ABC AFTERNOON BRIEFING
THURSDAY, 29 SEPTEMBER 2022
GREG JENNETT (HOST): Well, we know full well that Australia's got an inflation problem at present, running at just under 7% and expected to sit at around that level for a little while. But we also now have a glimpse at more accurate data that tells us when that peak just might reach or be passed. Now, Competition and Charities Minister Andrew Leigh is responsible for the Bureau of Statistics, amongst other things, and he's with us now. Welcome back, Minister. This is a bit of a revolution, moving to monthly measurement. Why is more frequent measurement of inflation any more accurate or useful to governments, policy makers?
DR ANDREW LEIGH, ASSISTANT MINISTER FOR COMPETITION, CHARITIES AND TREASURY: Greg, it doesn't really matter at a time when inflation is low, as it's been for much of the past decade, but it really does matter at a time like the present, when we're trying to ensure that we get inflation under control. With the government is focusing on supply side reforms and the Reserve Bank focusing on demand side reforms, we really need that frequent updating. Australia has been an outlier in having only quarterly inflation figures. So full credit to David Gruen and his team at the ABS for bringing out these experimental monthly estimates.
JENNETT: So it's timely for the reasons you just outlined. We were going to get there anyway I think it's just that it's landed in a sweet spot. In what sense is it experimental? And how can we be certain that it is, in fact as accurate as the quarterly reporting?
LEIGH: Well, unlike other figures that the Bureau of Statistics brings out, the inflation number isn't revised, and that's because it's often locked into contracts, it has an immediate flow through to government payments and to business. And so all of those indexation measures will still continue to be based on the quarterly numbers for the time being. The Bureau needs to make sure that it's got those monthly figures right. But, Greg, it does show some interesting patterns across sectors. Over the last year, you've seen the price of new dwelling construction up 21%, fresh fruit and vegetables up 19%. Anyone who's been to the supermarket lately will know that one. And then you've got areas like communications, where prices are only up less than 2% over the last year. So some real divergence right across the economy.
JENNETT: So these are trends you're already able to pick up or discern from the first run of monthly numbers. But how divergent are they from what we would have been getting anyway through the quarterly reporting? Are they greatly at odds? Are they giving us deeper new insights?
LEIGH: They're not bang on, but certainly we're getting that greater frequency, which is really important. One of the questions that people are asking when discussing inflation is whether it's predominantly goods inflation or whether it's flowing over to services inflation. The last US inflation figure did suggest that inflation had become more embedded in the economy. I'm hopeful that we're still enduring a more transitory shock. I'm on what Paul Krugman calls ‘Team Transitory’ in believing that it's going to be possible for the world to bring inflation back under control over the coming years.
JENNETT: And this country any faster than has been projected in recent budgets and statements?
LEIGH: Well, we've got lower inflation now than many advanced countries, Greg, but we're certainly not immune from those global pressures. Australia is a very internationally engaged country, and so for something like fuel, for example, what's going on in Ukraine very quickly flows through. But the Reserve Bank is very focused on this. The Government's focused on this through our cheaper childcare reforms, through our reforms on renewables, through trying to make sure we're doing what we can to unlock supply chain blockages. To really ensure we get inflation under control.
JENNETT: Since we're talking about international trends, can I get your thoughts on what's going on with policy in the UK Government or the UK economy, if you like? Higher tax cuts for higher income earners, heavy borrowing to fund government functions, higher inflation running there. This is really unorthodox economics. What are the risks that are being run there? Risks of contagion that could envelop Australia as well?
LEIGH: Well, certainly the IMF has commented unfavourably on some of the decisions that the British Government announced. They're looking at quite short-term measures which come into effect next April, and including the ditching of the planned company tax increase from 19% to 24%. So I'm reluctant to get into too much criticism of other countries, but would note that the IMF has taken a somewhat dim view of the decisions that the British government has made.
JENNETT: Would there be lessons there for stage three tax cuts scheduled for Australia?
LEIGH: Well, there you're looking at measures which don't take effect until 2024. So much further off on the horizon.
JENNETT: All right, we might be asking you and others questions about that in the Government for a few months, if not years to come. Andrew Leigh, thanks for joining us today.
LEIGH: Real pleasure. Thanks, Greg.