Interview with Sally Sara, RN Breakfast, ABC Radio

Subjects: interest rates, housing market, construction code, migration, Japan Sally Sara: The Reserve Bank held interest rates at 4.35 per cent yesterday, but Governor Michele Bullock warned there are still inflationary pressures across the economy. Jim Chalmers is the federal Treasurer and joins me now. Treasurer, welcome back to Breakfast.

Jim Chalmers: Thanks very much, Sally. You said yesterday the RBA’s decision was a welcome one at a time of ‘persistent pressures at home,’ but there’s more work for the government to do to address inflation. What is that work?

Well, of course it was a welcome decision because people are under pressure and so a lot of Australians would have breathed a sigh of relief at the decision from the independent Reserve Bank. The points that the Reserve Bank Governor made yesterday about these inflationary pressures are similar to the points that we have been making. We have seen inflation come in substantially lower than what was forecast but it’s still too high for the time being, and that’s why the government has been managing the budget responsibly and helping with the cost of living where we can, in the most responsible way that we can.

The RBA Governor, Michele Bullock, said it was her personal view that the Reserve Bank may have to hike rates again. Would that put further strain on households? As you know, Sally, whenever we have these discussions, I don’t predict or pre‑empt or make judgments about future movements in interest rates.

That is the appropriate task for the Reserve Bank Governor and her independent board. The decision taken yesterday, I think, reflected a couple of important things. First of all, Australians are under a lot of pressure already.

We acknowledge that and we’re acting on that. Secondly, inflation has come in quite substantially lower than the Reserve Bank forecasts before yesterday’s, and lower than the Treasury forecasts as well to be fair. This was the second meeting since the Budget and on both occasions, rates were held steady.

Those are the facts. It’s up to the independent Reserve Bank to determine the future course of interest rates and monetary policy. I’m focused on my job – managing the budget responsibly, providing cost‑of‑living relief where we can do that in a sensible way.

The Governor also said that falling house prices were not a major concern. Do you share that view? My view is you shouldn’t judge the housing market by volatility over a period of a few months.

In fact, if you think about house prices in this country in the 2000s, even with that quite remarkable house price growth over that period, you take the last 10 years or so, we’ve actually seen prices go down at least 7 times by our count. They went down quite substantially between 2017 and ’19 and they went down a little bit in 2022. That’s because, as Sally Auld said to you on your program a little while ago, often what happens with house prices is a consequence of a range of factors, including movements in interest rates.

The Reserve Bank Governor said yesterday, I’ve said on a number of occasions, the private sector market economists have said as well, what we’re seeing in the housing market is a consequence of a whole range of factors – economic conditions, interest rates, policy changes – not any one factor on their own. So do you think it is of concern at the moment, what’s happening with house prices?

For some people who have their wealth tied up in that, they’re worried. Housing is a long‑term investment. I think as you and I have talked about before, people don’t make decisions on housing from week to week.

They make decisions on investing in housing over a longer period, and over a long period now we’ve seen house price growth and we expect to see more modest growth over the course of the next couple of years. That’s another point, Sally. The Treasury assumptions in the Budget around house prices are assumptions for the next couple of years, not the first few months after the Budget.

We’ll get some lending data on Friday. We’ve seen data from Westpac this week. We’ll see some Commonwealth Bank data today as well.

We’ve seen home loan applications drop, haven’t we? From those initial numbers. Yes, for a range of reasons.

As the Westpac CEO made clear, you shouldn’t jump to conclusions based on a few months of data and there’s more than one thing happening in the housing market. That’s why we saw some of these prices softening before the Budget. Let’s look at housing.

The Shadow Housing Minister, Andrew Bragg, will outline a policy today to address what he argues is a mismatch between housing construction and the number of migrants coming to Australia. He says that the gap can be closed by ensuring that net overseas migration averages less than 180,000 over a four‑year period and saying that that can be achieved ‘while benefiting the budget and the economy’.

On the face of it, does that make economic sense to you? First of all, I think the obvious point about Andrew Bragg is that he’s a housing spokesman for the Liberal Party whose policy is to cut funding for housing. That’s the first point.

On migration, we’ve seen net overseas migration come down 45 per cent from its peak and we expect it to go down further over the course of the next year or 2. How that relates to the housing market is when we came to office, dwelling completions and commencements were going backwards and now they’re growing. We’re making progress getting net overseas migration down.

We’re making progress when it comes to the housing market as well. Those 2 things are really important. Now, if Andrew Bragg’s at the Press Club today, that’s an opportunity for him to explain something else, Sally.

I see that John Howard is out there today saying that the Liberal Party shouldn’t be doing deals with One Nation. Andrew Bragg says that they should. So, that’s an opportunity for him to explain that difference too.

Where are those remarks? John Howard’s reported in the papers today saying that – Andrew Bragg’s remarks. He has said that ‘of course,’ depending on the outcome of the election, they would consider doing a deal with One Nation.

Those remarks have been widely reported in recent weeks. There’s a difference there and I’m just pointing out if he’s at the Press Club, there’s an opportunity for him to explain that. One of the other proposals is to reduce the Housing Code from more than 2,000 pages, the Building Code, down to around 80.

Is that achievable, and is that a good way to kick‑start productivity in the housing sector? He’s a bit late to the party on this. We’ve been very clear that the Code’s too hard to navigate and it’s too costly.

We’re making it easier and faster to build by pausing the Code and working with the states and with the industry to streamline it. I’m told Minister Clare O’Neil’s had something like 30 consultation sessions with the industry in the last year or so to get the best way to streamline the Code. We released some draft proposals earlier this year to do that, we’re going to present a final plan to building ministers later this year.

That will streamline the Code, reduce variations, improve where the provisions are too complicated, make the Code relevant in an age of AI. These are the things that we have been working on in a methodical way before any of these sorts of suggestions were made by the Coalition. When is your Cabinet colleague Tony Burke, the Minister for Home Affairs, when he is going to reschedule his Press Club address to announce the government’s plans for migration?

That will be at some point in the future. Obviously, I don’t schedule Tony’s speeches for him. What happened?

Why was it called off? We’ve been working through these issues in migration. Obviously, as I said before, we’ve made some progress getting net overseas migration down.

When we came to office it was absolutely galloping and we’ve been able to get it 45 per cent below its peak and we expect to get it down a bit further. That requires ongoing work. We have flagged that publicly and when we’re ready to make an announcement, no doubt Tony will make that announcement in the usual way.

Treasurer, just finally, yesterday in Question Time the Prime Minister rejected the Opposition’s characterisation of an exchange on a comedy podcast, particularly regarding the Japanese Prime Minister’s gift of melons. Does he need to explain, in his own words, what he did mean to convey in that exchange? I think he has explained.

He’s answered a number of questions about that, as have my colleagues. I don’t think there’s anything I could usefully add to that apart from reminding your listeners just how important that Japanese relationship is and how closely we work with our Japanese counterparts in the interests – Was it a misstep? I wouldn’t have thought so.

I take him at his word when he says that the way that it’s been interpreted is not the way that he intended. What did he intend? That’s what I haven’t heard as of yet.

He’s had multiple opportunities to answer questions on this, Sally. I think your listeners would understand that this is not something that’s front of mind for me as I work through these other issues we’ve been talking about, questions around house prices and inflation and the like. Jim Chalmers, thank you for joining me this morning.

Thank you, Sally.