Interview with Patricia Karvelas, ABC, RN Breakfast
21st July 2022
PATRICIA KARVELAS: Prime Minister Anthony Albanese is warning the Reserve Bank of Australia against overreach as it lifts interest rates in a bid to tame inflation. The central bank has flagged that the cash rate could hit close to 3.5% by the end of the year as it tries to dampen the surging cost of living. The federal government has ordered the first major review of the central bank in decades amid criticism the RBA has failed to anticipate changing economic circumstances. Liberal Senator Jane Hume is the Shadow Finance Minister, and our guests this morning, Senator welcome.
JANE HUME: Good to be with you, Patricia.
KARVELAS: Shadow Treasurer Angus Taylor says the coalition will hold the government to its commitment to making the RBA review bipartisan does that mean you support this review?
HUME: Well, in fact, it was the coalition that initiated the idea of an RBA review back in February. The idea that it would be bipartisan was part of that initiation. We're very pleased to see that it remains bipartisan, it's crucial that consultation be timely and genuine. That's exactly what we intended to see. Patricia, the RBA is such a crucial institution in Australia. It plays a central role, obviously in monetary policy, but also in things like payment systems, financial systems stability, as well as being the bank for the government. We think it's essential that the review is independent of the political process and focus very much on preserving the strengths of the RBA. As such an important institution.
KARVELAS: Economists believe up to 30% of borrowers could get into trouble if the cash rate hits 3.5%. Is the Prime Minister right to warn the RBA against overreach?
HUME: Well, look, the Prime Minister couldn't remember what the cash rate was let alone the unemployment rate was, I think this is probably a discussion best left to the Treasurer. However, Michele Bullock, who is one of the senior economists she is the Deputy Governor of the RBA, has said that most households have some buffer in their balance sheet that's built up over the last two years because of COVID. That will make sure that they can absorb those interest rate rises. Now we know that with interest rate rises, you feel the pinch; everybody feels the pinch. I feel the pinch on my mortgage too. It's very important that we keep inflation under control because of course inflation erodes your purchasing power. That is the primary focus of the RBA, that 2 to 3% band of inflation to make sure that they can maintain price stability. It isn't just done through monetary policy. It has to be done through fiscal policy as well. That's where the government needs to step up and make sure that there is some control spending, that there is budgetary responsibility to make sure that both levers monetary policy and fiscal policy are keeping those inflation rates down.
KARVELAS: Okay, so the Shadow Treasurer has suggested that Labor needs to tighten its belt in the face of rising inflation. Where do you believe they should cut spending? Can you identify that?
HUME: Well, that's up to the Labor government. In fact, in the last term of the coalition government, we cut a record amount of the budget deficit of $103 billion over four years. The single most important thing that any government can do to help ease inflationary pressures is to strengthen that government position. Now the Albanese government went to the election, proposing an increase in the deficit and an increase to government borrowing with $18.3 billion in new spending.
KARVELAS: Okay, but my question is to you, Senator, where would you cut funding right now?
HUME: That's not my responsibility. That is the government's responsibility. As opposition Shadow Minister for Finance, my job is to judge whether the proposed cuts that Labor are making are appropriate and in the national interest. Unnecessary spending will result in governments competing essentially, with households and businesses to borrow money and will push interest rates up.
KARVELAS: If you think they need to tighten their belts. You are the opposition. You need to make suggestions, don't you?
HUME: No we don't, in fact what we need is to judge the decisions made by government. That's exactly what we'll do. Next week, the government will go with a wish list to parliament, with a wish list of policy ideas that they've come up with over the last nine years. What we need now is for the Minister of Finance, Katy Gallagher, and for the Treasurer, Jim Chalmers, to make sure that they have the power to say no to their colleagues.
KARVELAS: Hang on, they took all of those policies to the election, and they were elected.
HUME: No, in fact, the PBO said the exact opposite. They confirmed last week that only the Liberal Party was the party that went into the last election proposing to improve the budget bottom line.
KARVELAS: No, No, they took to the election the policies that they want to put in the budget. That's the comment I just made. That's true.
HUME: No, in fact, the PBO said that they didn't, that their policies weren't appropriately costed. Now they've taken to the election, the policies that they want to implement. That doesn't necessarily mean that everything needs to happen on day one. They have competing priorities, and budget repair should be right at the top.
KARVELAS: Well, if they dumped any of those key policies like the childcare policy, I imagined voters wouldn't be happy. I mean, you can't go to the election with a big policy and then not implement it, can you?
HUME: If Labor have a plan to improve the budgetary bottom line, that's certainly something we will consider as something that we will support them on. Because let's face it, Liberals and Nationals are naturally fiscally conservative. The last couple of years have been a big leap of faith for us in order to make sure that we could get to the other side of COVID and save lives and livelihoods, and make sure that those unemployment rates are down. Now the focus must be on budget repair, because that's the only way that fiscally we can reduce inflation.
KARVELAS: On Tuesday, the federal government released a damning report on the state of the environment. It was actually handed to your government, your environment minister Sussan Ley, when you were in government but not released. Why didn't it get released?
HUME: When the coalition was in government, we delivered several initiatives that protected Australia's national environment...
KARVELAS: That's not my question. Why wasn't the report released?
HUME: I think you're asking the wrong minister.
KARVELAS: No, but you you're very senior. Have you asked since then?
HUME: That's not a decision that I was a part of. As Environment Minister Sussan Ley took the advice of experts, she took the advice of scientists in protecting our national environment. Obviously, Tanya Plibersek must do the same. We have a strong record on protecting the Great Barrier Reef and billion dollars towards that. We banned the exports and mixed plastics, we drove increasing recycling, we protected threatened species, including the 50 million dollar recovery package...
KARVELAS: Okay, I want to go to first principles if we can. Do you think now that integrity and transparency in these issues are front and centre, and that reports like that should be released by governments?
HUME: Well, that's a decision for the government of the day.
KARVELAS: So they don't necessarily have to be released?
HUME: I wasn't privy to the discussions around that report. What I can say is that the coalition has a strong record on protecting Australia's national environment.
KARVELAS: So if Labor sat on a report like that, you just say it's up to them?
HUME: I would say it's very convenient hit of Tanya Plibersek and her new portfolio to turn a conversation about the environment into a conversation about government transparency. The question is, what is Tanya Plibersek going to do about the environment?
KARVELAS: Oh, of course, they're key questions, but this actual report looked at your time government. Final question, this 43% cut in emissions that will go before the parliament. Do you think you should be voting in favour of that, given what the electorate said very clearly on climate change at the election?
HUME: I haven't seen the details of that legislation. From what I understand it does seem that the legislation that's coming before us next week is more about enshrining objectives rather than any real policy detail. I will wait till I see the legislation before I make a judgement on that it will go to our party room, and a decision will be made.
KARVELAS: Thank you so much for joining us this morning, Senator.