Interview with Peter Stefanovic, First Edition, News24

Subjects: Intergenerational Report, fertility rates, migration, interest rates, fuel excise Peter Stefanovic: Well, we’re all going to live longer, we’re going to work less, retire later and the country will pay for it through the AI boom. That’s about the crux of an Intergenerational Report that tries to predict how our great nation will look and fare in 40 years’ time.

So joining us live is the federal Treasurer, Jim Chalmers. Treasurer, good to see you this morning. So 4‑year forward estimates are often wrong, so how much faith can we really put in a report looking 40 years into the future?

Jim Chalmers: Morning Pete. Look, the crux of the Intergenerational Report is serious economic risks and pressures on the budget but really substantial advantages for Australia. We are realistic about the risks, but we’re optimistic about the future because there’s a lot in the Intergenerational Report which speaks to Australia’s unique combination of advantages.

And so when it comes to the big shifts that we’re expecting to see in AI, in energy, the composition of our industrial base, the aging of our population, the fragmenting of the world, obviously this puts pressure on budgets and economies right around the world, but Australians’ story is a much stronger one than many of our peers. Stefanovic: We’ll get to AI in a moment.

I want to ask you about birth rates though, because the birth rate plunging to roughly 1.4 per woman, I mean that’s in line with several other western democracies as well. But would you call that a crisis? It’s certainly the case that fertility is falling further and faster than Treasury anticipated even a few years ago.

That’s one of the confronting elements in the Intergenerational Report, and you’re right to point out that that’s happening around the world, and in some countries they are in a more difficult circumstance than Australia is. But those declining fertility rates is a really important reason why we’re investing billions of dollars in early childhood education and care, it’s why we expanded paid parental leave, paid superannuation on paid parental leave.

All of this is about making it a little bit easier – Stefanovic: Yeah, but that’s not working though – – for families to – Stefanovic: – the birth rate’s still going down despite all of what you’ve said there. Well, we don’t know what it would be in the absence of those policies, that’s one point that I would make about your question, Pete. But broadly I do accept that this is right around the world quite a substantial challenge.

Now I’m not like Peter Costello in the sense that I don’t tell people to have more kids; I see that as a deeply personal decision – Stefanovic: – that people make about whether to start a family and when it start a family and how many kids to have. But we embrace our responsibility to make that a little bit easier if that’s the choice that people want to make, and we’re doing that by early‑childhood care, paid parental leave and super.

Stefanovic: Does that give you cover for higher migration? I don’t see it that way. I mean, first of all, we’re managing the net overseas migration numbers down quite substantially.

Net overseas migration’s down almost 50 per cent in the recent figures from the peak that we saw around the time that we came to office. So, we’ve been getting net overseas migration down since that peak a few years ago. That’s the first point.

But migration can be a force for good in our economy, so long as it’s robustly and responsibly and well managed. And that’s what our migration reforms are all about, getting those numbers down to more normal levels, making sure that the system is more robust and stronger and more transparent so that migration is in our national economic interest. The numbers were extremely high in that post‑COVID peak.

We’ve been able to manage them down really quite substantially, as I said, almost 50 per cent. That’s a good thing, but it always requires more work to get those net overseas migrations down to more normal levels. But if you look at the Intergenerational Report in the context of fertility rates falling faster, the context of our aging population, the amount of Australians over 85 tripling, overwhelmingly a good thing that people are living longer and healthier lives, but migration has a role to play.

We’ll make sure that it is responsibly and robustly managed in Australia’s national interest. Stefanovic: Okay. Money markets are pricing in 3 rate rises by March of next year, Treasurer.

Is that what you are anticipating? Oh, Pete, for the years that I’ve been talking to you on your program, you know that I don’t make predictions about decisions taken independently by the Reserve Bank. They’ll meet next week, they’ll weigh up all of the global and domestic conditions and come to a conclusion and a decision without any free advice from me in the lead‑up to that meeting.

I think it’s self‑evident around the world in other countries interest rates are going up because of the impact on inflation of this war in the Middle East. From an economic point of view the war in the Middle East has been a disaster, and from an economic point of view the end of that war can’t come soon enough. It is pushing up inflation around the world and here in Australia.

It is pushing up interest rates around the world as well; I think in every major advanced economy the market’s expecting interest rates to go up. And so, our Reserve Bank will weigh up all of those conditions, they’ll come to a decision independently, and I won’t make any predictions before that. Stefanovic: Well, the US went up, as you know, last week, not just the war but also the AI boom as well, and there might well be another one this year.

But how much ownership would you take of any rate rise, of any one rate rise? Look, I take responsibility for my part in the fight against inflation, and that means managing the budget responsibly, providing cost‑of‑living relief in the form of permanent and ongoing tax cuts, making it easier for people to find a bulk‑billing doctor, because that takes pressure off family budgets, making sure that wages have been growing over 3 per cent over our time in office.

So I take responsibility for my part in the fight against inflation, and that means continuing to manage the budget in the most responsible way that we can, and it means providing cost‑of‑living help in the most responsible way that we can, in our case cutting income taxes 5 times and providing all of the other assistance I’ve just run through. Stefanovic: Right.

But fewer people are now taking out loans for investments, first home buyer activity is at a 4‑year low, it’s down 20 per cent year on year, which is who the tax changes were for. Have you misjudged the tax fallout at all? No.

And the first point to make about that is the changes we’re making to the housing market to make it easier for first home buyers and the reforms that we’re making to the tax system should be judged on their impact over the next few years, not on the last few months. That’s the first point; housing is a long‑term investment. Second point is, as you know, Pete, the housing market was softening before the Budget, it’s a function of rate rises, broader conditions in the economy as well.

And if you look at some of those private sector forecasts for house‑price growth, including some of the more dramatic forecasts that we’ve seen released into the public domain in recent weeks a lot of those forecasts expect house price growth to return next year, or in and around then. And so, really I think we need to bring a sense of perspective to all of this.

There are a number of reasons why the housing market is softening. Our tax policies and our reforms in the housing market are all about making it easier for first home buyers. The impact will be felt over the course of the next few years and not over the last few months.

Stefanovic: Okay. Let’s just go to a final point now, the Opposition continuing to sell its fuel excise cuts and its policy which was announced this week. Do you still rule out cuts to the fuel excise?

Yeah, it’s not something that we’ve been discussing or considering, and that’s because we think a better way to provide cost‑of‑living help is via income tax cuts which those same Liberals and Nationals voted against in the parliament. You know, if our opponents cared about the cost of living, they wouldn’t have voted against tax cuts for millions of workers.

The other point to make is when it comes to debt and deficit, you asked me about that in the context of the Intergenerational Report. As it currently stands, the Liberals and Nationals have made more than $110 billion of unfunded commitments which would push up deficits and push up debt, and by their own logic push up inflation and interest rates. And so it’s for them to explain why with all of those unfunded commitments why they can continue to make these claims about the budget and inflation.

We manage the budget in the most responsible way that we can, that includes providing responsible cost‑of‑living relief in a permanent and an ongoing way, tax cuts, bulk billing, higher wages are all important parts of that. Stefanovic: All right. We’ll leave it there.

That’s the federal Treasurer, Jim Chalmers, on this Tuesday morning. Treasurer, thank you so much. Thanks Pete.