Jim Chalmers flags deal on Reserve Bank’s new structure is close
- Written by: Michelle Grattan, Professorial Fellow, University of Canberra
Cost of living remains at the top of people’s minds as inflation stays sticky. With an election in less than a year, the government has been doing what it can to address some of the pressures. But the Reserve Bank doesn’t envisage an interest rate cut this year, and has suggested spending by governments is keeping inflation higher for longer.
On Thursday, new figures showed employment has surged, but the unemployment rate ticked up to 4.2%, from 4.1%
Treasurer Jim Chalmers joined the podcast to discuss a range of issues.
Chalmers is optimistic he is close to a deal with the opposition over his long-awaited reforms to the Reserve Bank. The plan is to have two boards rather than one: There would be a new board of experts to take over responsibility for monetary policy.
We’ve had discussions, including relatively recently, about how we come to a bipartisan view about these reforms. I’ve done my best throughout to be as bipartisan as I can because I think the structure of our central bank should be above partisan politics. And I believe [shadow treasurer] Angus Taylor has that view as well.
There are a couple of issues that we’re still working through. […] Hopefully we can progress things quite soon and get it finished so that the changes can come in at the start of next year.
Bank Governor Michele Bullock’s recent comments about strong government spending, and the observation by the bank’s chief economist Sarah Hunter that the economy was running a “bit hotter” than the bank previously expected sparked headlines about the government and the bank being at odds. Chalmers is anxious to stress what they agree on but firmly rejects the suggestion of the economy being hot:
The Reserve Bank governor and I both say in our own way that we’ve got the same objective here, which is to fight inflation, but we’ve got different responsibilities. Governor Bullock acknowledged that in her speech in Armidale. We both want to see inflation moderate, further and faster. I’m an enthusiastic part of that.
I’m not sure that there’s the data or the feedback to sustain an argument that says that the economy’s too hot. There was barely any growth in the most recent national accounts. Household savings came off substantially. Retail has been weak. You know, there are a whole bunch of indications that our economy is quite soft.
On the lacklustre reception of the budget, Chalmers says he keeps his expectations realistic, and he remains confident he’s made the right economic decisions:
I’ve been around long enough to have realistic expectations about all of that.
I think it’s important to acknowledge people are under pressure and when they’re under pressure, they express themselves and the political system.
That’s expected and unsurprising. I genuinely think that if you make the right economic decisions for the right economic reasons, the politics will take care of themselves. If not in the near term, then certainly over the longer term.
On the latest employment figures:
Well, employment’s gone up by more than unemployment. The unemployment rate has ticked up because of participation rates at a record high. The labour market is soft around the edges.
The participation rate is up. The amount of new jobs just in one month, just in July, was almost 60,000 new jobs that are all full time. That’s a really good thing in the context of an economy which is soft and weakening more broadly.
Although real wage growth is sluggish, Chalmers highlights the government’s record on wages especially on the gender pay gap:
We’ve had a particular focus on people on low and middle incomes and a particular focus on women, and one of the most heartening aspects of the labour market data this week has been that the gender pay gap is the narrowest it’s ever been in the history of our country. […] That’s not accidental. That’s deliberate.
