Interview with Tom Connell, NewsDay

10 November 2023

TOM CONNELL: Well, let's turn to what's happened this week in terms of your home loan. We've had another increase in interest rates, concern now they might have a five in front of them. That's that Official Cash Rate, the home loan then would probably have an eight in front of it. Joining us now live as Shadow Finance Minister Jane Hume. Thanks for your time.

JANE HUME: Good to be with you.

TOM CONNELL: How high can we go here do you think?

JANE HUME: know that a lot of Australians are very worried about exactly that. I think that the RBA’s message this week was loud and clear to the Labor Government to get inflation under control. This should be your number one, number two, and number three priority, because otherwise it's going to be Australians and particularly Australian mortgage holders that are going to end up paying the price already. So if you've got a $750,000 mortgage, that's an additional $24,000 a year so $2,000 a month for a family with a mortgage like that, compared to just a little over a year ago. It's not the sort of money you find down the back of the couch is that and that's after tax as well. So it's an enormous cost on Australian families and something has got to give.

TOM CONNELL: Okay, so that's the message. What should the Government be doing within its remit because it has to either increase tax or cut spending. So what measures would you put on the table there to reduce inflation?

JANE HUME: Well, certainly they should be cutting their spending, there is no doubt about that. They're expending an additional $188 billion just in the last two budgets alone.

TOM CONNELL: Just want to pull you up on that, because it sounds like you've just spent that in the last two years. This is over I think, but even beyond even forward estimates. So it's a net $34 billion actual sort of spending if you like. So it is more spending. But you know, $180 billion, it's not like they’ve tipped that extra money into the economy, but it's spending the issue where do the cuts come from?

JANE HUME: Well there are a number of areas. I mean, there's the off balance sheet funds, so there's an additional $45 billion there. There's things like the construction fund housing Australia's future fund, the poles and wires, the energy transition fund, those $45 billion actually attracts an additional $6 billion of interest payments per year. The IMF specifically said that those off balance sheet funds are inflationary. So there's one place that you could go.

TOM CONNELL: So cut all of them that I mean part of that is the plan to modernise the grid which we need to, renewables are coming in, the grids less stable. So if you just scrap that in one fell swoop, something's got to replace the poles and wires or there is no plan on renewables?

JANE HUME: There is no doubt, that is what politics is all about. You know, it's about competing priorities.

TOM CONNELL: I think the energy grid is a pretty important priority.

JANE HUME: Well, I think getting inflation down is actually a pretty important priority too and you know, there's only two things, the two ways you can control inflation. You have to control it through aggregate demand. Aggregate demand has two elements, private sector demand, public sector demand. Private sector demand has come right back down and it's come back down because the RBA has had to do all the heavy lifting, public sector demand is still increasing. Look at the additional 10,000 public servants that we've had hired in the last 12 months alone now. You know, the Australian has come out today with a costing of around a billion dollars. That’s 10,000 additional public servants. I don't know whether you're feeling an additional 10,000 public servants worth of increased services from this government in the last 12 months, but I don't think Australians are either.

TOM CONNELL: But isn’t it a part of that replacing the outsourcing which ramped up and up and up under the Coalition and used people such as PwC, which didn't turn out that well. So isn't that, if you're going to reduce reliance on big four and outsourcing, you have to hire people don't you?

JANE HUME: Don't you think it would be a better idea to make a more efficient public service rather than just a bigger one, that ever expanding and bloated bureaucracy? And we've offered to help with this. You know, we've said that if the government can find ways to bring back to writing those costs around things like NDIS to rein in those costs around things like aged care as long as it isn't just using a blunt instrument like and additional tax, we will help them with that. But they have actually denied that opportunity and reining in the costs, that is the hard part.

TOM CONNELL: I can tell you, you don't want fewer people working in the public service. You want a few more. You can't even get through most days, you call back twice and they say oh, you're not allowed to call again today.

JANE HUME: Well, that's a problem with the quality of service. I don't know whether it's a problem with the number of people that are on the phone, but more importantly, it's taxpayers. It's mortgage holders that are now paying the price for those additional costs because let's face it, inflation is disproportionately affecting those through higher interest rates.

TOM CONNELL: The next budget in reply then, is the Coalition going to go a bit harder itself on, here's our alternative with a whole raft of spending cuts, because we didn't really get that last time. Is that your responsibility next time?

JANE HUME: We will go to the next election with a very very clear program of what it is that our priority is.

TOM CONNELL: Well, that's a long way away. The inflation story might have petered out by then.

JANE HUME: We would hope that it has petered out by then! Because quite frankly the RBA and indeed now the Treasury forecasts are saying that inflation is going to remain high outside of that band until the end of 2025. Now, if you're a mortgage holder, and you're paying higher interest rates for longer because inflation is higher for longer, that's miserable news.

TOM CONNELL: But that budget in reply, are you willing to be really unpopular in the next one, go, here's all the things we wouldn't spend money on now?

JANE HUME: Well, we'll go to the next election, which is when we can implement changes.

TOM CONNELL: Is the budget in reply a bit pointless?

JANE HUME: No of course not. But when we do, that's when we can actually implement the changes that we want to see and we will go with a fiscally responsible plan.

TOM CONNELL: Then rather than saying six months later, inflation hasn't come down. They shouldn't have spent this money you should say here's the money they shouldn't have spent say that at that point in time rather than, here's some money that might be better spent putting your money where your mouth is?

JANE HUME: We already clearly say that, when we oppose a particular policy position, it's because we believe that their priorities should be elsewhere so it becomes very clear there. But most importantly, most importantly, this government has been in opposition for nine years, it's accumulated a wish list of things that it wants to do. Jim Chalmers is trying to be a popular Treasurer. It is very hard to say no to your colleagues that come to you with a wish list and that's exactly what he has to do and unfortunately he has failed to do that.

TOM CONNELL: Hard for the Coalition in that last budget, but it was still a net spending budget.

JANE HUME: But inflation was not a problem for the Coalition Government.

TOM CONNELL: Well, It was at the end of that last budget, there were lots of warnings about inflation.

JANE HUME: They were caused by two things and you know exactly what they were

TOM CONNELL: Well all around the world. It was all taking off.

JANE HUME: Those two things were fuel prices, and that was because of Russia's invasion of Ukraine and our supply chain issues from COVID. Now the COVID supply chain issues have largely been alleviated and that fuel price spike has now come back, now it’s baked in.

TOM CONNELL: There were plenty of warnings around at the time.

JANE HUME: Now It’s baked in, and that’s the big problem and Labor has to deal with it.

TOM CONNELL: Jane Hume, appreciate your time this morning.

JANE HUME: Thanks Tom.