better condition and all of that together helps to make room to fund our priorities, to pay down debt and also to buffer ourselves against some of this global uncertainty that we’re seeing.

STROUD‑WATTS:

And on the monetary side. Are you happy with Michelle Bullock and the job that she’s doing? It’s been about 9 months now since she’s taken the helm.

CHALMERS:

I’m obviously very proud of the appointment that we made of Governor Bullock. I think people are seeing some of the reasons why we’re proud of that appointment. The clear speaking, the communication has been an important part of that but it’s not really for me to kind of engage in an ongoing performance review of Governor Bullock or any other governor in our system – the governor does her job independently. The Reserve Bank board takes decisions independently from the government. But we are doing our bit in all of the ways that you and I have talked about today.

STROUD‑WATTS:

It’s going to be a busy weekend with the Chinese Premier’s visit. What are the economic stakes for Australia?

CHALMERS:

Obviously, this is an incredibly important economic relationship for Australia and Premier Li’s visit will be a really welcome opportunity for us to continue to engage, to continue to stabilise a relationship which has no shortage of challenges and complexities. It can be a complex relationship to manage but what we’ve shown, I think, in the last 2 years is that by engaging, by standing up for our interests when it’s necessary to do so, but also looking for ways to engage and stabilise the relationship, there can be good economic dividends from that. We’re very pleased to see almost all of the trade restrictions lifted over the past couple of years – that’s important for our employers and our industries and our exporters. We recognise and understand how important that economic relationship is and Premier Li’s visit will be an opportunity to advance that even further.

STROUD‑WATTS:

We were talking about the inflation numbers for China and obviously for Australia. We’re closely watching the developments when it comes to the economic recovery, we hope is an economic recovery. Do you think the recovery is on foot? Do you think the property sector is at least out of structural levels of direness that we’ve seen? And do you think that translates to still a longer‑term demand for Australian commodities?

CHALMERS:

We’ve acknowledged and understood and felt some of the weakness in the Chinese economy in recent times, recent quarters and that won’t fix itself overnight. Even with some of the interventions by the authorities, we’re still seeing some underlying weakness in the Chinese economy, and that does impact on our commodity prices and on our economy more broadly, so we watch that very closely. The thing about the global economy, it’s a mixed bag – China has been a bit weaker, the American economy has been a bit stronger, Canada’s got higher unemployment, Europe has seen almost no growth, and so all together, this is a difficult global environment to navigate. And again, it’s why it’s so important we engage with our trading partners, we get the budget in better nick to buffer ourselves against this global uncertainty, we fight inflation without smashing growth. All of these conditions we’re seeing around the world and around our country justify the approach that we’ve taken in our Budget.

STROUD‑WATTS:

There’s been quite a bit of interest around Northern Minerals and the shareholders thereof. How do you engage with China when it comes to strategic minerals given that we know that the Premier is likely to visit a lithium refinery in WA?

CHALMERS:

We’ve been very upfront about our interests here and where we need to advance our interests, we’ll do so. Whether it’s in the Foreign Investment Review Board process or in other ways, we see critical minerals really as the opportunity of a century for Australia. There’s a lot of interest from around the world, not just from China, in our critical minerals, and that’s because they are such a crucial part of the future economy. And so my job in addition to engaging with the Chinese, in addition to making sure that our Foreign Investment regime is robust and implemented properly, is to make sure we make the most of this critical minerals opportunity. We want to make Australia an indispensable part of the global shift to net zero, this big energy transformation that’s happening around the world and critical minerals are an important part of that.

STROUD‑WATTS:

China could make or break that, though. If you take a look at the Indonesian nickel impact on Australia’s nickel boom, you can’t beat them. Do you join them? Do you work together with Beijing?

CHALMERS:

Obviously there have been some concerning developments in the global nickel market, and we’ve been upfront about that as well. We engage with our own exporters and employers, businesses substantially on that question. We want to make sure that these global markets for critical resources are operating efficiently and we want to make sure that Australia is a successful part of that.

STROUD‑WATTS:

Clearly, the antenna is up there when it comes to foreign interest in strategic areas of investment, is this something that’s going to be a key focus do you think going forward?

CHALMERS:

Well, when we announced our changes to the Foreign Investment Review Board process, the regime, we made it very clear that in some areas we’ll be strengthening the regime, in other areas, we’ll be streamlining the regime, whether it’s critical infrastructure or critical minerals or critical technology. Obviously, like any country, we’ll be looking to strengthen that regime to make sure that any investment in those critical areas is in our national economic interest.

STROUD‑WATTS:

There’s already been a number of overtures in the setup to the [INAUDIBLE] visit in terms of reducing the tariffs and sort of smoothing out that relationship. Do you think that relationship is on a steadier footing? What are you hoping to take away from the visit?

CHALMERS:

Certainly the relationship is on a steadier footing but we are not naive or unrealistic about the challenges of managing what is a complex relationship in our region and we’ve been upfront about that as well. Our job is to engage, to do that in a meaningful and respectful way, to speak up for and stand up for our national interests when that’s necessary, but overwhelmingly to manage that relationship in the interests of our people and our economy and I think we have made some good progress there, and we see Premier Li’s visit as an opportunity to advance that progress even further.

STROUD‑WATTS:

You’ve also said that Australia will be fine in the case of another Trump presidency. But, you know, history tells us that left‑leaning governments tend to fare not that well under Trump in terms of a global context. Are you wargaming for what might happen, obviously, with respect to what would happen with America’s policies towards China, Australia is a vulnerable proxy there, too.

CHALMERS:

Well, a couple of things about that. Obviously, we follow the political developments in the United States very closely, as everyone does around the world but we are confident that the relationship will be strong no matter who the Americans choose to lead them. We play the cards that we’re dealt when it comes to decisions taken by democracies around the world and we will engage enthusiastically with our American friends no matter what the outcome of the election is and I think what we showed when President Trump was president last time is that Australia has an important role to play in that relationship. When it comes to the description that you applied to our government, I see our government as a real centrist, middle‑of‑the‑road government, taking decisions in our national economic interest, not overloading on ideology in either direction and I think that is a useful way to think of us and certainly that’s the way that we engage with friends around the world.

STROUD‑WATTS:

Treasurer, it’s a pleasure having you with us. We appreciate your time.

MIL OSI News