Interview with Patricia Karvelas, RN Breakfast

5 July 2023

PATRICIA KARVELAS: Jane Hume is the Shadow Finance Minister and she's our guest this morning too, welcome Jane.

JANE HUME: Good morning PK.

PATRCIA KARVELAS: I want to start where we went with Katy Gallagher, do you think that you should stop taking donations from these big consultancy firms?

JANE HUME: Well, I think that Katy made a very good point that is first of all, that a decision to take a donation comes from the political parties, the organisations themselves, not the Government and it isn't the Government or the politicians that make the decisions about procurement, more importantly thought i think with the decision around PWC, it wasn't about procurement, it was an issue around disclosure, that actually breached the contract, it breached the law, and when an organisation or an individual is brought in to give advice to the public service, that they act ethically, that they act within the terms of their contract and that they act within the terms of the law. That was really the issue that was at the heart of the PWC issue.

PATRICIA KARVELAS: I want to move to the interest rate decision yesterday. The Prime Minister has spoken this morning. He says it's a good thing interest rates were paused at 4.1% yesterday. Do you agree?

JANE HUME: Well, I think Australian households would agree they're probably let out an enormous sigh of relief after seeing the RBA's decision to hold interest rates at 4.1%, but it's probably not much of a reprieve. You know, we're still expecting energy bills to be up nearly 30% across the country. That's going to hurt the hip pocket of thousands of Australian families and the Governor himself said that inflation is still too high and will remain so for some time and of course, the longer that inflation stays higher, the longer the standard of living of Australians is lowered and we're already seeing that in a lot of the data. You know, NAB released some data just in the last week that showed that so many people are changing their consumer behavior. About 55% of people aren't going out to restaurants anymore and that might save them over $100 a month. But it doesn't do those small businesses, those restaurants any good. About half of Australians are skipping those micro treats like coffees or lunches out or trips to the movies to save up to $60 a month and again, that's of course, what, you know, a tightening monetary policy will do, but it doesn't improve your standard of living. So we want to make sure that the standard of living is improved. The only way to do that is to get inflation down and we have to make sure that it's not just the RBA that's doing all the heavy lifting there.

PATRICIA KARVELAS: Well, you've accused the Government of having an inflationary budget, but the Reserve Bank has said multiple times that their budget is not inflationary. Do you believe the Governor, Phil Lowe?

JANE HUME: Well, the Government could be doing more to create a deflationary environment. It's not just enough to wave the white flag and say inflation or the direction of inflation isn't our responsibility. You have to make sure that your fiscal policy, which is the responsibility of the government, is moving in the same direction.

PATRICIA KARVELAS: Well, okay, so let's give an example. There is clearly a bigger surplus than was anticipated in the May Budget, and instead of spending it, they're paying down debt with it. Is that acceptable?

JANE HUME: We think that it should be banked to the bottom line. But it's not just about returning a surplus in one year. It's about making sure that you have that disciplined economic management in future years and if you look at the Budget, there are deficits as far as the eye can see. The surplus that's being returned this year is largely because of increased commodity prices and of course because of inflation itself. More Australians are employed. That's terrific, but they're being moved into higher and higher tax brackets through bracket creep and that's what's delivering this large surplus, this one off large surplus. So Australians are paying more tax. That actually means they've got less money in their pockets.

PATRICIA KARVELAS: So what are you suggesting that this money shouldn't be paid? I don't get what you're trying to say.

JANE HUME: Well, there was $185 billion of additional spending in this Budget and the October Budget.

PATRICIA KARVELAS: (Interrupts) Yeah, but in terms of what you're saying. Sorry, I don't mean to be rude, but just in terms of people not having this money in their pocket, would you rather it be in their pocket and then being them spending it?

JANE HUME: Well, bracket creep is insidious, essentially. But right now, if people had more money in their pockets, they'd be spending it, presumably.

PATRICIA KARVELAS: Wouldn't that be inflationary?

JANE HUME: That's why we would hope that the Government stays with the stage three tax cuts, which don't kick in for another 12 months. By that stage, we would hope that the inflation beast has been tamed, which is why it's so important for the Government to take responsibility for taming the beast and don't get me wrong, Patricia, it's not me saying this. Jim Chalmers said it himself. He said in October last year that tackling inflation was his number one priority. He said it was public enemy number one, and tackling the inflation beast was his number one priority. That was in October. It's only got worse since then. We've only seen inflation increase well until the last month, and we've only seen interest rate rises increase as well because inflation is coming down. Now, the RBA has said there may well be more pain to come because inflation is higher for longer because of the decisions that the Government is making.

PATRICIA KARVELAS: Just final question if we can, Senator. The Government said the future of the Governor of the Reserve Bank will be announced in July, in the month we're in. Do you think Phil Lowe should stay or go?

JANE HUME: I think Philip Lowe is possibly one of the most qualified economists in the country that's seen the economy through some really tough times and that he should be paid due respect for the work that he has done.

PATRICIA KARVELAS: So you think he should be kept in the role?

JANE HUME: I think that there are very few people out there in Australia that would be as qualified to do this job as Phillip Lowe.

PATRICIA KARVELAS: If the Government decides not to extend him, how would you view it?

JANE HUME: Well, it's entirely up to the Government.

PATRICIA KARVELAS: How would you view it?

JANE HUME: Well, I think it would be a real shame. I think that Phillip Lowe is an eminently qualified economist, that he's done a very good job in very, very difficult circumstances in the last few years. So I'll be interested to see what decision the Government takes on this.

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

JANE HUME: Great to be with you.

PATRICIA KARVELAS: That is the Shadow Finance Minister, Jane Hume, you're listening to ABC Breakfast.