Interview with Greg Jennett, ABC Afternoon Briefing

7 August 2024

GREG JENNETT: So they’re the arguments as put earlier in the day, we want to go to that Senate inquiry that's been held in Sydney today. I mentioned that only a moment ago, Shadow Finance Minister Jane Hume was there through hearings that began with the Reserve Bank's Sarah Hunter and then went on to economists and the small business lobby. We spoke to Jane Hume from the ABC's Sydney studios. Jane Hume, it's good to have you back with us once again on Afternoon Briefing. So you've been at these cost of living committee hearings today where you were fortunate enough to have the reserve Bank. Sarah Hunter, before the Committee, you pressed her on government spending, but given the opportunity to say that Federal Government spending alone, that is not including states and territories might be causing the RBA headaches in its fight against inflation? She didn't exactly say that, did she? So how can you continue to run that argument?

JANE HUME: The RBA are always very cautious and diplomatic with the words that they choose to use, but I felt that the most striking statistic in yesterday's statement of monetary policy was the leap in the forecast of public spending from 2.1% to 4%. Now that's a significant change in expectations. And they said that was one of the drivers of inflation, that is now staying higher for longer. So that was a really key indicator. Of course, whatever Sarah Hunter said today was very consistent with Michele Bullock's message yesterday that they're not expecting to see inflation to come back to that 2 to 3% band now until the end of 2025. So they've pushed out their forecasts yet again. That's cold comfort to people that have a mortgage that were hoping to see an interest rate cut. Of course, they also said that they didn't even consider a cut in interest rates. In fact, it was either a hold or a hike in interest rates and that's a real concern.

GREG JENNETT: Sure, I understand the longer term trend and obviously the pain being felt by households, but it was said, wasn't it, by the RBA representative today that they can't actually separate out any particular initiatives, any particular spending that the Albanese Government or Treasurer Chalmers might be running? So where does that leave again? Where does that leave your argument that it's $45 billion worth of excessive, unwarranted spending? That is causing the problem or adding to the problem?

JANE HUME: Well, in fact, it's $45 billion of off balance sheet funding. So that's not even stuff that we're seeing in the Budget. What they said was that they couldn't pull it apart project by project, say this rail line here or this road, there is an inflationary expenditure It is overall public expenditure, public spending that is leading now to that pressure on aggregate demand. Households are doing all the heavy lifting because interest rates are going up, so they're feeling the pinch. Private consumption is being wound right back. But public expenditure continues to grow. Sarah Hunter today said that she wants to see a softening in public expenditure, public spending before they can take their foot off the brake on interest rates. And that's going to be a, you know, as I said, cold comfort to those people out there with a mortgage that are really doing it tough.

GREG JENNETT: Can I ask you about energy bill relief in the form of rebates? I think there's an acknowledgement here by the bank that is suppressing inflation, holding it to about 3% at the end of this year. And in fact, it would spike again next year when it comes off. That's almost an argument to keep it going indefinitely, isn't it?

JANE HUME: Well, it's an argument. As one of the economists, Professor Richard Holden, said today that those subsidies are essentially creating a smoke and mirrors effect that, in fact, they're artificially bringing down headline inflation. But then it spikes up again in just a year's time when those subsidies come off. In fact, the RBA said that they will look through those policies to core inflation that trimmed mean inflation figure when they make their interest rate decisions. And that is what's holding up. That's proving home grown and sticky. That's not coming down fast enough to satisfy the RBA to allow them to lower interest rates and give households and businesses. Let's not forget this is not just a cost of living crisis. It's a cost of doing business crisis to give them the comfort, to bring down interest rates and take the pressure off businesses and households.

GREG JENNETT: But any relief is good relief, isn't it? Particularly for households, but sure businesses as well at present, and that is pretty much endorsed by the reserve Bank on these numbers.

JANE HUME: Well, you can understand, of course, why households and businesses that are, you know, really wondering how the next dollar is going to come through the door, how to keep the lights on will appreciate any subsidy. But unfortunately, while government spending remains high, it actually makes the pain last longer. Making tough decisions is an important role of government. That doesn't seem to be what this Government has done. It's taken the easy route and thrown out additional government spending, but that's just making the inflationary pain last longer and keeping interest rates higher for longer.

GREG JENNETT: Yep, it was an interesting hearing that we observed earlier today. Can I take you to something that wasn't covered but falls within your shadow responsibilities Jane Hume, that's the way the public service works at a federal level You'd be well aware now that the New South Wales Premier's Department or in effect, the Minns Government, has issued a directive to the public service in that state instructing that work from home be fundamentally wound up for those who continue to do it. Where's the Coalition's policy, should you be in government next year, on work from home?

JANE HUME: Well, the Coalition have always said that Australia deserves a first class public servants, an effective and efficient public service, and that should incorporate some workplace flexibility, as it does in most large workplaces around the country. That said this is not a busy work programme This is not a make work programme. We want to make sure that people are getting the services that taxpayer money is there for. It's a big responsibility. They should lead by example. I tip my hat to Chris Minns that he's taken this, you know, this quite unprecedented step for governments. I think it's a really good and positive sign that he has high expectations that the public service will deliver on the commitments that his Government has made. I think that it's something that potentially the Federal Government could, you know, take a leaf out of his book. But I think the most important thing from a Federal Government perspective is just the sheer volume, the number of new public servants. 36,000 servants in the last two years alone. That's 50 new public servants every day since the Labor Government were elected. I don't think that anybody is feeling 36,000 new public servants better served in the last two years. And that, of course, is part of the pressure that this Labor Government is putting on inflation, making it harder for the RBA to do its job and bringing inflation back down under control. You don't have your fiscal policy and your monetary policy lined up together. It's like having one foot on the brake, one foot on the accelerator, and that public spending and that includes expenditure on the public service is part of the problem. The RBA have identified it and that was confirmed by economists today.

GREG JENNETT: We might have a conversation as we get closer to the election about what you think is a more appropriate overall level of staffing in the federal public service. But I know you and colleagues have been asking at Senate hearings and estimates processes about the level of work from home in the Commonwealth public service, from the figures that have been provided back to you. Is it your starting position that it is excessively high?

JANE HUME: Well, I think there is some concern for the Government that so many businesses are so sorry, so many buildings are pretty much standing empty while public servants work from home. There's been plenty of reporting on that. We just want to make sure that the public service is delivering on its promise, delivering for taxpayers that is, working efficiently and working effectively to deliver on its promise. Now, whether that involves some level of workplace flexibility, of course that's acceptable, but it can't be an expectation, a standard, an entitlement that every public servant can work from home. That's not delivering on the promise that's made to taxpayers who are paying for those salaries.

GREG JENNETT: And on the flip side, just finally, if you were to continue at a reasonably high levels in the Commonwealth public service, would you look for savings in, you know, building costs, leases, building ownership and the like? Should the Commonwealth public service be downsizing?

JANE HUME: There is no doubt that there are inefficiencies in the public service now that of course, any sensible government would be looking at addressing, because, as I said, the public service has to deliver on taxpayer expectations. Is that happening now? I don't think it is.

GREG JENNETT: All right, we'll pick up on that and other themes with you Jane Hume in the countdown to the election. I promise. Thanks so much for joining us once again.