Interview with Alan Kohler, That's Business, ABC podcast

Subjects: Artificial Intelligence strategy, budget, housing and migration Alan Kohler: The Treasurer, Jim Chalmers, was our first interview on That’s Business 3 months ago. Well, a lot has happened since then, including a lot on the subject of AI, including a big speech this week by the Prime Minister about how they’re going to regulate AI. So I thought it would be a good time to get Jim Chalmers back on to delve further into what the government’s planning to do about regulating and encouraging AI, and is it even possible to do that at the same time?

The Treasurer has been given the job of dealing with AI and productivity. So what does that mean, and how does it impact the existing productivity agenda? Which, by the way, isn’t going very well.

And what about housing? Construction has fallen behind the housing accord target of 1.2 million houses over 5 years. So does that mean the government will have to cut immigration more than it was going to?

So to answer those questions and more, here is Treasurer Jim Chalmers. G’day, Treasurer. Thanks for joining That’s Business again.

Jim Chalmers: Very kind of you to have me back, Alan. Thanks. Treasurer, just to deal with AI first and the Prime Minister’s speech this week, you’ve had a fairly laissez‑faire approach, I think, to AI up to now.

Does this speech suggest that you’ve now woken up to the dangers of it? Well, I think what the PM’s speech did and why it was so important was that it took a lot of the good work that we’ve been doing on AI and, showed what the next steps are going to be. And so, I wouldn’t accept your point that there hasn’t been much activity until now.

I mean, we had the AI plan released by my colleagues. We had a version of the standards released some months ago. We set up the AI Safety Institute.

And if you look around the world, this actually puts us a bit closer to the front of the pack when it comes to these really important questions. You know, every country is trying to work out the best way to maximise the upsides here and minimise the risks when it comes to AI. And what the PM has done and what the government has been working on for some time is to recognise that this is a transformational technology – probably the biggest transformation in our economy in our lives – to work out how to seize and shape that opportunity in a way that also manages some of the risks.

And so the big parts of the speech obviously were about legislating the standard for data centres, making sure that creatives maintain control of their work and also really centralising AI in the work of the government under the Prime Minister’s leadership. And so for all of us in different portfolios, in my portfolio, thinking through the issues around productivity.

Obviously, AI will be front and centre now in the intergenerational report that I’ll release before the end of the year. All of the issues around regulation, the financial system and its stability, all of us have got a lot of work to do. But that work didn’t begin yesterday.

It has been happening for some time, but I think the PM’s speech gave it a new focus. And that’s why it’s been so well received, I think, really right across the spectrum. Can I get a sense from you what you think the risks are and what’s the balance between opportunities and threat here?

Well, I see a lot of upside in AI when it comes to our economy and our society. As I said before, it’s truly a transformational development which will help us solve a lot of problems in our economy and in our communities more broadly. But when we think through the risks, obviously, there is some anxiety about what it means for workers, what it means for the labour market more broadly.

I mean, yeah, there’s anxiety, but what I’m talking about is what you think the actual risks are, not just what people think they are. Yeah, well, the big risk is obviously that we don’t find a way to make this improve people’s standard of living at work. And so a lot of the work that Amanda Rishworth and other colleagues do in our team is about making sure that AI improves people’s working lives.

That’s a risk, that it doesn’t. Obviously there are risks when it comes to natural resource management and the standards are about making sure, for example, that the data centres make a net contribution to the energy grid, that they are responsible when it comes to water security. And also when it comes to some of the planning issues – making sure that data centres are not being built instead of housing in local communities, that they’re conscious of local community concerns about the geography of these data centres.

And so there are a number of risks. We’ve been upfront about that. But overwhelmingly, this is a big opportunity that we intend to seize and shape and to do that in a way that recognises Australia’s got huge advantages here, Alan.

You know, we’ve got geography, we’ve got renewable energy, we’ve got stability. There is so much that is attractive when it comes to investing in Australia and data centres and the AI opportunity, and we intend to make the most of it. Do you mean by that that what you’re trying to do is use that leverage that you have got to get frontier AI training done in Australia rather than just have kind of ordinary data centres?

Is that what you’re trying to do? I think that’s one of the central points of the PM’s speech, is that we want to maximise this opportunity. We want to make the most of our leverage.

We want to make the most of our huge advantages here. You know, I engage with all parts of this, including the big tech companies, and I know as Treasurer there’s an extraordinary amount of interest in Australia, already a huge amount of investment. One of the brightest parts of our economy right now is the way that business investment has come up substantially.

That’s not just about data centres, but they are an important part of the story. And so we do have some big advantages. They are recognised by investors and by others.

And so what the PM was saying yesterday was if we come at this challenge in a uniquely Australian way, which recognises our unique combination of advantages – the ones that I ran through a moment ago – then we can make the most of this. And making the most of it means attracting this, you know, frontier investment, investment in this frontier technology, this game‑changing technology, in a way that helps our people become beneficiaries of this change rather than see us fall further behind.

Right. So do you think you can get some frontier training done here? I mean, it seems to me that it’s a bit like getting GM and Ford to build factories here, to actually build their cars rather than import them.

I mean, we ended up closing them down. But is that a decent analogy? Is that what you’re trying to achieve?

I think our advantages here in 2026 are much more substantial than some of those historical examples. And the reason I know that from discussions with investors right around the world and here in Australia is because when investors look around the world, they see our renewable energy opportunity, they see our government stability, our geography, our national security arrangements.

All of that is very attractive to them. So what – all we are saying here is that the best way to attract this investment, including in that frontier technology that you’re describing, the best way to attract that, rather than deter it, is to make extremely clear what our expectations are and what the obligations are on these investors and on these builders of data centres in Australia or large data centres in Australia.

Now, you’re right to point out that there’s more than one kind of data centre. There’s the data centres which are essentially about servicing cloud computing, and there’s a lot of them around Australia already. That’s right.

We’ve got tonnes of those. Yeah, but the next step obviously is these very, very big data centres, which are about training. And in order to attract that investment, we have to make our expectations really clear, the obligations really clear.

And that’s what the PM did yesterday. All the natural resource management questions, all the questions around how we go about this and work with the states, but also making it extremely clear that when it comes to creators, they need to maintain control of their work. These are all the central questions that every country is working through.

And what the PM did yesterday was make the Australian position extremely clear. So there’s pictures of you meeting with Dario Amodei, the CEO of Anthropic, when he was here recently. Is what he was doing here basically setting out the terms for Anthropic doing frontier AI training in Australia, with an investment of $21 billion, apparently.

I don’t know whether you’ve announced that or what. And did that deal that he was offering, or at least proposing, did that involve a deal on copyright? Oh, no, I wouldn’t describe it that way at all, Alan.

The meeting that I had with Anthropic was really about understanding their position, but also conveying our position – the position that we have made really clear via the Prime Minister during the course of the week. And that is, we welcome investment in Australia. We’re very interested in attracting more investment in this country, and being part of this, you know, revolution in technology.

But only if there are a number of standards met and only if there are obligations met, including to our creative sector, the people who create so much of this content. And so, I mean, I’ve seen some reports of those discussions that I had with Anthropic. First of all, it’s not unusual at all for me to meet quite regularly with CEOs and others from some of the world’s biggest companies, and obviously, Anthropic is a very big company.

But it wasn’t Anthropic presenting to us a series of conditions; it was understanding each other’s position. And I think what you’ve seen in their public commentary and the public commentary of some of the other tech platforms and from the creative sector as well is that there is a balance to be struck here. And I’m really confident that we are finding an effective balance to attract this investment, not deter it; to make the most of the opportunities, not waste it; but to do that in a uniquely Australian way which recognises our unique combination of Australian advantages.

So, just on copyright, the Prime Minister said no company should use Australian books, music, art or news to build or train AI without the artists’ control. So how will they have control, do you think? And also, copyright is all about money.

So who’s going to collect – will you collect the money, and how will you get it to the artists and the writers? Yeah, so a number of models have been proposed, including some that you just mentioned briefly in your question. We engage a lot with the creative sector.

I’ve done a little bit of that engagement, but primarily Michelle Rowland, Tony Burke and others have been engaging with the sector. We made it clear through the course of the week that we will consult on the best model to do that. But our position is really clear, our starting position is really clear – and that is, creators need to maintain control of their work.

That’s a non‑negotiable. How we go about getting to a landing that everybody can live with is part of the work that we will do now. And, again, if you look right across our cabinet in the government, you know, half or more of the Cabinet is engaged in one way or another with this really important question.

It’s that important, that central to our economy, that half the Cabinet is working on some of these very complex issues, including the issues around copyright and creatives. Michelle Rowland, Tony Burke and others are doing a great job working through all of these issues to try and settle the best model. On the question of safety and sovereignty, it seems to me that the issue really comes down to whether you have a regime of mandatory pre‑deployment testing – that is before the AI release is released into Australia – or that it’s voluntary and post‑ deployment.

So what exactly is the AI Safety Institute doing? Is it going to do pre‑deployment testing or not? Well, the AI Safety Institute has an ongoing role.

I don’t think it’s necessarily an either/or when it comes to considering technology which is about to be deployed versus technology that is already deployed. And as you know, Alan – you follow this closely, as would people watching us today – this is an incredibly fast‑paced environment that we’re in right now. The pace of change, technological change and other change is accelerating.

And so the AI Safety Institute is all about trying to catch up and keep up with those developments. And so that’s an important part of the work. Beyond that, as I said in relation to the copyright question, the speech that the PM gave this week is not about finalising every one of these issues; there is more work to do.

We’ve been upfront about that. And we are all engaged in that work. For me, some of the questions are about regulation, financial stability, competition, productivity, the intergenerational questions in the IGR that we’ll release later this year.

All of this stuff requires us to do ongoing work. There’s not a country in the world that’s going to set and forget the arrangements for AI because of how fast this environment moves. And so the AI Safety Institute is a good example of where it’s work will be ongoing.

Okay, but you didn’t really answer the question. I mean, is it possible, are you considering having a regime such as with pharmaceuticals, where stuff has to be checked before it actually goes out? I think as I said in my answer to the question – maybe it wasn’t exactly what you were looking for, Alan – Definitely not.

But what I was trying to say is that our regulatory models, they evolve with the technology themselves, and there is more work to do to settle the final models, whether it’s this question or other very complex questions as well. I mean, on this question of safety, I can’t get over the fact that the statement on AI risk that was put out 3 years ago with 357 signatories, now it’s still there with 1,300 signatories, which says that the risk of extinction needs to be considered as a priority, a global priority.

I mean, what do you think of that? Well, we are dealing here with some of the biggest, most fundamental issues, not just in our economy but in our society more broadly. These are historical questions.

Whether we get this right or wrong will have huge consequences for the future of our country, the future of the global economy. And so there have been concerns raised about what it looks like if we get this wrong. We don’t intend to get it wrong.

We intend to get it right. And that means making sure that this transformative technology works for us, not against us. It’s why we’ve got the safety institute you’re asking me about.

It’s why we’ve got the standards. It’s why we engage frequently and enthusiastically with a really fast‑moving part of our economy – because the stakes are high here, and getting it wrong invites a whole bunch of consequences that we don’t want to contemplate. Getting it wrong invites those consequences.

Getting it right, means capturing these immense benefits in a way that minimises the risk. And every company, every country, every community in one way or another is grappling with these fundamental questions. And we are grappling with them, too, as the government.

The PM gave you a window on our thinking here, and we intend to get it right. There was another statement, in fact, this week put out by more than 2,000 signatories about the economics of it, saying that policymakers and economists must understand the economics of AI. Now, you’ve been put in charge of productivity side of things.

What does that mean? Data and digital is already one of your 5 productivity agendas. So how is that going to change now?

Well, I think everybody recognises at the most basic level that AI has the capacity to make our economy more dynamic and, therefore, more productive, and the best way to grow our economy over time and lift living standards for people is to make it more productive. And so you can see that the way that AI can speed up already, you know, some basic tasks in people’s workday, so that’s a pretty easy way to understand the economics of the productivity element here.

But obviously, it goes, you know, much beyond that. You know, we’re thinking about the role of AI in regulation. We’re thinking about the role of AI in the context of an ageing population.

And one of the reasons I keep coming back to this intergenerational report that we’ll be releasing later this year is one of the things you’ll notice if you compare this year’s one to the one we released 3 years ago is really AI has become front and centre. And that’s because if you look at all the big shifts in the global economy and in our societies, you know, ageing and demographics, changing industrial base, geopolitical fragmentation, the energy transformation, all of that is relevant to this technological revolution which we see in AI.

And so for me it’s central to the work that I do as Treasurer, and it’s central to the work that I do trying to turn around a couple of decades of pretty ordinary productivity performance. Just on productivity, I mean, it’s been falling since you became Treasurer to the point where the speed limit now of the economy is quite low and the Reserve Bank has had to slow it down more than it would have otherwise had to do with higher interest rates, arguably.

So do you accept that lower productivity under your watch has led to higher interest rates? I think it’s pretty clear why – you know, why we saw some of those interest rate rises in the course of the last few years. We’ve had 2 big spikes in energy costs playing out in the inflation data.

You know, when we came to office, inflation was rocketing. It got up near 8 per cent in 2022. We got that down substantially.

It has come up a bit in recent months again, primarily but not exclusively because of a war on the other side of the world. And so I think in the very specific terms we know why we’ve seen those changes in interest rates. But your broader point about the speed limit in the economy is right and something that I’ve acknowledged before.

You know, this is not a challenge that we’ve had for the last few years; it’s a challenge that we’ve had for the last couple of decades. And what we learned in 2025 about our economy, when growth did come back in really welcome ways, in 2025, we saw net overseas migration come down, we saw growth pick up, and we also saw this really welcome transition from the public sector to the private sector.

Private‑sector‑led growth started to absolutely rocket in the second half of 2025. And so we did come up against those speed limits on our economy sooner than was anticipated. We’ve been upfront about be that, as has the Reserve Bank.

And so when rates went up earlier this year, that was primarily in the first instance about the bigger, faster recovery in the private sector and subsequently it’s become around some of these considerations, particularly around energy costs and then becoming a broader challenge of inflation when it comes to fertiliser, when it comes to building costs and the like.

Yeah, but the main criticism of you is that your reforms – and there are some obviously – are incremental rather than transformative. That’s true, isn’t it? Oh, look, I don’t think anyone who looked objectively at the Budget that we handed down in May could say that it wasn’t sufficiently focused on shifting the needle on productivity.

I mean, that was the broadest and biggest productivity package at least since the 1990s. We’re talking about cutting compliance costs by more than $10 billion, just the competition policy part of it represents a $13 billion uplift in GDP. And so I think because the Budget had the tax reform package in it, not a lot of people have focused as they usually would on the productivity package.

But no objective observer of that Budget could say that it was insufficiently focused on productivity. It had a huge productivity package in there in addition to all of the other things that we had to do on fuel security, tax reform, Budget repair and the cost of living. And so we’ve been very focused on this challenge.

We know that we’ve had a longstanding problem with productivity in this country for a couple of decades now. In fact, the worst decade for productivity growth I think in the last 50 or 60 years was the decade before we came to office. And so we’re working very hard to try and turn that around.

Now, if there was a simple solution here, if there was a switch that we could flick to instantly turn around 2 decades of underperforming on productivity, somebody would have flicked that switch already. The truth is we’ve got to act on a number of fronts. We’re speeding up approvals and we’re making it easier and faster to build.

We’re attracting more investment and we’re very alive to the possibilities of this technological transformation which is represented by AI. Are you saying that the productivity package in the Budget will get productivity back to what it needs to be, which is, like, 1.5 per cent growth per year? It will boost productivity.

And it feeds into our – Yeah, but will it boost it enough? Well, it remains to be seen. But we will be better off because of the productivity package in the Budget than we would have been otherwise if we did what our predecessors did, which was largely nothing.

The Parliamentary Budget Office put out a report this week saying that with, you know, long‑term projections for the Budget. And they’re saying that the return to surplus in 2035 only happens if there are no more income tax cuts giving back bracket creep. So is your plan to keep bracket creep from here on?

You’re certainly opposing the opposition’s plan to index the tax scales. Well, let me make a couple of points about that, Alan. First of all, the Parliamentary Budget Office report said that we’ve improved the Budget over that medium‑term trajectory.

We’ve got the deficits down, we’ve got the debt down quite substantially. Debt is actually lower in the year just finished by about $200 billion compared to the trajectory that we inherited. You know, we found more than the usual amount of savings.

And so the Budget repair story in Australia is quite encouraging, but we know that there’s much more work to do. Now, when it comes to the assumptions in the PBO work, you know, we release our own medium‑term forecasts and assumptions in the usual way in the Budget, the way that governments of both persuasions have done that. But we’ve also been repairing the budget, getting the budget in better shape at the same time as we’re cutting taxes 5 different ways.

And there’s your answer to your question about bracket creep, Alan – you know, this is a government which returns bracket creep. We’re doing it 5 times, and we’ve found 3 different ways to return that bracket creep so that we can cut taxes for workers. And if you look at that 10‑year period that the PBO is talking about, I think it would be a brave and unwise assumption that no government is going to cut income taxes again in a 10‑year period when you consider that we’ve cut income taxes 5 times and we’ve only been here for 4 years.

I’ve said repeatedly – and I mean it – when we can afford to cut taxes further for workers, when we can do that in a responsible way, of course, we will look to do that. And our bona fides there are the fact that we’ve already cut taxes on a number of occasions. Those tax cuts were opposed by the Coalition, as you know.

And so returning bracket creep is a very, very important not just aspiration of this government, but it’s part of our record. It’s part of the real change that we’ve been delivering. Now, when it comes more broadly to that 10‑year period, if you look at the Budget papers from May, what you’ll discover is that the improvement in the Budget over that 10‑year period that the PBO is talking about, 3 times the improvement comes from savings than comes from changes to taxes.

And so if you look at our – the policies that play out over that 10‑year period, 3 times the savings than the tax changes, and that’s another important thing which I think is too often neglected in the commentary about the Budget – and that is the huge effort that we’ve put into finding savings. They also did some work on the impact of migration on the budget and showed, you know, what a big impact that it has.

There’s no point going into the details of it. But on the question of housing affordability, you know, the target of 1.2 million houses over 5 years from the middle of 2024, you know, you’re running well behind on that. Is there going to be a need, do you think, to bring immigration down more than it has come down already, which is not that much to be honest – it’s about 300,000 still.

I mean, Treasury is forecasting migration, I think next year of 225,000. Are you thinking that you might need to make that forecast – turn that forecast into a target so that in order to improve the housing affordability given the fact that the completions and housing starts just aren’t kind of making it at the moment? Look, it’s an ambitious target, and in order to meet it, everybody needs to do their bit.

We’re doing our bit with the big investments we’re making in building more homes. It’s not quite true that net overseas migration hasn’t come down a lot – it’s down 45 per cent from its peak, which is a very substantial moderation. That was a very big, unusual peak, though.

Well, that’s true, Alan, but it’s come down very substantially since then. I mean, we’ve tried to make the point when the usual suspects try and play politics around migration that when we came to office it was surging in that post‑COVID period, and we’ve been able to get it down substantially – 45 per cent from its peak – and we expect it to go down further as you rightly point out in your question a moment ago.

Also, don’t forget when it comes to housing, if you look at when we came to office, I think commencements, investment and approvals, they were all falling. Now they’re all growing. And so we’re turning things around on housing.

We are moderating net overseas migration quite substantially. Those 2 things are happening simultaneously. Now, you started your question asking about the PBO and the impact of migration on the budget.

Don’t forget, we’ve been delivering these improvements in the budget position budget to budget and MYEFOs at the same time as net overseas migration has been coming down. And also when it comes to the question of economic growth, you know, if you look at 2025, when we did see that very welcome bounce back in growth, and particularly private sector growth, that was happening at the same time as net overseas migration was coming down substantially as well.

And so I think all of those things are important bits of perspective when we think about some of these really important questions around migration, housing and growth more broadly. But will you turn that Treasury forecast of migration into a target? And if not, why not?

I think there are important reasons why it’s seen as a forecast rather than a target. But we have played a more active role in getting those net overseas migration numbers down. You know, if you look at the steps that we’ve taken when it comes to students, for example, if you look at the good work that Tony and before him Clare had done at tightening up the visa system, this is all about seeing what levers we have to get that net overseas migration down to more normal levels.

But that number you reference in the Budget I think for the usual reasons, governments of both persuasions have seen that as a forecast or an assumption rather than as a target necessarily. Our target is to get net overseas migration down. We’ve made some good progress there, and that is why it’s down very substantially.

But down to what? Well, you can see in the Budget. The numbers that you reference are the accurate ones.

You can see that that’s – you know, what the Treasury is expecting as a consequence of the steps we’re making and other developments in our economy. And so we presented that in the usual way. The thing that’s been a little bit unusual is we have played a more active role in managing those numbers down, and you can see the fruits of that in the fact that we’re now down 45 per cent from that big post‑COVID peak.

Okay, we’ll leave it there. Thanks very much, Treasurer. Thanks very much, Alan.