SKY AFTERNOON AGENDA WITH KIERAN GILBERT
WEDNESDAY, 31 MAY 2023
SUBJECTS: Cost of living pressures, Interest rates, CPI, and housing.
KIERAN GILBERT (HOST): Let's return now to the politics of the day. With me is Assistant Minister for the Treasury Andrew Leigh. Andrew, thanks for your time. We heard from Governor Lowe, his appearance before the Senate estimates today. But I want to start with that monthly inflation number. Does it mean the RBA is more likely to hike rates again next week?
ASSISTANT MINISTER FOR CHARITIES, COMPETITION, AND TREASURY ANDREW LEIGH: Kieran, the monthly inflation number is just an inflation indicator at this stage. It'll be a full inflation measure from next year, but right now it doesn't cover the full basket, so you should expect it to be a little bit more volatile. When you strip fuel out of the equation, then inflation actually falls on this monthly number and the fuel number seems to be largely driven by indexation, which, as you know, happens twice a year. So, I don't think it's a major cause for concern. Most economists would agree that the inflation peak has passed.
GILBERT: Well, the Treasurer said as much in Question Time today that we're beyond the peak and obviously Treasury, RBA are of that view. This doesn't shake that forecast at all? That doesn't show that inflation is more sticky than maybe the forecasters had thought?
LEIGH: I don't think so. When you look at that core inflation measure, that's still trending downwards. But that's not to say that households aren't still under significant cost of living pressure. That's why we're pursuing our cheaper medicines policy, which the Coalition was railing against in Question Time today. Our energy bill relief, which the Reserve Bank Governor says will take three quarters of a point off inflation and which the conservatives voted against, and important measures such as targeted relief to people on JobSeeker and youth allowance.
GILBERT: Governor Lowe spoke about the issue of rent, and it's almost like a self fulfilling prophecy here because as rates go up and then rents likely go up to help those repayments and rent becomes this driver of inflation, it's a problem. How do you get around that?
LEIGH: Rents are certainly going up substantially. That was one of the reasons, Kieran, why we put in place the biggest increase to Commonwealth Rent Assistance in 30 years as part of the last budget. We recognise that households are feeling the squeeze and that it's important also to increase the supply of housing. Long term the way in which you ensure that you don't get out of control rents and housing prices is to bring more supply on stream. I'd love it if the Liberals and the Greens would stop their blocking game in the Senate and support the Housing Australia Future Fund. 30,000 more social and affordable homes, 4000 of them directly targeted towards women and children fleeing domestic and family violence.
GILBERT: And with costs up, and the RBA Governor indicating that more people have to live in the accommodation we have, given the supply constraints, how do you think that advice will be received?
LEIGH: I think Australians already feel that housing squeeze right across the board and recognise that it's a big issue for young Australians. It comes up all the time in my electorate, Kieran. I have young couples coming to me at street stalls saying that on two modest incomes, they don't know how they can raise a family and buy a home. It shouldn't be that way and that's why housing affordability is such a big priority for the Government. The big investments in the Housing Australia Future Fund, the investments in homelessness, the investments in the Commonwealth-State agreements as well.
GILBERT: Well, that's the key, isn't it? The states, because you've got to get those planning Ministers at a state level to put the heat on councils to get approvals up, surely.
LEIGH: We've definitely got to unlock more supply and we're doing that through direct budget investments and also through engagements with state and local governments. Things like ensuring better long term leasing arrangements, that's important as well. Making sure that people are able to have stable tenancy arrangements. It's a major issue that my colleagues and I are seeing reflected back to us across the board and it arises from nine years of Coalition inaction in which there was no real focus on dealing with Australia's housing affordability problems.
GILBERT: The Governor said wage rises as they are forecast are not problematic. If we have productivity growth, how does the government intend to drive that productivity growth? Because he says if you get wages increasing, but without that improvement in productivity, that is inflationary.
LEIGH: Well, productivity is fundamental to us as a Labor government. We want to invest in institutions and our competition reforms are a core part of that. We want to invest in individuals and the fee-free TAFE places and university places are part of that. We've got to invest in infrastructure, so what we're doing in the National Broadband Network and the investment in roads and rail infrastructure is a key part of that.
GILBERT: Do you need to be careful in terms of the wages, supporting the wages bid?
LEIGH: The Treasury Secretary said very clearly, we're not in a wage price spiral. I don't think anyone imagines -
GILBERT: Not yet.
LEIGH: Well, I don't think anyone imagines we've got an inflation challenge right now because cleaners and checkout workers are being paid too much. We've got an inflation problem because of busted supply chains the Liberals did nothing to fix during their decade in office and a war in Ukraine. The Government's working hard on the supply side, the Reserve Bank on the demand side, and together, economists believe that inflation will be back in the target band within a couple of years.
GILBERT: Andrew Leigh. Appreciate it.
LEIGH: Thanks, Kieran. Talk soon.