Interview with Danica De Giorgio, AM Agenda

5 July 2023

DANICA DE GIORGIO: Let's return now to one of our top stories. The RBA has left the cash rate on hold at 4.10%. Joining me now live is the Shadow Finance Minister Jane Hume. Jane, thank you for joining us. The Prime Minister says this is a good thing. Do you agree?

JANE HUME: Well, certainly thousands of Australian households are breathing a sigh of relief today to make a because of the decision of the RBA, but it's probably a short lived relief, because they've still got higher energy bills expected to go up around 30% or so at the next bill. They've still got higher mortgage repayments, much higher than they were just a year ago and we know from the data that we're seeing, whether it be through the Cost of Living Committee, or whether it be through economists or the banks, that people are changing their behaviors, they're seeing inflation, staying higher for longer. That means that their standard of living is decreasing and they're doing things like getting rid of those, you know, the micro treats, not going out for a cup of coffee or buying your lunch at a cafe instead bringing it from home or not going out to restaurants, or to the movies to try and save money to pay off their mortgages, to pay their rents. Inflation is still the thief in the night. It remains the dragon that has to be slayed and the problem is that the Government isn't doing its bit to bring inflation back down. That's why the RBA has to do all the heavy lifting.

DANICA DE GIORGIO: The Coalition has been highly critical of the Government for, as you just said, not bringing down inflation for failing to act on the cost of living. But does the RBAs decision to hold rates confirm that those cost of living measures implemented by the government have indeed had their intended effect?

JANE HUME: Well, inflation, the headline inflation rate has come down in the last month and I'm sure that the RBA took that into their considerations when they're making their decision. Unfortunately, though, underlying inflation, core inflation has hardly moved and moved from 6.5 to 6.4, that shows that inflation is still really sticky and that's going to be a problem. If inflation is higher for longer than the RBA won't be able to not just pause on rates but potentially won't be able to give households any relief for a much longer period of time, we would like to see the Government do its best to actually bring inflation down not just waved the white flag and say that's not our responsibility. That's the Reserve Bank's responsibility. It should be doing its bit to actually have deflationary measures. We didn't see any of that in the Budget. Yes, we saw some cost of living relief, but that's just playing around at the edges and of course, things like changes to childcare or, or energy subsidies, they all get eaten up if inflation continues higher for longer.

DANICA DE GIORGIO: But what can the Government do then, by way of a cost of living relief so that it doesn't add further to inflation?

JANE HUME: Well, the only way you can bring cost of living relief to all Australians is to bring inflation back down. How do you bring inflation back down? Well, you have to reduce aggregate demand and the only way our Government can do that is to curtail its innate desires to spend and spend and spend more, we know that the government has spent an additional $185 billion just in the last two Budgets compared to the last Coalition Budget $185 billion. Well, of course, that's a signal to the Reserve Bank, that it's going to have to do the heavy lifting on keeping inflation low because aggregate demand is still fueled. This Government has also put wages and wages, particularly those minimum wage rises ahead of productivity increase. The Reserve Bank has said that, yes, we can have wage rises. Of course we can, but it has to be accompanied by productivity increases and it does seem like the Government doesn't have those policies in place to improve productivity, like increasing supply of energy, like reducing red tape and improving competition, like maintaining your industrial relations system so that it's flexible for employers, allowing more labour output for hour of work.

DANICA DE GIORGIO: The finance Secretary Jenny Wilkinson is on the shortlist to replace RBA governor Phillip Lowe. Is she a good pick in your view?

JANE HUME: I've always had a terrific relationship with Jenny Wilkinson and a great I'm a great admirer of hers. However, I would say that I think that Philip Lowe has been exceptionally well qualified. He is a steady hand at the wheel at an incredibly difficult economic period of time. There's hardly a person in Australia that would be better qualified than Philip Lowe to leave the Reserve Bank. I think that if he wants to extend his term, it's something that the Government should seriously consider.

DANICA DE GIORGIO: So you're supporting Philip Lowe, then you'd rather he stay in that role?

JANE HUME: But it's not the Opposition's call. It's definitely the call of the Government but I think that the idea that they have demonised Philip Lowe is unreasonable, particularly when Philip Lowe has only one tool in the shed and that is interest rates. If the Government waves the white flag on inflation that it leaves all the heavy lifting to the Reserve Bank, and Philip Lowe has to use the one tool that he's got to deal with it. They can't demonise him for doing their job.

DANICA DE GIORGIO: All right, let’s move on now to the Voice to Parliament. Linda Burney will tell the National Press Club today that health, education, jobs and housing are the four policy priorities on which she will ask the voice to provide advice. Does that allay some of the Coalition's concerns about its scope?

JANE HUME: Actually, I think it just raises more questions. Why is it that the Minister for Indigenous Affairs is already directing the voice as to what it is that it should be providing advice upon? I thought that the point of the voice was that it would advise the Government as to what the priorities are, not the other way around? And what are the points? These are pretty basic policy areas. The Government's been there for more than a year now. Is the Minister for Indigenous Affairs seriously saying that she hasn't started to tackle these problems because she's been waiting for a referendum? Surely that would be her first priority.

DANICA DE GIORGIO: Just finally, a new report today has found that Melbourne rents are growing the fastest of any capital city in the nation. You're from Melbourne. Does this surprise you?

JANE HUME: No, not at all. In fact, though, whether it's part of the Cost of Living Committee or whether I'm talking to business groups or community groups or charities, we know that rents are a real problem in Victoria and, of course, part of that as a function of that is high interest rates being passed on from landlords through to renters, that's the only way they can maintain those properties. But we're also seeing additional taxes being imposed on Victorians through State Governments, particularly land tax and of course, that's going to make owning investment property more and more expensive, which is going to push rates up. Governments can make much better decisions about how they manage their own Budgets in order to make sure that they relieve rent pressures from those people that are relying on stable and affordable rents just to find somewhere to live.

DANICA DE GIORGIO: Jane Hume we'll leave it there. Thank you so much for joining us this morning.

JANE HUME: Thanks Danica.