No election spendathon: Chalmers says he’s got the big calls right

Treasurer Jim Chalmers has promised the government will not engage in a budget spendathon to win the next election, declaring it has got the big economic calls right over the past two years and will not mess that up with inflationary giveaways.

Speaking on the Inside Politics podcast, Chalmers said the looming mid-year fiscal update and an expected March budget would be focused on keeping inflation under control and dealing with global and domestic economic challenges.

Treasurer Jim Chalmers being interviewed by senior economics correspondent Shane Wright, chief political correspondent David Crowe and senior writer Jacqueline Maley for the Inside Politics podcast.Credit: Fairfax Media

He also revealed major concessions to win Coalition support for the biggest changes to the Reserve Bank in 40 years.

Cost-of-living pressures and high interest rates have contributed to a sharp slowdown in economic growth, with GDP up by just 0.1 per cent through the first three months of this year. Per capita GDP has been negative for four of the past five quarters.

But inflation, while slowing, is still well above the Reserve Bank’s 2-3 per cent target band, with concerns from some economists that government spending, especially at the state level, is adding to price pressures.

Chalmers said the government would continue to be responsible with its budget spending, noting that while inflation had fallen from 6.1 per cent when it came to office to 3.8 per cent, it was too early to declare “mission accomplished”.

“In every update, every budget that we’ve handed down, we’ve been responsible and we’ve been restrained, and that’s deliberate because inflation is still the primary challenge in our economy,” he said.

“So people can expect us to be responsible and restrained in the MYEFO [mid-year economic and fiscal outlook] and in the election context.”

Asked if Labor would have a “spendathon” election, Chalmers said: “I don’t believe so. Certainly not from our point of view.”

The treasurer suggested voters would reward the government for making the right economic call rather than spending money.

“What we’ve shown is a willingness to make the right economic decisions for the right economic reasons, and the politics, I believe, will take care of themselves if you get those big calls right,” he said.

“Even when you think about the last budget, I got a bit of grief in the press gallery about saying that there are not just inflation risks, but there’s global economic uncertainty. That’s proven to be the case. We’ve been right.

“Our judgments about the economy have been right the last couple of years, and that’s because we’ve prioritised good economic decisions over political decisions. And people can expect that even in the context of an election.”

On coming to office, Chalmers commissioned an independent review of the Reserve Bank, the first in 40 years, which recommended a string of major changes including the creation of a separate committee to make decisions on interest rate settings.

Chalmers had hoped to have that committee in place by July 1. But the Coalition has questioned its membership, with some Liberal MPs claiming the treasurer would “stack” it with people less focused on inflation. The bank has not had inflation within its target band for most of the past 10 years.

According to Chalmers, the Coalition raised concerns around six key issues and he was prepared to give ground on each. They include keeping RBA governor Michele Bullock as head of the bank’s governance board, and flexibility around the length of time people can serve on the board.

He said he was prepared to negotiate an appropriate “landing point” on the board’s make-up with shadow treasurer Angus Taylor.

Chalmers wrote to Taylor on Thursday offering to move all members of the governance board onto the monetary policy committee, in a move that would end the deadlock between the major parties.

“I’m not going to be pig-headed about these reforms,” he said.

“I hope that that means that we can come to an agreement and legislate these changes in time for a start, not in the middle of the year, which is what we had originally intended, but perhaps closer to the start of next year.”

A large part of the government’s agenda has been taken up with housing. The average Australian mortgage has climbed to a record $637,000, increasing by $154 a day over the past year, while record-low rental vacancy rates have pushed rents up at their fastest pace since 2010.

Chalmers said he was worried about the intergenerational and macroeconomic issues created by high house prices, arguing it was one of the reasons the government had pumped $32 billion into housing policies since coming to power.

“We don’t want this to be a country where finding a good place to live near where the jobs and opportunities are being created is a memory. And we don’t want it to be a memory, we want it to be a feature of our economy,” he said.

Listen to the full interview with Treasurer Jim Chalmers on a special edition of the Inside Politics podcast.

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