Press conference, Logan

Subjects: inflation figures, Future Fund results, Productivity Commission Jim Chalmers: We’ve got no shortage of challenges here in our economy, but we’ve got a lot of advantages as well. Inflation has come down again. We’ve got low unemployment, high labour force participation.

We’ve got one of the 3 strongest budgets in the G20. The ratings agencies have been very positive about Australia’s AAA prospects. So we’ve got a lot going for us, but we know that we’ve got a number of substantial economic challenges as well.

And inflation is one of those challenges. We welcome the fact that inflation has just come down again for the fourth month in a row. Inflation has come down again.

It is very substantially below the forecast that we had at Budget time just a few months ago. But we know that people are still under pressure, and we also know that inflation will bounce around as it returns into that target range in the coming months. So we welcome the fact that inflation has come down again for the fourth consecutive month, but we know that people are still under pressure, and that’s why we’re cutting their income taxes and providing help with the cost of living and delivering real change in the tax system to make it easier for people to buy their first home.

Now, if you look at the detail of these inflation figures today, a couple of things really stand out. First of all, inflation came down in Australia in July at the same time as it went up in most advanced economies. The reason why there’s been upwards pressure on inflation in July around the world is because of the movements in the global oil price and all of the volatility that comes from the war in the Middle East.

It’s another reminder that from an economic point of view and from a cost‑of‑living point of view, the end of the war in the Middle East can’t come soon enough. That’s really clear. But another really important factor stands out in the inflation figures for July here in Australia.

The price of electricity actually fell in July in these figures. It fell more than one and a half per cent. Through the year we saw electricity prices moderate from inflation up around 22 per cent to something more like 6 per cent.

And as I said, in the month itself, in the month on its own, electricity prices fell, and that’s because of the default market offer but also because we see the impact of various rebates, movements in rebates. And that’s the other important point. Now, fuel was a big driver of inflation in July, and the fuel excise relief comes off in August, and so we expect that to play out in next month’s figures.

Inflation will bounce around a bit as it gets further down towards the Reserve Bank’s target range. We’ve seen it come down for the fourth consecutive month, and underlying inflation was steady as well. So we welcome this moderation in inflation.

It does mean that inflation is substantially lower than the budget forecast, but we’re under no illusions because we know that people are still under pressure. We know that inflation is still too high and that’s why our cost‑of‑living help is so important. There’s one other good piece of economic news before I take some of your questions, and that revolves around today’s Future Fund results.

We are really pleased to see the Future Fund deliver returns of almost 15 per cent, and it comes on the back of returns of more than 12 per cent the year before. What this shows is the Future Fund’s earnings have gone up, not down, since we changed the Future Fund’s investment mandate to ensure that it’s focused on maximising its return at the same time as it’s cognisant of national priorities, like residential housing, like the energy transformation and like infrastructure.

Now, when we changed the Future Fund’s investment mandate a lot of people gave us a lot of free advice. They made a lot of predictions which have turned out to be completely and utterly wrong about the Future Fund. Future Fund earnings have gone up, not down, since we changed the investment mandate.

We’re very pleased and very grateful to the Future Fund, its leadership, Greg Combet, the outgoing CEO Raphael Arndt, it’s board and its staff for this really quite tremendous outcome from the Future Fund – 14.8 per cent in a year, 12.1 per cent the year before. The year before we changed the investment mandate it was more like 9.1 per cent. So the returns have gone up, not down, since we changed the investment mandate.

We’re very pleased and very grateful for that quite stunning result from the Future Fund, and I thank everyone involved in delivering that for the Australian people. And with that, happy to take a couple of questions. Journalist: Obviously that headline inflation rate is down, but the Reserve Bank’s preferred measure of inflation, the trimmed mean, remained unchanged.

Is that a positive thing, that it remained unchanged? Or is that still more work to do there? Well, it reflects a number of movements in our economy.

It reflects global pressures and some persistent domestic pressures as well. It’s a good thing to see headline inflation come off 4 months in a row. Underlying inflation, the trimmed mean, as you rightly point out has been steady.

Inflation has been coming in quite substantially below what the Treasury had forecast in May. It is substantially lower than the peak in headline terms of around 5 per cent that they were anticipating only a few months ago. But we know that those pressures are still there whether it’s pressures from movements in global oil price or other pressures as well.

We know that inflation is still too high even with this welcome moderation in headline inflation today. Journalist: Economists are not ruling out another interest rate rise before Christmas. What do you think that the people of Logan will think if their rates go up?

Well, obviously I’m not going to predict or pre‑empt the decisions that the Reserve Bank takes independently about future movements in interest rates. I haven’t done that before, and I don’t intend to do that now. They will weigh up a whole range of factors, including today’s inflation data, which showed that inflation has come down again for the fourth month in a row, underlying inflation is steady.

They’d weigh that up along with the data from the labour market and elsewhere in the economy, and they’ll come to a decision independently without any free advice from me. Journalist: Treasurer, Luke Gosling made the right decision [inaudible]? Yeah, I think so.

And [inaudible] from my point of view the most important thing is that we don’t interfere with the legal process which is underway now. That’s why I don’t intend to comment on those legal proceedings in the Northern Territory. I’ve obviously seen the news that Luke has stood aside temporarily from the important work that he’s been doing on behalf of the government and on behalf of the country until these legal matters are concluded.

But beyond that, there are good reasons not to comment further. Journalist: Should he have stepped down when he was first arrested? I don’t have anything further to add to the answer that I just gave you.

I’ve seen that he’s stood aside from those responsibilities. I believe that’s appropriate, and I believe that the most important thing now is that the legal proceedings happen without a running commentary from his colleagues like me. Journalist: I’m not asking you to comment directly on the RBA’s work, but do you think the electorate is open to taking on more stress from an interest rate rise?

Look, I think this community, like communities right around Australia, have been dealing with inflationary pressures in the economy playing out in decisions taken independently by the Reserve Bank. Now, we know Australians are under pressure, but more than acknowledging that, we’re acting on that by cutting taxes, providing cost‑of‑living relief, making the housing market fairer for first‑home buyers.

And that’s really the difference in our politics. You know, the government, the Albanese Labor government, takes cost‑of‑living pressures seriously enough to respond to them, trying to remediate them. Our opponents just trying to play on those pressures that people are feeling.

We don’t dismiss the pressures that people are under. We understand that really since for the last 5 years or so there has been inflation more persistent than anyone would like. It’s been fuelled by 2 major wars on the other side of the world.

And that’s what we’re seeing in this data as well. Inflation came down, but the pressure in the other direction has come from movements in global oil, for example, in July, spreading out through our economy. That’s why in other countries we saw inflation come up in July.

It’s gone down in Australia. That’s a welcome development. But we have perspective about it as well because we know that a lot of those pressures are still there.

Journalist: Just [inaudible] raised concerns with you or the government about private credit risks? And the risks are definitely on ASIC’s radar. Could you be seeing those first cracks here?

Obviously ASIC has got an important job to do when it comes to that part of the market and that part of the economy. I don’t think it’s a surprise to anyone that there has been softness in our economy given all of this global economic uncertainty and given some of the persistent pressures in our economy. But overall I think it’s really important that whether it’s our political opponents or their fellow travellers that we don’t unnecessarily talk our economy down.

The Prime Minister gave a wonderful speech last night at the BCA. I was there. His major point and a view that I share is that it’s possible to acknowledge the challenges in our economy – inflation and productivity and global volatility – without going out of our way to talk the place down like our opponents do [inaudible].

We’ve got faster economic growth than almost all the major advanced economies, faster employment growth, we’ve got one of the 3 strongest budgets in the G20, the ratings agencies are very positive about us. We’ve got low unemployment, high labour force participation. So we’ve got a lot going for us in this country and we can’t forget it.

Journalist: The Productivity Commissioner Angela Jackson says she’s disappointed by the Prime Minister outlining the government’s intent with the GST carve‑up given the final report is yet to be released. Is it appropriate for the government to make a decision before seeing the final report? And do you agree with the Prime Minister’s description of the Productivity Commission having an economic rationalist view?

Well, a couple of things about that. The Prime Minister has made the government’s views very clear about the GST distribution, and that’s appropriate. And when the government has that view about the contribution of the WA economy to our national prosperity and how that plays out in considerations around the GST distribution, of course it’s appropriate that the Prime Minister express that view on behalf of the government.

That’s the first point. The second point about the report itself, don’t forget, this report was commissioned in the legislation that Scott Morrison passed in 2018. We’re obligated to follow through on this report because it’s in the legislation that our predecessors passed in 2018.

The last point I’d make about it is this: I know Angela Jackson, I know Danielle Wood. I’ve spent a lot of time working with and interacting with the good people at the Productivity Commission. And I want them to know just how much I value them.

That place is full of really good people – public‑minded, public‑spirited people doing a job for the government – in this case, the previous government – has asked them to do. And I think it’s really important that they are respected. Now I also know that in some circles calling someone an economic rationalist is not necessarily a criticism.

I don’t consider what the PM said to be inappropriate. But I think some of the other commentary around it has been unfortunate. Journalist: What about the WA Premier Roger Cook said and later the comments that [inaudible] called members of the Productivity Commission east coast clowns?

No, I don’t believe that is appropriate. I think you can disagree with the conclusions of the Productivity Commission without denigrating them. I think it is important that even when those conclusions are contested – as they often will be – that we continue to respect the people of the PC and the really important work that they do.

And, you know, it’s not unusual for state governments to express a view forcefully about the GST share or other issues around state government funding. It would be strange if state governments weren’t advocating for a bigger slice of the pie. But as we go about this really important work, I think it’s not just possible but really important that if people disagree with the PC, that they don’t denigrate the people there or their important work.

Journalist: One of the key drivers to the inflation figure today, the annual inflation figure today, was the 5 per cent increase in housing costs which the ABS attributed to the rising costs of new dwellings. How do you think that will impact the government’s plan to funnel investment into new stock? Yeah, I mean, that’s not a new development.

We’ve seen some inflationary pressures in housing for some time now. Part of the reason for that is the global pressures which initially hit the global markets and energy markets are hitting economies more broadly now, whether it’s the market for PVC piping or some important part of construction or in any other construction processes. So we’ve seen that for a little while now, some of those price pressures in the housing market.

Obviously that makes things more difficult when you’re building a heap of homes which this government is doing. But not a new development, not something that’s just been sprung on us in the last month or 2 but a feature of the housing market for a little while. Journalist: Has Treasury modelled the impact of a reduction in net overseas migration on the budget bottom line?

Well, the Treasury provided me figures in the budget which show net overseas migration is down 45 per cent since the peak. That’s deliberate. We’ve been managing that net overseas migration down from the big gallop that we inherited when we came to office, and we expect it to go down further.

So the Treasury’s input into the budget is to provide those net overseas migration forecasts, and what those forecasts show is that Treasury expects net overseas migration to moderate further in addition to the very, very substantial moderation that we’ve already seen. Journalist: [Inaudible] Queensland, South Australia [inaudible], childcare provider Edge Early Learning has gone into voluntary administration.

Is there something the government – they operate a number of child – a lot of childcare centres around the place. Is there something the government can do to step in to help them out? Look, I’m broadly aware of those developments, but I haven’t been briefed on them yet, so I might save any comments about that particular place for another occasion.

Okay, thanks very much, everyone.