ABC MELBOURNE DRIVE WITH RAF EPSTEIN
TUESDAY, 6 DECEMBER 2022
SUBJECTS: interest rates, inflation, coal and gas prices
RAF EPSTEIN (HOST): Eight consecutive rate rises. Interest rates, or the central rate, hasn't been this high since the end of December 2012. These are the issues that are faced by the Albanese government. Andrew Leigh is the assistant Minister for Competition Charities and Treasury. Thanks for joining us.
ASSISTANT MINISTER FOR COMPETITION, CHARITIES, AND TREASURY ANDREW LEIGH: Pleasure, Raf. Good to be with you and your listeners.
EPSTEIN: I know you heard that call from Montrose. I'm sure that is not unfamiliar to you. What do you say to someone who thinks, A, the strategy isn't working and B, it's crushing them psychologically when you call it?
LEIGH: Jeremy, I think, is speaking to how many Australian households are feeling today. Eight consecutive rate rises, taking interest rates to 3.1%. And that means for somebody who's on a $500,000 mortgage, this additional rate rise will be costing them an additional $75 a month. That's going to be tough for many households, particularly as we head into Christmas. And the independent Reserve Bank has acknowledged the impact that has on Australia. They've got a mandate to keep inflation in the target band 2 to 3%, and we've just had a 6.9% inflation reading, which is why they're seeking to make this decision. The statement says that global factors explain much of the high inflation, but there's still strong domestic demand relative to the ability of the economy to meet that demand.
EPSTEIN: I guess Jeremy would want to know that at least you think what the Reserve is doing, does the government think it's working?
LEIGH: Well, it's up to the Reserve Bank to explain its decisions on the demand side. Our focus is on the supply side, which is why the budget had measures for cheaper childcare, cheaper medicines, more affordable housing. That's why we're moving in the energy space. That's why we're also trying to get wages moving again through the Secure Jobs, Better Pay Bill. We're aware that there's a real distinction between what the government does on the fiscal side and what the Reserve Bank does on the monetary policy side. And it's really critical we're operating in concert with one another. So we ensure what economists call a soft landing out of this challenging time.
EPSTEIN: I 100% appreciate the Bank's independent, but I think people who are really struggling, like Jeremy, want to know that you think, as a government, that things are heading in the right direction. So maybe I shouldn't ask you if you think the Reserve’s strategy is working, but are all of the right things being done? Can someone like Jeremy see sort of a bit of a glimmer of hope on the horizon, do you think?
LEIGH: Well, I've been in the economics game for decades and I don't remember another time in which the forecasts were as uncertain as they are right now. Whether that's what's going on with harsh weather events, whether it's the future of the war in Ukraine, whether it's what other countries will do in terms of their rate changes, or whether it's what's going to happen out of how China deals with this latest wave of COVID There's a lot of uncertainty around right now and they're unusual economic circumstances. So you've got this high inflation reading, but at the same time, we've got the unemployment rate at 3.4% and high levels of job vacancies and job ads. So it's a challenging time for economic policymakers. What Jeremy can know is that the Federal Government is doing all we can through childcare, medicines, affordable housing and working to get wages moving and that the Reserve Bank's focus is on trying to get inflation back within the target band. None of that makes it easier, though, for households who are going to be paying more on the mortgage, and I certainly appreciate that pressure that's going to be hitting many Australian households, the difficult conversations people will be having around the dinner table tonight about what aspect of spending they're going to have to cut back on in order to make those higher mortgage repayments.
EPSTEIN: There's a lot of pieces on the chessboard. I don't want to get into the intricacies of what the Government is going to do to cap coal and gas prices, and you probably don't want to answer the questions, but I'll try one question. Queensland and New South Wales are receiving some record royalty streams at the moment because coal and gas is selling at such a high price. If the Federal Government wants to cap those prices, New South Wales and Queensland wants some compensation. Is it possible that we, as Victorian taxpayers, as national taxpayers, may end up paying compensation to New South Wales and Queensland because they'll get less from their gas or coal royalties? Is that part of the solution, maybe?
LEIGH: Well, I don't want to preempt the discussions taking place in National Cabinet on Friday afternoon. Certainly we know that Australians are paying a big price for nine months of Russian aggression and nine years of Coalition incompetence when it comes to the energy space. And the discussions on Friday, I hope, will be positive and constructive. I hope that all states will recognise that there is a national interest in maintaining a strong industrial base and not having factories closed down as a result of high energy prices. And I hope states will recognise the pressure that's coming on households right now with these significant energy price rises in some jurisdictions. So that's going to be a conversation involving Chris Bowen, Madeleine King, Ed Husic and Jim Chalmers on Friday, along with their state and territory counterparts. I'm hopeful that we will get the national interest put first and get a clear and considered response there.
EPSTEIN: So is that a yes? We'll have to compensate them for their royalties coming off.
LEIGH: Well, I hope we're able to get a landing that doesn't see Australian taxpayers left worse off and ensures that we're able to have shared sacrifice in this space. It's a time at which we do need to be putting the national interest first and I think the National Cabinet conversation will be important.
EPSTEIN: Appreciate your time today. Thank you.
LEIGH: Thanks Raf.