SENATOR THE HON KATY GALLAGHER
Minister for Finance
Minister for the Public Service
Minister for Women
Date: Tuesday, 4 July 2023
MATTHEW DORAN, HOST: A sigh of relief when you saw the RBA's decision like so many Australian households.
SENATOR THE HON KATY GALLAGHER, MINISTER FOR FINANCE: Well, I think a pause will be relief for a lot of households across the country who have been feeling the pressure over the last 12 months of interest rates increasing, cost of living – all of those pressures coming on household budgets means that, you know, a pause for a month I think is a welcome relief.
DORAN: When you read the statement that's been put out by the RBA Governor and no doubt you do have more information than we do out in the general public. But what are your key takeouts from Phil Lowe and the Governor's read on the status quo and how the economy is ticking along at the moment?
GALLAGHER: Yeah, well, I think it's largely going as we had expected and as we had forecast in the Budget. You know, we are seeing growth in the economy slowing, we're seeing through a whole range of economic data, you know, whether it be consumption data or confidence data that we are seeing the effects of, I think 12 months of tightening monetary policy and the pressures that people are under. So I think, my reading of it – and I don't want to put words in the mouth of the Reserve Bank – but my reading of them is that they have made this decision to pause based on, I guess, some of the uncertainty about the economic outlook. I think a lot of what they had in their decision and we get the same information that you get, you know, are things that they've made comment on before. So, keeping an eye on wages, looking at productivity, all of those issues they've been mentioned before.
DORAN: There are of course comments and it seems like it's the proforma comments that we get from the RBA about any future decisions, leaving the door open for further hikes to interest rates in coming months if the situation doesn't improve. Would you be hoping that the pause button, they may be a bit more likely to use that pause button in the future to allow that effect of the cumulative interest rate hikes to really be felt in the economy because it does take some time to flow through, doesn't it?
GALLAGHER: Well, I think they make that point themselves in their decision today. I mean, they've got a very clear job to do. It's to make sure they deal with the inflation challenge without crunching the economy. And, you know, the Governor talks about that narrow path. And I think from our point of view, from the Government's point of view, noting that the independence of the Reserve Bank, we've got to keep focused on the things that we need to do to make sure that we are doing as much as we can to manage the inflation challenge too, which is why our Budget took all the decisions that we took there, whether it was repairing the Budget, finding savings, banking the upward revision, delivering the first surplus in 15 years, and at the same time trying to invest in the productive side of our economy so we're dealing with this productivity challenge which the Reserve Bank mentioned today as well. So, you know, things like investment in people, in skills, the energy transition, and how we position for the jobs of the future, that's all part of the decisions we took in May. And it was focused on trying to deal with the inflation challenge, address cost of living pressures where we could, where it was responsible to do so, but also set up the economy going forward. You know, we've, I guess had 10 years where decisions have been avoided or not taken and we're trying to clean up that in the decisions we took in May.
DORAN: I want to pick up on that productivity issue because the Reserve Bank does say that wages are ticking along but they are increasing ever so slightly, and that that will not put too much pressure on inflation as long as productivity is also rising. You talk to some business groups, and they say that productivity isn't ticking along in the way that it should what more can the Government be doing to try to fuel that fire.
GALLAGHER: Yeah, so I mean, from the Government's point of view, we welcome all the increases that we're seeing in wages growth. I mean, wages have been stagnant for a decade. We're seeing some improvements in that for the first time in a long time, and I think that will make a real difference to working people around the country that get a few bucks extra an hour for the work they do. So we want that but we want a more productive economy as well. So you know, how we deal with that, through the policies that we're rolling out now. That's why, you know, the Jobs and Skills Summit was one of the first things we did in Government and why skills and training is a big part of this Budget. It's why we're putting all the effort in getting the energy transition right and making sure that we're dealing with that and that's why we need to invest in innovation, technology, support small business. All of those decisions were part of the decisions we took in the Budget. You can't flip the productivity switch overnight. We've had, again, a decade of the worst productivity growth in 60 years. And so we need to start turning that ship around and our policies that are designed to do that.
DORAN: Let's pick up on cost of living pressures because you've noticed there that wages are going up but in many cases, particularly for those at the lower end of the spectrum, they are only going up by a couple of dollars here and there. Whereas the price of basically everything is going through the roof and is continuing to do so. Do you think Australians are going to have a concern that the government is not doing enough here to actually help them with some of those cost of living pressures? I know that you point out there's only so much the Government can do without overcooking the economy and putting too much money in there. But do you think Australians understand that pressure that is present on your decisions when it comes to that situation?
GALLAGHER: I think Australians understand what's happening at the moment. You see that reflected in the economic data that we get you know, when you do see consumer confidence and consumption, people change their behaviour based on their real life experience, what's happening for them, what's happening to their family. I think as the decisions we took in the Budget start rolling out so people will get that energy bill relief, they'll see it through their childcare fees, they'll notice that when they go get their script from the chemist, those types of investment when they get bulkbilled at the doctor, they'll see the effort that's going into looking at how we can really target that cost of living relief without adding to the inflation challenge. And that is and was a careful consideration that we took in the Budget was how do you sort of take the edge off some of these costs of living pressures and you know, make sure that inflation is coming down at the same time because if we are feeling inflation, as you say, or if decisions were taken that added fuel to inflation, that's worse for households over time. So that's why I think our Budget was so carefully calibrated to making sure we could do what we can for those that need that extra support but seriously look at how we restrain and show restraint from spending in the short term when inflation is at its highest.
DORAN: Is it a bit too careful, though, because we look at something like childcare. We're already seeing childcare providers ratcheting up their fees to families and much of that benefit that will come through increased childcare subsidies is just going to be eaten up the moment it pops up in a family's bank account.
GALLAGHER: Well, I think families will notice that it. They'll notice that when they come through their fees. I mean, for a family on $120,000 it'll be saving in the order of $1,700 a year. That's a big difference. And we are doing some, you know, we're watching the early education sector pretty closely. We've got the ACCC doing a review into what are the cost drivers in childcare and early education and care. We've got the Productivity Commission Report underway looking again into the future of what Early Education and Care looks like in the future. So these are things that we take seriously. We see huge economic potential, particularly in a productivity lens from getting early education and care right. It's a $5.4 billion investment into that sector. I think that shows you how seriously we're taking it.
DORAN: And before we go, one other issue. There has been further confirmation from Senator Linda Reynolds saying that she will be referring the confidential settlement between the Commonwealth and former staffer Brittany Higgins to the National Anti-Corruption Commission. You've made your views on this quite clear in the past. So in this broader discussion that we're seeing at the moment and including the warnings from the Commissioner himself about the politicisation or the weaponisation of his agency, do you fear that moves like that could set a precedent here for how politicians are going to be interacting with the NACC?
GALLAGHER: Well, I think, you know, I refer back to the comments that have been made by the Head of the National Anti-Corruption Commission. I don't think there's any benefit in politicians talking about matters that are the responsibility of the NACC. It's up and operational, it was an election commitment of ours, we've delivered upon it and now it's over to them.
DORAN: Katy Gallagher, thanks for your time.
Lisa Glenday 0403 931 209 | Gallagher.Media@finance.gov.au