Reserve Bank review set to start before next week

By Melissa Coade

July 18, 2022

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

Jim Chalmers wants to see a review of the Reserve Bank underway before parliament sits on Tuesday 26 July.  

The treasurer told a press conference that details about the review panel and terms of reference would be settled before next week. 

“I’ve got a little bit of consulting still to do, including with the Opposition, but I have come to a concluded view — almost — on the nature and timing and composition of that review process,” he said on Tuesday.

Chalmers noted the world’s food and energy security matters were worrying his ministerial counterparts involved in G20 finance talks in Bali.

The current state of the global economy found itself in was a ‘difficult and dangerous place’, he added. But the treasurer also said historically low employment rates, and the federal government’s economic plans meant Australia could weather the storm. 

“There is a lot of concern around the world about the state of the global economy,” Chalmers said, underscoring the unique impacts that the situations of China, the US and Ukraine had on the international community. 

“The challenges [sic] are some combination of high and rising inflation, rising interest rates and the slowing growth that brings about, food and energy insecurity, and also the issues around government’s choices being constrained by the debt that a lot of countries have added to over the course of the pandemic.”

In the context of high and rising inflation, the treasurer said the Reserve Bank had an instrumental role to play in setting interest rates but governments could relieve pressure by focusing on supply in the economy. He flagged features of the upcoming budget that would include policies intended to ‘lift the speed limit’ on the economy such as affordable renewable energy, childcare reform, as well measures intended to stimulate the digital, advanced manufacturing and care economies.

“[The budget] plan is focused on getting value for money, giving a responsible cost of living relief, implementing our election commitments and making sure that we can lift the speed limit on the Australian economy as well,” he said. 

Of the top factors contributing to inflation in the domestic economy, the treasurer ruled out wages as a reason for growth. He said stagnant wages in Australia for the past 10 years and real wages current ‘going backwards’ meant an undesirable combination of ‘wage stagnation and spiking inflation’.

“I had a long conversation with Joe Stiglitz about this this morning in my office,” Chalmers said. 

“We’ve made it clear that a windfall tax is not something that we are considering. It’s not something that we are proposing.”

The government was taking its fiscal restraints seriously, Chalmers went on, but said some cost of living announcements would be prioritised.

“Where we responsibly can and affordably can do the right thing by people, to help them through a difficult period, of course we would consider that.

“We’ve got cost of living support coming in the form of relief for medicine costs, and also a fairly substantial package of cost of living relief in childcare. We’ve said that those are priorities,” he said.

Chalmers also foreshadowed a ministerial statement to be released in 10 days outlining the difficulties of servicing Australia’s trillion-dollar government debt. He warned the news would be ‘confronting’ with respect to how inflation was expected to affect interest rates and real wages.

“My job is to paint the true picture of the economy and our economic challenges and that’s what I intend to do.

“That ministerial statement at this stage will be provided on Thursday, 28 July,” he said.

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