Interview with Ross Greenwood, Business Now

5 June 2024

ROSS GREENWOOD: Joining me now is the Shadow Finance Minister, Jane Hume from from Canberra. Jane, many thanks for your time this afternoon, and there's a big question. Would have you done anything different? Would the economy be right now, any different if the Coalition was in power?

JANE HUME: Well, Ross, you're really starting with the big issues here. Can I tell you the number that struck me most of all in this data and that was productivity. Productivity, big donuts, zero productivity over the quarter, zero productivity over the year and negative productivity since Labor came to power. In fact, 5.2% backwards in productivity. That's a real concern, and that's certainly something that the Coalition has been speaking a lot about. We've said that we would be focusing on those drivers of productivity, particularly energy prices, which we know we can't have a thriving manufacturing sector in Australia without low energy prices. So getting the energy prices under control by putting more supply into the system. Getting rid of these highly restrictive industrial relations reforms, for instance, that are wrapping up big and small businesses in huge amounts of red tape. Of course, it's small businesses that are suffering the most from this, they don't have, you know, compliance departments or human resources departments to deal with the amount of red tape that's being wrapped around them now. A deregulation agenda, a proper deregulation agenda to allow governments to get the settings right and then move out of the way so that the private sector can do what it does best. And then, of course, lower and simpler and fairer taxes. That's the only way to bring aspiration back into the economy. That's how you drive productivity.

ROSS GREENWOOD: So are you saying that the Coalition would go to an election, saying that it would promise tax reform to bring about those lower taxes, a fairer tax system?

JANE HUME: We've already given an indication that's exactly what we would do. By first and foremost, in the business space, by making sure that instant asset write off is at a level that genuinely provides a tax incentive to businesses. The government have said that they'll continue the instant asset write off, but only for one year and back at 2019 levels. We've had so much inflation since that period of time, businesses want to invest, but they can't buy anything like as much in terms of plant and equipment for $20,000 now as they could back then. We've said that we'll lift it to $30,000 and we'll take it out over the forwards, so that businesses can plan for that growth. This is a time when a lot of businesses we know are really bunkering down, when wages are going up, when their cost pressures are going up, they might not be able to make those investments immediately. They need a little bit more time up their sleeve to plan for that, and that's what the coalition have committed to.

ROSS GREENWOOD: Okay, so the economy, the numbers that came out today, half of our economy is consumption. Consumption is absolutely weak. You can see it even in household savings, where households are under pressure now. Right now, stage three tax cuts, the government's cost of living pressures, perhaps even an interest rate cut down the track sometime all of that would actually help a bit of that consumption. Maybe help our economy to rise, but the real problem is that could also cause inflation.

JANE HUME: And that's exactly what Michele Bullock is referring to when she says they are on a very narrow path to keeping the country out of recession, but at the same time getting inflation down, because getting inflation down is the Reserve Bank's number one priority. She also said that should inflation continue to run out of control, well, then the RBA would not hesitate to raise rates again. Now that's going to send a chill down the spines of many Australian households who have already seen the cost of a $750,000 mortgage increase by around $24,000 a year. That's an awful lot of money. It's not the sort of money that the average household finds down the back of the couch spare change. So you can see why people are doing it tough. Real disposable incomes have gone backwards under this government by around 7.8% and that's due to the cost of inflation, interest rates and, of course, higher taxes as well.

ROSS GREENWOOD: Well, you've also been, as you mentioned here in the Senate Estimates, and Michele Bullock, the Reserve Bank Governor there today, the Reserve Bank is on almost a glide path to try and hold as many jobs as it possibly can, while at the same time trying to hopefully, ultimately. Bring inflation down, so therefore interest rate cuts may be further off than many anticipate. The question right now is that households are surviving because they've got jobs. If business, as you say, is doing it tougher, jobs ultimately will be lost.

JANE HUME: That potentially could be the collateral damage in all of this. While the economy has been going backwards, while the cost of living has been raging out of control, because people knew that they had a job and they could get another one, it actually took a little bit of the sting out of the tail. But while businesses, we're now seeing insolvencies hit new highs, when businesses start laying off people, well, then that cost of living crisis is going to become even more real for some of the most vulnerable out there in Australia. And quite frankly, I think that the Reserve Bank, they have one task, and that's to get inflation back down. You called it a glide path, I think it feels a little bit more like a goat track at the moment, and a very rocky one at that. Michele Bullock made that very clear today, that this was not going to be an easy road to travel, and quite frankly, if the budget was in better nick, if the budget was not as expansionary, it was contractionary, well, that would help with the inflation challenge.

ROSS GREENWOOD: Okay, but the real issue is right now that Australia is very close to recession. Can Australia avoid a recession, do you think?

JANE HUME: Well, we're already in a per capita recession. In fact, we've had five quarters now of negative growth per capita. While we've had positive GDP growth, only just, sort of anaemic GDP growth, because we've had those incredibly high immigration levels, I think it's around 1,228,000 more people in Australia now, that's what's causing this. That's essentially what's keeping GDP ticking over in the positive territory. On a GDP per capita basis, we've actually been going backwards now for five quarters in a row. That's something that we should be really concerned about.

ROSS GREENWOOD: Senator Jane Hume, always good to have you in the programme. Many thanks for your time today.

JANE HUME: It's great to be with you, Ross.