Interview with Patricia Karvelas, RN Breakfast

1 August 2024

PATRICIA KARVELAS: As you heard, the Treasurer, Jim Chalmers is confident inflation is being tamed. That's despite the latest data showing it's risen in annual terms. But underlying inflation, a figure that removes big one off price changes in the economy, edged down and may offer hope for borrowers ahead of the Reserve Bank's monthly rates meeting next week. Liberal Senator Jane Hume is also the Shadow Minister for Finance, and she joined me a short time ago. Senator Jane Hume, welcome. 

JANE HUME: Good morning Patricia. 

PATRICIA KARVELAS: Official figures show inflation for the three months to June rose 3.8%, up from 3.6% in the March quarter. Was that in line, though, with expectations? 

JANE HUME: Well, it certainly wasn't in line with Treasury's forecasts. They suggested that inflation should be around 3.5% by now and on a downward trajectory and in fact, we're the only major economy that has seen inflation rise in the last six months. Underlying inflation is lower in the US, it's lower in the UK, New Zealand, Germany, Japan, Italy and France. So half of the Olympic teams have lower inflation than we do. So this is not great news and I don't know how hard Jim Chalmers and Anthony Albanese are trying to spin this, but it's not great news for Australians who are really feeling the pinch of the rising prices that we're seeing. 

PATRICIA KARVELAS: In fact, annual headline inflation is essentially in line with both market and RBA expectations. 

JANE HUME: Well, that's not entirely true, P.K.

PATRICIA KARVELAS (INTERRUPTS): That’s the headline inflation rate.

JANE HUME: In fact, economists were predicting that it could be even worse now just because a forecast from economists came out for one inflation figure in line with their expectations doesn't mean that the economy is doing well. In fact, the Reserve Bank and indeed Treasury have had to push out their forecasts as to when inflation will come back to that target band, that two to three per cent band three times just in the last two years. 

PATRICIA KARVELAS: Okay, no one's contesting the fact that inflation is sticky. Even the Government concedes that it is clearly harder to get down. If you look at what's happening in Europe, inflation ticking up there as well, that's happened overnight as well. Doesn't it just demonstrate that inflation doesn't work in a linear way. You don't pull it down in a linear way. 

JANE HUME: Well, it certainly doesn't work, go down in a linear way. If you don't have your priorities focused on getting it down, your Government priorities focused on getting it down. What we've seen is that there are two levers that you can pull to get inflation down. One is your monetary policy, and that's the RBA's job. But they only have one tool in the shed and that is interest rates and we know that interest rates keep ratcheting up and that's causing all sorts of pain in the economy. But the other is your fiscal firepower. That's the Government's control, that's using the Budget to get inflation under control and the problem we've seen in the last few Budgets is because they have been expansionary, because they have been high spending Budgets, that, in fact, it's a little bit like having one foot on the brake and one foot on the accelerator and the RBA's job is made all that much harder if fiscal policy is moving in a different direction to monetary policy and that's what the Coalition have been saying. That the Government needs to do its fair share of the heavy lifting to get inflation under control, because otherwise Australians are going to pay a price. 

PATRICIA KARVELAS: Okay. Yeah, you have been saying that. But you haven't been specific as in the opposition, not you specifically, but the opposition hasn't been specific about what you would do to take what you say is the pressure off the Reserve Bank and interest rates. So what would you do? What would you cut? What would the spending be that you would immediately cut? That would be substantial enough for this to change the dynamic that the RBA is looking at. 

JANE HUME: Well, I can tell you exactly what we wouldn't have done that additional $315 billion of spending in the last two years, which is the equivalent of $30,000 additional spending for every Australian household, includes things like 36,000 new public servants in two years alone. So let's just put that into context. That's around 50 bureaucrats each and every day since the election. Now, that costs billions of dollars. Just a back of the envelope calculation is around $24 billion. We wouldn't have spent an additional billion dollars on a US company to build a quantum computer that, you know, let's recall this, Australia's own Chief Scientist has said probably won't deliver anything that's quicker than the private sector. We wouldn't have spent $170 million on ad campaigns, including one on the Future Made in Australia that hasn't spent a dollar yet in our own country. 

PATRICIA KARVELAS: That's a list that's not going to take, that's not going to take lots of the heat out of the economy, those things are they? 

JANE HUME: It's putting money into the economy PK. You are asking me what we would do that would be different. 

PATRICIA KARVELAS (INTERRUPTS): Well, they are three things. Are they going to really shift the dial? 

JANE HUME: It’s also worth mentioning, we would not have spent $450 million on a referendum that the Government knew that they were going to lose. We wouldn't have spent $107 billion, sorry million dollars, to shut down an export industry, not start a new one, that will provide more revenue and productivity, but shut down an export industry and, you know, right down to little things like it, like, little bit important, $620,000 for a speechwriter for Bill Shorten to sound more empathetic on the NDIS. 

PATRICIA KARVELAS (INTERRUPTS): I understand there were all things that you have objected to, absolutely right and people can agree or disagree, but do they really make, but honestly, I'm talking about the RBA's consideration for an interest rate cut. If you had taken all of that spending out of the economy, are we really, that wouldn't shift the dial would it? On the pressure on the RBA?

JANE HUME: Absolutely. The RBA has said that inflation in Australia is a home-grown problem. It's not an imported problem and if you have a home-grown problem, the Government has a responsibility to find a home-grown solution. It has to lead by example and it certainly hasn't done that. Because one of the great drivers of inflation, of course, is inflationary expectations. If you have an expansionary Budget, if you're putting more money into the economy, that sends an indicator that the RBA has to do more work, by ratcheting up interest rates over and over again, costing Australians more. Of course, we know it's not just that baseline inflation rate that's the problem. The cost of living has gone up even further. You know, I heard Jim Chalmers talking yesterday about rents. He was saying that rents went up by 7.3%, but they could have gone up by 9.1%. Well, the Government doesn't deserve a pat on the back for making sure that rents only went up by 7.3%. 

PATRICIA KARVELAS: And no, absolutely not a pat on the back. I think that's fair enough. 

JANE HUME: It’s not just rent, it’s food, it’s health, it's education. All of that is going up even further than underlying inflation. 

PATRICIA KARVELAS: Okay, just on another issue before I let you go Senator, should the Commonwealth help keep Rex in the skies? 

JANE HUME: Well, Rex is really important, particularly to those regional and remote communities. We don't want to see another disaster that we saw with Bonza, we can't really afford Rex to become another victim of Labor's poor economic management. We want to see LLabor engage every single day with the executive, with the administrators, find solutions to keep Rex in the air. I was in Alice Springs not that long ago, and they were telling me that the airport is a lifeline to their community, A school there, an indigenous school, was saying that they can't get teachers from around Australia unless they have a viable airport and a viable airline, so that they can attract those teachers who can then go back to their hometowns for weddings or whatever. It might be a family commitment. If you cut off a remote or a regional community without an airline, those communities just shrivel up and die. It's fundamentally important that we do everything that we can to make sure that there is a competitive airline industry and that those planes keep flying. 

PATRICIA KARVELAS: Thank you so much for joining us this morning. 

JANE HUME: Great to be with you PK.