Source: Australian Treasurer
Jim Chalmers:
Headline inflation is now in the mid‑twos and underlying inflation is in the low‑threes. These numbers are better than expected and better than forecasts. What they show is we are making very meaningful, very substantial, and now sustained progress in the fight against inflation. It means that headline inflation is now at an almost four‑year low, and now sits in the middle of the Reserve Bank’s target band, and underlying inflation is now at its lowest in 3 years. These are very welcome developments.
We don’t pretend that it’s mission accomplished on inflation, but we are making very substantial progress. On every measure, we have now made substantial and sustained progress in this fight against inflation. Inflation was much higher and rising fast under the Liberals when we came to office, and we’ve been able to get on top of this inflation challenge and to get it down in a very meaningful way. Inflation is now almost a third of the 6.1 per cent that we inherited when we came to office.
Now, if you look at the numbers, headline inflation was just 0.2 per cent in the December quarter. That makes it 2.4 per cent higher through the year, which is around a quarter of its peak, and in the bottom half of the Reserve Bank’s target band. It means our headline inflation is now lower than most major advanced economies, including the US, the UK, and Germany. And if you look at the underlying measure, the trimmed mean measure, it was 3.2 per cent through the year to the December quarter, down from a revised 3.6 per cent. If you look at the trimmed mean number in the quarter, it almost halved. It’s now 0.5 per cent and that makes it around a third of what it was at the time of the election.
If you look at the big drivers of this moderation in inflation, the big drivers were construction costs, rents, and insurance, and that, I think, is quite an encouraging sign that inflation is moderating more quickly than anticipated, even as recently as the forecast that we released in December. These numbers are better than the market expected, and they are lower than the forecasts for inflation, and both of those developments are very welcome.
Australians collectively can be really proud of the combination of developments that we have seen in our economy in recent times. Inflation is down, wages are up, unemployment is low, and 1.1 million jobs have been created during the course of this Albanese Labor government. Now the soft landing that we have been planning for and preparing for is now looking more and more likely.
Many countries around the world have paid for this kind of progress on inflation with much higher unemployment, or with negative quarters of economic growth. What Australians have been able to achieve is an economy where growth has continued to tick over, albeit slowly, where unemployment has stayed incredibly low, jobs are being created, wages are up, but inflation is down considerably and we see that in the numbers again today.
Our cost‑of‑living pressures aren’t disappearing, but they are easing. We know that the fight against inflation is not yet over, but these are incredibly encouraging signs that we are getting on top of this challenge in our economy. The worst of the inflation challenge is now well and truly behind us, and that’s one of the reasons why we are confident but not complacent about the economy in the year ahead.
We know that our political opponents will try and dismiss and diminish what Australians have been able to achieve together in their economy. We know that Australians are doing it tough. We know how important our cost‑of‑living help is, and we know that the best thing we can do, the most important focus that we can maintain is on the cost of living and that is the government’s approach.
The Albanese Labor government is focused on beating inflation and helping with the cost of living and building Australia’s future. Our political opponents, Peter Dutton and the Coalition, are focused on conflict and culture wars, and they would make people worse off and take Australia backwards.
If we look at the impact of the cost‑of‑living measures over recent years on the pressures that people face right around Australia, it’s worth reminding people that Peter Dutton did not support cost‑of‑living help for Australians doing it tough. If Peter Dutton had his way, Australians would have been thousands of dollars worse off and they would be worse off still if he wins the election and that’s because when he was the Health Minister, he went after Medicare. Coalition governments want lower wages, not higher wages, and he will push up electricity bills with his nuclear insanity that he has been trying to foist on the Australian people.
So the choice and the contrast is very clear. The biggest risk to inflation and the cost of living and the economy in 2025 is Peter Dutton and a Coalition government. For our part, the Albanese Labor government is focused on getting inflation down, getting wages up, rolling out this cost‑of‑living relief, keeping unemployment low because that is the best way that we can make a meaningful difference to the cost‑of‑living pressures that we know Australians are still confronting. Happy to take a few questions.
Journalist:
You talked about, Treasurer, it not being mission accomplished yet, but started off this press conference pretty smiley, talking about an incredibly positive, optimistic set of numbers. Do you see there being an argument, a legitimate argument not to cut rates at this point? Are there pressure points pushing in the other direction still?
Chalmers:
I’m not going to make any sort of commentary which can be confused with giving free advice to the independent Reserve Bank, or making predictions about the decision that they will take when they meet on the [18th] of February. I respect the independence of the Reserve Bank too much to try and make predictions or to give them free advice, or to try and colour in for them the decision that they will make independently and announce towards the middle of February.
I have always seen our responsibility as a government to be the focus on the areas that we can influence, getting inflation down, getting wages up, keeping unemployment low, those have been our objectives and we leave the decision on interest rates to the independent Reserve Bank.
We’ve had a lot of free advice over the last couple of years from our political opponents and others, who say that we should have cut much harder or we should have done things differently. What these numbers show is we’ve been able to achieve something that other countries cannot, which is to make this remarkable progress on inflation at the same time as we maintain the gains we’ve made in the labour market and keep the economy ticking over.
Now, the economic and often the political orthodoxy, and what we’ve seen play out in other countries, is that you have to pay for much lower inflation with much higher unemployment. Australia has shown that there is a better way to go about it and we’re seeing the fruits of some of those efforts in the inflation numbers today.
Journalist:
Has the government done everything it can to provide the environment for rates to come down?
Chalmers:
We take no outcome for granted when it comes to interest rates, and again, it’s not for me to give free advice to the independent Reserve Bank. I respect their independence. They will weigh up these numbers and other numbers that we’ve seen in the economy since they last met. They will come to a decision and communicate that decision in February, and I’m not going to get in the way of that. I’m not going to predict it or pre‑empt it or give them free advice. I’m focused on my job and my job is to roll out this cost‑of‑living help in the most responsible way, get inflation down and wages up, and keep unemployment low. We are encouraged by the numbers that we have seen today, but we take no outcome on interest rates for granted.
Journalist:
Are you relatively comfortable, given how much data that we’ve seen now, that the numbers are in or around the band at a sustainable level, or do you think we might see some bumpiness over the next few months?
Chalmers:
I think inevitably when you see the inflation numbers here or in other countries, inflation rarely moderates in a perfectly straight line. For example, inflation in the US is higher than it is in Australia and it’s rising in the US again, and that reminds us, I think helpfully, that inflation doesn’t moderate in a perfectly straight line around the world and that’s been the experience here as well. I think that’s an important thing to remember. But the facts of the matter are laid out by these new numbers today. Headline inflation is now in the bottom half of the Reserve Bank’s target band. Underlying inflation is in the low‑threes, both of those outcomes are better than expected and lower than the official forecasts.
The Reserve Bank will weigh up all of those considerations, they will come to a decision independently, but I think what we’re seeing here is a reminder that the soft landing that we have been planning for and preparing for is looking more and more likely.
Journalist:
Would a rate cut influence the Prime Minister’s thinking around election time, and can you actually commit to doing a budget on March 25? We’ve heard language from your Finance Minister about being a budget update. Can you commit now to doing a Budget on March 25?
Chalmers:
We’re working towards a Budget on March 25th.
Journalist:
Towards or actually doing one?
Chalmers:
The reason I put it like that is because it’s a decision for the Prime Minister. It’s not a decision that I take alone. The Prime Minister takes that decision. Our expectation, and all of our work, is heading towards a March 25 Budget. The reality is that the Prime Minister will make that decision, no doubt he will confer with his colleagues about it, but our expectation is that there will be a Budget on the 25th.
Journalist:
Would you like – sorry Treasurer, would you like to do a Budget on March 25 and if so, are you aiming as much as possible to find a third surplus?
Chalmers:
There’s 2 parts to that question. I hand down budgets when the Prime Minister asks us to, and we’ve handed down 3 already and the fourth one is due on March 25. I’ve seen speculation about a third surplus, and I would urge caution on that front. We are deliberately cautious and conservative when it comes to budgets. We were in the first 3 and we will be in the fourth. But I think there’s cause for additional caution and conservatism because there hasn’t been anything yet that we have seen which would make us think that there would be a substantial difference to the budget bottom line than what we forecast in December in the mid‑year budget update. I know that there’s speculation to the contrary. I know that there’s a lot of global economic uncertainty which can impact the budget bottom line in both directions, but nothing we’ve seen yet has materially changed our expectations.
Journalist:
Is the rate decision on February 17–18 the primary factor in the Prime Minister’s decision around when to go with the election?
Chalmers:
I wouldn’t have thought so. I wouldn’t have thought so, but you’d have to ask the Prime Minister. You know, an election is due –
Journalist:
Surely he’d know that, though?
Chalmers:
Well, you’d have to ask him. An election is due by May, so the election will be on us before long and there will be a number of considerations when it comes to timing, and you will have to – it’s not for me to decide on my own.
Journalist:
Would a rate cut be – would you feel that it would be personal vindication for your fiscal strategy in the face of a lot of criticism from the media and other politicians?
Chalmers:
First of all, I don’t see it in personal terms. The most important thing here is to see some of the price pain that Australians have endured now since before the last election, that that continues to ease, and that we get inflation down at the same time as we get wages growing again in a more meaningful way and we keep that unemployment rate low. Those are the things that I’m focused on. You asked me about the free advice that we get from time to time. You know, there’s been some very strange commentary, you know, people –
Journalist:
Such as?
Chalmers:
People saying that there were going to be 3 rate hikes last year and there were none. There hasn’t been a rate hike since November in 2023.
Journalist:
Warren Hogan?
Chalmers:
Well, he’s not the only one. There’s been a lot of strange commentary, and we get a lot of free advice. One of the things that I’m proudest of is we have maintained a focus on the key elements of a soft landing in our economy – inflation coming down, not sacrificing people’s jobs, keeping the economy ticking over. We’ve still got an economy which is soft, softer than is normal. We’ve still got people under pretty extreme pressure. But the sorts of things that we are preparing for and planning for are now unfolding.
This very substantial and now sustained moderation in inflation is probably the most important part of that, but to be able to do that, while maintaining unemployment at 4.0 per cent, is a pretty remarkable achievement for which all Australians can share in the credit.
If you think about if you’d said a few years ago that it would be possible for a government, in this case our government, to maintain average unemployment rates, the lowest of any government in 50 years, at the same time as we get inflation from its peak of 7.8 now down to 2.4, I think Australians can be proud of that progress that has been made, and not because cost‑of‑living pressures have disappeared, but because they are easing at the same time as we satisfy some of these other economic objectives.
Journalist:
Should Australian tech companies be concerned about this rise in Chinese AI?
Chalmers:
Obviously this is a very fast‑moving and volatile part of the economy. It’s one of the reasons why Ed Husic, to his credit, and other colleagues are putting a lot of time and effort and thought into the appropriate guardrails when it comes to AI. We are forward leaning about AI. We think it can be revolutionary in our economy, that it has the capacity to boost productivity and deliver a whole range of economic gains, but we know that there needs to be guardrails as well.
If you look at DeepSeek, and what we’ve seen in the last couple of days, which have been some pretty extraordinary developments that the market has reacted to in a pretty remarkable way, the advice that Ed has provided, which I would echo now, is we would urge Australians to be cautious about this new technology.
Obviously we are constantly receiving advice on it. You wouldn’t expect me to go into all of the detail of that here. But what we try to and what our agencies try to, is to work closely with the sector, the private sector, updating the advice when it’s appropriate.
Journalist:
National security advice?
Chalmers:
All kinds of advice. When there’s a big development in our economy, particularly when it relates to technology, of course we have a look at it. Of course we monitor it closely. Of course we try and get our head around and understand the consequences for our own industries and our own economy. That’s pretty standard for a diligent government and that’s what we will do in this case.
Journalist:
But technology that is refusing to provide information about the Tiananmen Square massacre, not answering question the about the state of Chinese politics, potentially gathering data from Western accounts and feeding it back to the Chinese system, does that trouble you? Before receiving national security advice, does that trouble you at a general level?
Chalmers:
I don’t want to engage in a hypothetical or pre‑empt the sorts of discussions that we would have as a government. I’d echo Ed’s very wise advice, and Ed’s very wise advice is to be cautious. From a government point of view, we stay across all these kinds of developments, not just this one, and we provide an updated advice as it’s appropriate.
Journalist:
Just one very Victorian question given we’re in Melbourne. Airport Rail, it’s been reported by News Corp there’s $2 billion more on the table for that project. Can you explain why you see that as a city‑shaping project and why the federal government appears to be putting priority on that project rather than the Suburban Rail Loop?
Chalmers:
I’m not sure I perfectly share your assessment of it. What we’ve said about those 2 projects is that we consider them to be separate. You know, we don’t see a link between funding for one over the other. And all I would do beyond that is to remind you of what I said on Saturday, which is my wonderful colleague, Catherine King, she’s in discussions with States and Territories all the time about the best combination of projects in the infrastructure pipelines, and that’s the case here as well.
I would also say that I’m looking forward to spending some time this afternoon with the Victorian Treasurer. I had an opportunity to speak with her by phone already, but we will be catching up this afternoon. No doubt some of these sorts of issues will come up.
Journalist:
Do you think –
Chalmers:
I’m just conscious that we haven’t really perfectly shared the questions. Do you want to go?
Journalist:
I’ve just got one that hasn’t been answered already.
Chalmers:
Okay, thanks.
Journalist:
Your government’s announced –
Chalmers:
These 2 are very selfish, mate.
Journalist:
One of your government’s measures is about energy bill relief assistance, you spoke about cost‑of‑living assistance for voters. Can people expect that to continue beyond July this year?
Chalmers:
Our focus is on rolling out the cost‑of‑living help that we’ve already announced and that we’ve already budgeted for, including the cost‑of‑living help that comes in the form of those electricity rebates. And if you look at the numbers today, when it comes to electricity prices, they fell in – the year to the December quarter – they fell by 25.2 per cent, and they still would have fallen without the energy rebates and so energy rebates are part of the story but not the whole story. We’ve seen electricity prices fall by more than a quarter in the year to December. They still would have fallen 1.6 per cent without the energy rebates that we’re rolling out in conjunction with the states. What that says is our cost‑of‑living help is helping, but electricity prices would have moderated without it as well.
Journalist:
So the help isn’t quite as strong then?
Chalmers:
What we do from budget to budget is we consider the pressures that people are under, the budget constraints that we’re dealing with, and the economic conditions, and we come to a decision about what, if any, further cost‑of‑living help is appropriate and affordable and responsible. We did that in our first 3 budgets, and we’ll do that in the fourth.
Journalist:
Do you expect Jaclyn Symes is going to ask you for a fairer share of the GST for Victoria?
Chalmers:
I don’t know. I think that treasurers in every State and Territory are typically interested in more support from the Commonwealth. That wouldn’t make her unique if she did. But I’m looking forward to a discussion with her. I think she’s going to be a wonderful Treasurer here in Victoria and I try and maintain open lines of communications with all of my State and Territory colleagues, and that’s because I believe you get more done when you work together than when you work at cross‑purposes.
Journalist:
Absolute last one from me. There’s some good numbers at the start of inflation, but some really dire numbers in a Deloitte report on living standards and real wages. Do you expect to announce more between now and the election on how you will get the economy to grow, how to get productivity up and living standards up?
Chalmers:
Yes. And one of the things that we’ve tried to be very disciplined about is at the same time as we manage these near‑term pressures on people, that we don’t drop the ball when it comes to the longer‑term agenda. The productivity agenda around human capital, the energy transformation, adapting and adopting technology, our competition policy agenda, making our economy more dynamic and more productive, we have maintained a focus on these things throughout. We’ll have more to say between now and the election on those important policy areas.
I also remind you that I’ve tasked the Productivity Commission with some important work on what the next agenda beyond our current agenda would look like when it comes to boosting productivity in our economy.
We’ve made it really clear that coming out of these 3 economic shocks in the last 15 years, that in more normal times ideally growth in the economy would be private sector led, that remains my view, and in order for that to be the case, we have all got to work together to make our economy more productive and dynamic and competitive. We have done a bunch of things on that front but there will be more to do.
Thanks very much.
MIL OSI News –