Interview with Scott Haywood, Money News

1 November 2023

SCOTT HAYWOOD: And with the IMF targeting the spending of the government, let's bring in Shadow Minister for Finance. Senator Jane Hume. Senator, great to talk to you again on Money News.

JANE HUME: Great to be with you, Scott.

SCOTT HAYWOOD: So the irony of this assessment is that we need to reduce our infrastructure spending. But don't you think it's really more of a question of waste and inefficiency in government projects?

JANE HUME: Well, the IMF did today call out that lack of coordination between the Commonwealth government and the states, particularly on infrastructure projects, that's contributing to inflation and keeping inflation higher for longer and of course, that means that we're seeing mortgage holders squeezed but there's more to it than that inflation is going to be higher for longer because there isn't a government plan to reduce inflation. They've essentially turned over that task to the Reserve Bank. They're the ones in charge of taming inflation, not the government. And that means that the only tool that got interest rates, and if the only tool they've got is interest rates, of course, they're going to be higher for longer.

SCOTT HAYWOOD: I won't get you to comment on the Reserve Bank directly, but it does seem like we're headed towards another rate rise next week. Now is it time for the Labor government to do its bit on inflation through fiscal policy, rather than the one third of Australians with a mortgage having to do all the heavy lifting and what do they need to do?

JANE HUME: Well, Labor was elected on a promise of making life cheaper for Australians, cheaper electricity, cheaper mortgages, cheaper health care, but I can't find an Australian anywhere that says that they're better off than they were 15 months ago. That's why we are urging the government to have a plan to tackle inflation using fiscal policy, using its policy levers, reining in spending ambitions, not taxing farmers and truckies pushing up the price of groceries, and of course, doing more to encourage cheaper electricity prices. Not just lowering emissions, we have to make sure that those lower prices are passed on both in the short term, and in the medium term by increasing supply of energy. That's really the only sustainable way to bring down prices in the long term and most importantly, though, if the government uses its fiscal levers to control inflation, it establishes a different psychology around inflation because one of the drivers of inflation is inflationary expectations. If people can see both the government doing its share of the heavy lifting as well as the Reserve Bank, their inflationary expectations are tempered. And that means the RBA can take its foot slightly off the pedal on those interest rate rises.

SCOTT HAYWOOD: We've got a booming population at the moment which I know you'll put on Anthony Albanese, but to the point about infrastructure, shouldn’t we back spending more to keep up with the population growth rather than cutting back?

JANE HUME: It's not just the spending on infrastructure. It's the uncoordinated nature of the spending of infrastructure. Instead of simply pouring the billions of dollars into State Treasury coffers for nothing which is what the IMF has said will add to inflation, the Prime Minister needs to bring his state colleagues along with him. To do things like remove the planning and zoning red tape that's going to deliver the supply of more houses into the system. To coordinate the timeline of when infrastructure projects come on, so you don't push up the cost and that and that the price of construction. So there's decisions that government can have can make that is going to affect that aggregate demand, send a message to the economy about what you expect inflation to do, and if everything's involved wage decisions, high spending budget structural differences that you know, big Australia style immigration program, uncoordinated infrastructure, and of course those costs blow outs. All of that puts inflationary expectations and then of course, inflation at risk.

SCOTT HAYWOOD: Senator Jane Hume at the Shadow Minister for Finance, thank you so much for joining me on this Wednesday night on Money News.

JANE HUME: Great to be with you Scott.