Interview with Tom Connell, Sky News

26 October 2023

TOM CONNELL: Well, let's get back to what the RBA is going to do. It'll have a bearing on a lot of us, anyone with a mortgage. We've heard from the RBA Governor, not giving a lot of way about inflation, but she has clearly raised concerns about inflation and said she won't be afraid to act. Joining me now is Shadow Finance Minister Jane Hume. Thanks for your time. Is a rate rise incoming?

JANE HUME: Well, we would never speculate on what the RBA might do, even though we did try and draw Michele Bullock out on that today.

TOM CONNELL: So you failed to you, I'm usually the interviewer. You were having a go and you failed to get that grab?

JANE HUME: I think we knew where she was going to go here. She's done a couple of headline speeches quite recently where she spoke about a very low tolerance for inflation coming back to band any later than is already on that trajectory. She also said that she would have no hesitation in raising rates, should there be a material change that would lead her to do so. Obviously yesterday's CPI figures had a couple of indications there, one was that the quarterly component was much higher than anticipated.

TOM CONNELL: And at 1.2%, if you annualise that, which I know is a bit of a rough thing to do, but it's 4.8, so it's clearly too high.

JANE HUME: It does mean that inflation is going to be higher for longer, which of course means that interest rates are going to be higher for longer and that is a great concern, I think, to the opposition, and that's why we've been calling for the government to do what it can to put together a plan to reduce inflation.

TOM CONNELL: Let’s go through that. What about another fuel excise cut? There’s another war on, it's spiking prices. It's contributing to inflation. This is when the Coalition did it. The budget is in good shape. Is it time for one now?

JANE HUME: So we did do that. We did that at the time when inflation hadn't really set in. We did it when inflation was being driven by two things. Supply chain constraints leftover from COVID and the fuel price spikes that were coming directly from Russia's invasion of Ukraine. Now we're seeing slightly different scenarios.

TOM CONNELL: Fuel is a very similar scenario.

JANE HUME: Fuel is very much still there, but there are other sort of baked in components of inflation and Michele Bullock spoke about some of those today, particularly that services inflation increases, increasing rents, increasing prices of services.

TOM CONNELL: I’ll get to that in a moment, are you so because there's not a supply chain issue, that it's not the right time for a fuel excise cut?

JANE HUME: No no, that’s not at all what I'm saying. I'm saying you could in fact reduce fuel prices through a change in the excise. There's two problems with that. One is it is potentially only temporary if you reduce the fuel excise, that could all be eaten up with global volatility in a moment. So people might not actually feel that in their pocket.

TOM CONNELL: Could have happened last time though.

JANE HUME: That’s true and to some extent it did but because we said it was temporary, and because it was one of the only drivers of inflation back then, it did make a difference. Right now, though, there are other drivers of inflation as well and you probably need a broader base approach to having a plan to tackle inflation.

TOM CONNELL: Do you think it would be a good part of a multi-tiered plan? To think that overall, when you weigh the pros and cons of fuel excise cut. Now is another good time to do it temporarily and have an end date?

JANE HUME: We did try and draw Treasury out on this issue in the last couple of days and they were very hesitant to tell us what it is that they had advised the government on.

TOM CONNELL: They didn't say no to it though?

JANE HUME: Well, they have all sorts of information at their disposal. That obviously the rest of us mere mortals don't have and I would be very whether the government has been advised to.

TOM CONNELL (INTERRUPTS): Would you like to know from the government if they've asked about this or what advice they've had on this?

JANE HUME: Again, we tried to draw that out. But of course because those sorts of things are Cabinet-in-confidence, they weren't forthcoming. I'm actually disappointed about that because what we want to know is what is the government's plan to tackle inflation?

TOM CONNELL: Ok, so you're not saying do this, but you're saying it could be a good idea. Let’s find out if it is one? What are maybe some unexpected unintended consequences before you embrace it?

JANE HUME: I suppose what we want to know is what are the alternatives as well? What are the other things that the government could do to reduce inflation and there are plenty of things up their sleeves that could reduce red tape and regulation that was something that we asked about yesterday.

TOM CONNELL: It’s hard to do overnight.

JANE HUME: It is hard to do but it does make a significant difference.

TOM CONNELL: Such as?

JANE HUME: Such as productivity, state relations. Alignment of rules across borders is a really important one.

TOM CONNELL: But that all takes a while, if we’re talking about over the next six months. That's not something that will really change things.

JANE HUME: How about we change the idea of putting taxes on farmers, or taxes on truckies. Because of course, that immediately gets passed on to grocery prices and that would have an immediate impact. But that's a deliberate decision of the government to, in fact, raise prices.

TOM CONNELL: So what tax on farmers would you remove?

JANE HUME: Well, there's a new Biosecurity levy that was announced in the budget. Just recently there was also a heavy road vehicle user charge that was announced in the budget rescue and that goes straight on to truckies, they're not going to keep those, they're not going to absorb those taxes , they’ll be passed straight on.

TOM CONNELL: Ok, one big driver is domestic services. Is there much we can do about that? There's a few things including wages driving that and wages are still lagging behind inflation mostly. So can you do anything about that?

JANE HUME: Well, I mean, I think you can certainly, I mean, you can do whatever it is you can to reduce costs to business, rather than pushing up costs to business and again, when I'm talking about something like red tape reduction, tax reductions or assistance to businesses, that's really important. It's a shame we didn't get to discuss small businesses a little bit more yesterday. We did run out of time during Senate Estimates and the appropriate agency, they ended up leaving. That is genuinely a concern, particularly small businesses are doing it tough and the ones that have borrowed that are doing it most tough right now.

TOM CONNELL: What about immigration? It's a driver through housing and temporary intake is the one which is simply demand driven, which is not a Labor thing. It's an Australian thing. Does that need to be looked at as a problem?

JANE HUME: Senator Smith, Dean Smith, actually drew out some information just yesterday on inflation that showed that the quarterly increase has been by around 125,000.

TOM CONNELL: On immigration.

JANE HUME: Immigration, sorry. Yes, and of course, you know, extrapolate that over a year, year and a half, that's an enormous intake. We're talking half a million people. So of course that is going to be a driver of things like housing shortages.

TOM CONNELL: But as to what to do about it. So there's already a cap on permanent but actually the bigger cohort is temporary and, you know, we need a lot of these people, they’re students and so on. But what to do about it? Is there a sort of, is it the state of things that you need a one off measure to cap what is normally a demand driven system?

JANE HUME: Well, you know as well as I do, that a very well managed migration program has been one of the foundations of Australia's growth and prosperity for decades. But well managed is the key there, isn't it and allowing 125,000 people to come in without having planned for it, without having built the infrastructure around it, without the housing, of course that's gonna have a distorting effect.

TOM CONNELL: But when you say allowing, I mean, so there's a cap of 190,000 on permanent, the rest just just happened. I mean, the Coalition allowed it too. It's just there wasn't soaring demand?

JANE HUME: Not to that extent though. Well, if there wasn’t soaring demand there wasn’t the problem.

TOM CONNELL: When you say not to that extent, you just mean people didn’t come, you didn’t cap temporary migration.

JANE HUME: You’re asking the Coalition to solve a problem they didn't have. This is a government problem that they have right now and they haven't come up with a solution.

TOM CONNELL: What I'm asking about is a solution. So when you find out gee, there's a lot of people headed here the next year, you can't build houses in that year to make up for it. You just can't, we don't do that quickly. So is the solution to reduce temporary migration, should that be on the table?

JANE HUME: That’s a question that you should be asking the government, because they're very good at criticising the actions of the former government, but they don't seem to have a plan of their own.

TOM CONNELL: I’ll ask the government. Do you think that is too drastic a measure given other consequences?

JANE HUME: Well what are the implications?

TOM CONNELL: Well, you might have to reduce how many students come to Australia, then you reduce university numbers.

JANE HUME: Well, they have the resources of a department behind them to tell them what the implications are. We are trying to draw that information out at Senate Estimates and we don't seem to be getting exactly what we want from the government. They are playing their cards very close to their chest and being a little cagey on some of those really key issues.

TOM CONNELL: I guess the question broadly, then is, is it too radical a step to consider that? You know, how big is this problem? Or should that at least be looked at around, let's see what the consequences are around capping that number?

JANE HUME: There is nothing that should be off the table but at this point in time, because let's face it, inflation is much stickier than anticipated and it is the ultimate thief in the night. You know, it erodes your purchasing power, it eats away at your savings. It reduces your standard of living and it reduces your quality of life too and that's why it's so important that the RBA has to do its job certainly, to get it back down to band. But it's more important that the government helps by having a plan to reduce inflation, because it doesn't have one now.

TOM CONNELL: We will let you get back and ask those questions, Jane Hume, thanks for joining me.

JANE HUME: Thanks Tom.