6PR MORNINGS WITH GARY ADSHEAD
WEDNESDAY 8 NOVEMBER 2023
SUBJECTS: Interest rates; Cost of living measures; Unemployment; Trade with China; Encouraging volunteering.
GARY ADSHEAD (HOST): Dr Andrew Leigh is the Federal Assistant Minister for the Treasury, and he joins me on the line. Thanks very much for your time, Andrew.
ASSISTANT MINISTER FOR CHARITIES, COMPETITION AND TREASURY ANDREW LEIGH: My pleasure, Gary. Great to be with you and your listeners.
ADSHEAD: I mean obviously the RBA's decision yesterday on Melbourne Cup Day of all days is not helping you or your Government's argument around trying to keep a lid on cost-of-living expenses for people, is it?
LEIGH: Well Gary, the Reserve Bank will make its own independent decisions. So they're guided by the need to get inflation down. If you're worried about a cost-of-living crisis then curtailing inflation is the best strategy. As they point out in their statements, unchecked inflation causes problems for businesses and households and planning, it erodes savings and they argue even worsens inequality. What we need to do as a Federal Government is to work alongside that, making sure that we're not putting an unfunded cash splash in the economy, but we are providing responsible cost-of-living relief. Thinking through the measures we've got in place already - the bulk-billing incentive, the historic increase to childcare, the big increase to Commonwealth Rent Assistance, the energy bill rebates - they’re all targeted and all operating alongside the first surplus in 15 years to ensure that the Commonwealth Government is taking pressure off inflation.
ADSHEAD: See, the reality is, though, that if they are to make another interest rate hike before Christmas, it will come at a time when, you know, just because of instincts of what we are all about, and that is to spend money around Christmas time, it's just - it's going to sort of negate itself, isn't it, because people will be spending and putting money into the economy prior to, and just after Christmas, around holiday time. So you can almost say it's a given that they're going to have to hit us with another interest rate rise?
LEIGH: I don't think another interest rate rise is inevitable but that will be a matter for the Reserve Bank and its board, made independently from government. What we need to do as a government is to be ensuring that we're working alongside the independent Reserve Bank. They will have taken account of the fact that expenditure normally rises at Christmas time, that's not going to be a surprise to them. What they're looking to do is to put a lid on inflation and the pernicious impact that it has on savings and investment decisions.
We know if inflation gets out of control for too long, it can be really hard to get the genie back in the bottle. So that's the challenge the Reserve Bank's working on. The government doesn't run monetary policy, we run fiscal policy, and our measures are all about providing responsible targeted cost-of-living relief.
ADSHEAD: The other interesting thing, of course, we've just seen it's the same levers get pulled by the RBA, regardless of who the Governor is. There was such a hullabaloo about Philip Lowe. He became sort of public enemy number one, but the reality is, you know, you replace him with Michelle Bullock and it's the same policy settings.
LEIGH: Certainly in Australia we have monetary policy operating through a household channel and business channel. A change in interest rates flows through to borrowers that have variable rate mortgages and also affects the decisions of businesses and also has an impact through the exchange rate. All of that is well known and is central to the way in which the Reserve Bank operates. What’s central too, Gary, is that clear distinction between their job and our job. Countries really get into strife when they have politicians trying to tinker with interest rates. That would massively erode confidence in our economy and that's why you will hear Jim Chalmers, Katy Gallagher, Stephen Jones and I making clear that there is a firewall between the job the Reserve Bank has and the job we have. And the importance for us of that is providing that responsible cost-of-living relief. 60-day prescribing for people with long-term health conditions is a game changer. You visit the doctor half as often and you pay half as much for those medications. And that provides cost of living relief to those people.
ADSHEAD: What about further cost-of-living relief if what we sort of expect to happen, and that is that inflation will be difficult to manage during that whole Christmas holiday period that we see another interest rate rise, are you going to have to look at a suite of new measures?
LEIGH: We're always looking at ways of providing responsible cost-of-living relief in the mid year budgets or in the May budget next year. But it is important, Gary, to note that a range of these measures are only now flowing out. So the increase in bulk-billing, the biggest increase in the 40-year history of Medicare, only took effect on 1 November. The energy bill rebates are flowing through into bills people are receiving right now. The work that we did on 60-day prescribing only started in September. So a range of these measures are affecting household budgets right now, as we attempt to ease the squeeze for people who are feeling those cost-of-living pressures through their home mortgage payments.
ADSHEAD: Can I get your view on this, some commentators are suggesting that this rate rise might be the one that sends us towards a recession, what do you think of that?
LEIGH: That's not our current forecast. Our current forecasts are for the inflation to come back within the target band around 2025. We've already seen a moderation in inflation, quarterly inflation was worst just before the Liberals left office, annual inflation is steadily trending downwards. I'm still hopeful of a soft landing. What we've got in Australia, Gary, is a remarkable situation now with more jobs having been created this far into our term than we've seen in any full term of any first-term government in Australia. That’s half million jobs. Our unemployment rate is sitting below 4%, that is a strong signal for the Australian economy. That means a whole lot of people are working who would be out of a job if unemployment was higher.
ADSHEAD: And that actually is the saving grace, isn't it, really? You've hit the nail on the head, haven't you, Andrew. Unemployment, there's plenty of work out there at the moment and so if we are in a situation where the unemployment rate was higher, then there would be more people struggling to actually pay that mortgage bill.
LEIGH: Unemployment is a central marker of whether or not the economy is doing well and also central to inequality. The real marker between the haves and have-nots in society is often who has got a job. So when you've got the Prime Minister going over to China and managing to work constructively with the Chinese so that some $19 billion of the $20 billion of impediments to our trade are taken off, that represents hundreds of thousands more jobs in exporting industries. We need to be engaged in those multilateral and bilateral trade negotiations because Australia - and particularly Western Australia - have benefited so strongly from trade.
ADSHEAD: Can I just ask you finally, you know, the seaming imbalance that's there at the moment when we see the corporations coming out with these record profits, we saw Westpac on, you know, off the back of some of these interest rate rises announced a $7.2 billion profit while, you know, you're out there having to talk about the pressures that are on everyday household budgets, there's just something inequitable about the situation right now, isn't there?
LEIGH: Certainly firms will have to be accountable to their shareholders and you saw a strike against the Qantas remuneration report that came down recently. I'll leave it to those CEOs and executives to be answering to their shareholders. We need to make sure that the balance is right and particularly the reforms we're putting in place around multinational taxation have been important in this regard, making sure that multinationals pay their fair share is a priority for us, as is the tax transparency. So making sure that those rules that corporations, large and small, are doing the right thing.
ADSHEAD: I suppose I could lead that into the fact that I know you've been talking about unpaid voluntary work in the last few hours. What's your message there about that inequality, those people that go out there doing the right thing but get nothing for it at the moment?
LEIGH: Yeah, it's a good point. Our society really is run to large measure on the hard work that people in charities and not-for-profits do. If you're thinking about the social sector or the arts sector or the environment sector, charities and not-for-profits are absolutely crucial. We'd like to see more Australians having the opportunity to volunteer and the opportunity to donate to charity if they've got some spare dollars. So the Productivity Commission review into philanthropy, Volunteering Australia’s National Volunteering Strategy, the charity town halls I've been doing across the country, including two in Perth, are all about trying to build a stronger and more connected Australia.
ADSHEAD: Right now, you'd have to say that organisations like the Salvation Army and others are picking up the slack because of the number of people that are knocking on their door in terms of assistance?
LEIGH: Sure are. I spoke at the Salvos' 140-year anniversary conference today. They were reflecting that back to me that the number of people coming in the doors is going up and the resources they have to assist those people aren’t, in some cases, keeping up with demand. The Salvos do a great job but they're just one of many community organisations out there helping the most vulnerable. As we engage with charities and not-for-profits, we're doing so not only to reduce inequality but also to build a more connected Australia. A country that is more of a nation of ‘we’ and less a nation of ‘me’.
ADSHEAD: Andrew, thanks for joining us and giving us your time today.
LEIGH: Always a pleasure, Gary. Thank you.