On the long journey back from his high-level meetings in Asia this week, Jim Chalmers found himself dwelling on the sickening attack on independent MP Helen Haines.
“I had a couple of long flights where it’s just basically all you can think about,” Chalmers tells The Saturday Paper. “I mean, it’s bad no matter who it is, but the fact that it’s the most reasonable, the most respected, the most loved member of the whole place.”
With Australia facing an increasing prospect of a fifth interest rate rise this year, the treasurer is also monitoring the violent unrest, fuelled by rising living costs, spreading from France to other parts of Europe and Asia, including near neighbour Indonesia.
He can’t help but see the resonance between the violence dominating the news in Australia this week and the upheaval that his international counterparts are witnessing as politics globally becomes more polarised.
Asked if he believes the financial pain voters are feeling is contributing to an overheated and more febrile political environment, Chalmers demurs. He is, he says, “reluctant to equate the genuine, substantial cost-of-living pressures that mainstream Australia is feeling right now, and sort of lumping everyone into this violent tendency”.
He wants also to avoid ascribing any potential motivation to the accused attacker, who is now in custody and facing a committal hearing set for February 4 next year.
“But clearly, the more insecure people are, the more divided people are, the more susceptible a society is to violence,” the treasurer says. “There are very substantial global pressures at play. They are partly economic, partly cultural, partly technological, and no country, even a country as decent as ours, with a democratic heritage as proud as ours, is immune from the sorts of violence which played out in a beautiful country town in Victoria.
“I think one of the lessons from the past week is we can’t just kind of arrogantly assume that the violence that we see in the middle of Paris can’t be replicated on the main drag of Wangaratta.”
Chalmers has just returned from Hong Kong for the APEC Finance Ministers’ Meeting where he joined China’s Minister of Finance Lan Fo’an, Singapore’s Transport Minister Jeffrey Siow and the president of the Asian Infrastructure Investment Bank Zou Jiayi. He was also in Tokyo and Bangkok earlier this month, meeting with finance ministers and central bank governors.
The talks covered oil prices and fuel security, as well as surging bond yields that are driving up government borrowing costs. There were also discussions over competition for capital from hyperscalers due to the artificial intelligence boom.
The dominant topic was concern about the United States–Iran conflict. The consequent chokehold on shipping lanes has caused a global energy shock that is driving inflation higher with no sign of resolution. Chalmers describes it as a “disaster for economies like ours and economies around the world”.
“The primary focus of the governors and the ministers in Bangkok was how these higher oil prices are being felt right across our economies,” the treasurer says. Nevertheless, he says, in the meetings he attended, no policy responses to tame inflation were discussed other than higher interest rates.
“[It wasn’t] really part of any discussion that I was involved in, but obviously governments recognise that maintaining a responsible fiscal position is important in this context.”
The latest pricing has oil up to about US$110 a barrel, its highest price since May. The Reserve Bank of Australia’s deputy governor, Andrew Hauser, on Wednesday warned the inflation outlook is “materially worse” than forecast in August, raising the prospect of another rate hike next month.
Inflation sits at 4 per cent, according to the latest consumer price index, well above the target band of 2 to 3 per cent. The cash rate is at a 15-year high of 4.6 per cent and economic observers see a 50–50 chance of another hike at the RBA’s November 3 meeting.
“I saw the deputy governor’s speech, and obviously I’m not going to provide any kind of commentary that looks like I’m predicting or pre-empting their deliberations,” the treasurer says.
“I think it’s self-evident when you look at developments in the global economy since August, particularly the spike in global oil prices since the re-escalation in September, then obviously what we’re seeing are conditions that are pushing up inflation here and around the world, weighing on growth here and around the world, and pushing up borrowing costs and bond yields.”
“I’ve never taken the view that any one of us is beyond criticism. We take feedback seriously from all quarters, and I think it is the case that we can all always do better, me included.”
In the global context, he says, Australia is considered “this kind of island of stability and opportunity in a sea of uncertainty
and risk”.
The treasurer cites this country’s debt levels, which, though historically high, are low relative to other economies. “The overwhelming sense you get from engaging with our peers is that the world sees Australia much more positively than we see ourselves.”
Notably, the treasurer is also taking a more sanguine tone than he has to date on the key reforms he unveiled in the May budget to address intergenerational inequity – the changes to negative gearing and capital gains tax. Of the criticism he’s faced for the subsequent declines in house prices across the country, and for a negative impact on investors, Chalmers tells The Saturday Paper the “feedback that we get is the price that we expect to pay”.
“Reform is never easy, and if these changes were easy, somebody else would have already made them,” he says. “But the decision that I took and that we took were that these changes were important enough to invest some of our political capital in. We didn’t want to leave these necessary changes to somebody else to fix and see people locked out of the housing market unnecessarily for longer as a consequence of that. We knew that this reform would be difficult, but we are more confident than ever that it is important.”
Speaking of Australia’s appeal internationally as a potential destination for investment, Chalmers is also confident.
“They like Australia’s political stability. They like Australia’s industrial mix, our human capital. They like our geology, obviously the big opportunity in critical minerals. They like the opportunities in the energy sector in particular, and they like our geography.”
The treasurer has engaged with his Chinese counterpart in bilateral negotiations over war-affected fuel supplies. China is a top source of jet fuel for Australia, providing about 30 per cent of our supply, while diesel, which is about $3 a litre in Australia, is a far smaller import, at about 2 per cent. Much of Australia’s diesel comes from Japan, South Korea, Brunei and Malaysia.
The key negotiating point is that Australia’s diesel imports are “absolutely essential” to the iron ore and other export industries, which are a key part of Chinese manufacturing.
“The nature of the discussion and the nature of the relationship is that we are seeking reliable supply from China, but not just from China,” the treasurer says.
“China is a really important part of our fuel security strategy but not the only part. I was also able to talk with a Singaporean counterpart about this as well. And so, what we’re seeking there is some certainty, transparency around policy when it comes to exports but mostly pointing out the reciprocal benefit that comes from Chinese diesel in the Australian economy – playing a key role in the iron ore and other industries that China and other countries in the region rely so heavily on.”
Turning back to domestic politics, the treasurer is also forthcoming about the challenges facing the government. Various reputable opinion polls show Labor trailing One Nation at the moment, with a primary vote in the mid 20s, and record-low personal standings for both Chalmers and Prime Minister Anthony Albanese. The numbers are making Labor colleagues nervous about their futures in parliament.
“The government’s under pressure right now because people are under pressure right now, and as a senior minister in a government pushing difficult reforms through the parliament, I do take my share of the responsibility for some of the pressure that the government is under,” Chalmers says.
“I’ve never taken the view that any one of us is beyond criticism. We take feedback seriously from all quarters, and I think it is the case that we can all always do better, me included.”
The shadow treasurer, Tim Wilson, has declared that the next election, due in 2028, will be a referendum on the economy. It is a signal that the opposition will fight the government on cost-of-living grounds, rather than trying to stop voters shifting from the Coalition to One Nation.
Wilson claims policy reversals and a delay in the delivery of the biggest budget cuts, those to the National Disability Insurance Scheme, will punch an $11 billion hole in the government’s finances from May.
He has also blamed public spending for Australia’s inflation problem. “The Albanese government’s active inflation agenda is driving up unemployment, it’s driving up spending, it’s driving up inflation and it’s driving up interest rates. That means that Australians are falling further behind, they’re paying more on their mortgage, and they’re going to the supermarket and paying more and getting less.”
The treasurer and Finance Minister Katy Gallagher are working on a new savings package in the midyear budget update due in December. “That work is not finalised yet and so I’m reluctant to give a sense of its breadth or magnitude. But we take our responsibilities to manage the budget in a careful and cautious way very seriously,” he says.
Chalmers highlights a rising interest bill as something that will need to be tackled.
“There’s some very substantial pressures on the budget, including the higher borrowing costs, as some of the older, cheaper debt rolls off and is replaced by more expensive debt,” he says.
“…[T]he debt that we inherited from the Liberal Party is becoming more expensive to service, and that will be a fairly substantial pressure on the midyear budget update.” He says the increasing cost of heavy debt loads is weighing on budgets “right around the world”.
There are other pressures on the budget that are “serious and they are compounding”.
“We will weigh up pressures that people are under, the pressures the budget’s under, the challenges in our economy, and update the budget towards the end of the year, in the most responsible way that we can.
“We’ve had savings in the first eight of our budgets and budget updates. There will be savings in the ninth. The nature and magnitude of those savings depends on the work that we are doing over the course of the next few weeks.”
The treasurer says the advice from Treasury and the RBA is that times will be tough over the next 12 months. “Until there’s a proper end of the war [in Iran]. Until there’s a proper enduring reopening of the strait [of Hormuz]. And even not immediately after that. Until those things happen, people are going to be under more pressure,” he says. “Our job is to recognise the reality of that, at the same time as we focus on areas where we do have meaningful influence: providing this cost-of-living help in the form of tax cuts and more bulk-billing, for example, [and]managing the budget in a responsible way, a much more responsible way than we see in other countries. All of this is part of focusing on where we have some influence and agency. We won’t determine when the war in the Middle East ends, and so our job is to do the best we can and to play the cards we’re dealt.”
Last week, the prime minister assured his party room that, as in other election campaigns, he expected the government will be “kicking with the wind in the fourth quarter”.
That confidence is looking heroic as unemployment climbs alongside inflation. The latest labour market figures show the jobless rate rising above expectations, to 4.7 per cent.
Chalmers is tempering expectations but sees reasons for optimism.
“The current expectation of the Reserve Bank and the Treasury is that inflation will be back in the band this time next year, and we would have expected to have bedded down these difficult tax changes and legislated them by then. So, there are good reasons to be cautiously confident about the future, even as we recognise the very substantial pressure that people are under right now.
“And so, if things play out the way that the Reserve Bank and the Treasury currently anticipate that they will, then some of these indicators which are most concerning to us right now, they expect them to be a bit better by this time next year.”
Federal MPs will return to Canberra on Monday, reeling from what happened to one of their own this week. Chalmers is among the seasoned parliamentarians known for their effectiveness in the political fray who are now reviewing how they interact with constituents and each other. In the wake of the attack, Home Affairs Minister Tony Burke and Australian Federal Police Commissioner Krissy Barrett both highlighted the rising reports of threats against political figures.
“We have seen right around the world, in very troubling ways, an uptick in political violence, and we’ve seen it mirrored here in the threats to public figures and in other ways,” says Chalmers. “And the longer we leave this violent rhetoric to fester, the harder it will be to find a better and higher road out of it.”
He is expecting a collective reality check on how the business of politics is done, as well as a long line of tributes as the federal member for Indi remains in hospital.
“I would expect when parliament returns that we have an opportunity to send to Helen and her family members, her loved ones, her staff and her local community… to pay tribute to her in the middle of this fight in an appropriate way,” the treasurer says.
“[V]iolence of this kind would be distressing in every instance and on every occasion. It seems the fact that this has happened to the person who probably has the closest thing to a perfect temperament in a very imperfect place, I think is not lost on anyone.
“The fact that the parliament’s most rational, most reasonable, probably most respected person has been a victim of this irrational violence, I think, is not lost on anyone either, and I hope and expect that the parliament will give voice to that collective sentiment that we all feel.”
Karen Barlow is The Saturday Paper’s chief political correspondent.