Treasury’s red book brief flags falling real wages, rising inflation and interest rates

By Melissa Coade

May 27, 2022

Jim Chalmers
Jim Chalmers. (AAP Image/Mick Tsikas)

Jim Chalmers has spent three days with Treasury secretary Dr Steven Kennedy pouring over the so-called ‘red book’ brief to discuss the economic lay of the land. 

Australia’s new treasurer said that after two days of rolling briefings with top mandarins, his assessment of the nation’s economic challenges were tough days ahead. Chalmers said he had already set the Treasury’s APS to work addressing concerns about high and rising inflation and interest rates, and falling real wages. 

“We’ve got real wages falling backwards quite substantially and we’ve got a trillion dollars of debt in the budget which will take generations to pay off but is not going to currently deliver a generational dividend,” the treasurer told the 7.30 program.

“The challenges I’m inheriting from my predecessor are pretty serious challenges,” he said of the Liberal politician Josh Frydenberg who lost his seat of Kooyong to independent MP Dr Monique Ryan last weekend. 

When asked how Labor would meet its election spending commitments and balance these costs against rising inflation, Chalmers said the October budget aimed to expand the size of the economy to deal with the extra costs. The treasurer said the new government’s economic agenda was to grow real wages with a range of policy levers. 

“It’s economic orthodoxy to say that if you’ve got inflationary pressures then you need to increase the size of the economy, you need to expand its capacity,” Chalmers said.

“You do that with cleaner and cheaper energy, you do it by making the workforce bigger, through childcare reform, you train people so that they can work more and earn more in those higher-wage, higher-skill opportunities that emerge in an economy like ours — in a way that doesn’t add substantially to the budget bottom line but improves the quality of spending in the budget.”

Chalmers met with Reserve Bank chair Philip Lowe and other Australian economic regulators on Thursday. He also said he was consulting regularly with former Labor prime minister and treasurer Paul Keating and treasurer under Julia Gillard’s government, Wayne Swan. 

An audit of government books to review wasteful spending and get a ‘proper economic dividend for the country’  was the first task the treasurer said he would set about doing with finance minister Katy Gallagher. But he also warned the task was not as simple as ‘flicking a switch’ to resolve the trillion-dollar debt. 

“The budget is heaving with debt and there’s not enough to show for it because there’s all of these rorts and waste,” the treasurer said of the economic legacy of the Coalition government.

“An audit of those rorts and that waste in the budget will be an important way to try and go through the budget line by line to make sure that we can either improve the budget position or invest the taxpayers’ money more wisely.

“We’ve already highlighted $11.5 billion worth of budget improvements — we did that when we released our budget costings during the campaign — we hope to find more budget improvements so that we can improve the budget over time,” he said.

Chalmers also confirmed the Albanese Labor government would not be looking at reform measures to shift taxation away from income to consumption taxes. Multinational tax reform was a higher priority during this term, he said.


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