TOM CONNELL: Well if you’re holding out for the Mid-Year Economic Update to help save your finances, you might be disappointed. The indications of the Government, no major new changes, no cost of living relief in any major sense will be announced when that happens next week. Joining me now is the Shadow Finance Minister Jane Hume. Thanks for your time. Is this just a case of responsible budget management, even if it won't be popular?
JANE HUME: Well, the Mid-Year Economic Update is not there to provide Christmas gifts for the Labor Government. In fact, we know that so many Australians right now are going to be doing it really tough this Christmas. They're going to have to rein in their own budgets, and the government has to do the same. We know that rising inflation, rising interest rates and higher taxes are eating away at people's real disposable incomes. In fact, real disposable incomes in Australia have fallen more than almost any other advanced economy, around 6.6%. So you can understand why Australians are really feeling the pinch. They essentially have gone backwards in their real disposable incomes by about eight years. And at the same time, we're gonna see those economic indicators that we saw in the National Accounts roll out. There's only anemic growth in this economy at point 2% in the September quarter and that was really propped up by inflation, sorry by government spending, and by mining revenues and of course by immigration. By the large number of migrants that we've seen come into this country. In fact, we have a per capita recession, if you remove the increases in population growth, so with a very sluggish economy-
TOM CONNELL: That’s true. We had a few of them during the Coalition as well. I don't remember the Coalition talking about them. There have been quite a few over the years.
JANE HUME: Well I don't actually remember a Coalition government where we had half a million migrants coming into the country and essentially relying on that as a Ponzi scheme for growth. That is entirely unsustainable. And of course, it puts pressure on inflation. It puts pressure on houses-
TOM CONNELL: Well it’s a demand driven system under both governments. We obviously had the COVID Pause. I did want to move on and ask you though, about those indicators you spoke about are not great on disposable income, and yet the banks are saying you know, the economic carnage is not happening. We're not seeing an increase in defaults or even a big increase in people falling behind on mortgages. Is that the surprising bit of good news, the resilience that is out there?
JANE HUME: And yet we're seeing such a massive decline in spending ratios. In fact, spending ratios are now lower than they've been in 16 years. That's a really big deal. That means that Australians are finding other ways to pay their bills digging really deep in order to just get through almost normal everyday life and particularly in the lead up to Christmas. We know that we've heard stories about people going to food banks, for instance, people with two incomes, people with mortgages, are now lined up to receive charitable services just to put food on the table. This is a full blown crisis, a cost of living crisis that has been driven by high inflation that is out of control and the government is simply not pulling the levers that it can in order to ease up on inflation, and therefore making the RBA do all the heavy lifting. And of course, s&p came out well just this week saying exactly that, that high government expenditures are doubling the impact of those rate rises on inflation.
TOM CONNELL: So on the RBA, it's got a target band at the moment between two and three per cent. Meaning if it gets to three and sort of ease off and say we're nearly there. We're seeing reports today that will change to a specific 2.5%. What's your reaction to that?
JANE HUME: Well, I think my first reaction is that we're currently sitting at double that, that target rate of 2.5%. Our core inflation is still well above five. That's a real concern, because that's the measure that demonstrates that there is a homegrown inflation problem. It removes the seasonal factors. It removes things like fuel and travel. That is the stuff that is harder to get down. That's the sticky inflation. So that's going to be very difficult for the RBA to handle with only one tool in the shed and that of course, is interest rates, which is why we keep calling on the government to have a plan to tackle inflation using its levers. Using the fiscal policy levers and hopefully, we will see some restraint in next week's MYEFO. This is their opportunity to demonstrate to the RBA, to set those inflationary expectations in the community that the government's doing all it can do to get inflation down because unless you get inflation down, the cost of living will be out of control.
TOM CONNELL: But what do you make of that? I mean, this emanates from the review but confirmation this will be the aim of the RBA, not two to three, which might actually mean we get to that earlier. But 2.5 specifically, is that the right thing to aim for? Is two to three a bit too vague and hasn't helped us in the past?
JANE HUME: Well, I think the band still remains that's just the center of the band. That said, I think the really interesting thing here is that the RBA is now forecasting that inflation is going to stay higher for longer. They're not expecting to get back to that band inflation of two to three per cent until the end of 2025. Just last Christmas we were talking about it being the end of 2024.
TOM CONNELL: But if there is added impetus from this review of hitting 2.5%, does that mean more interest rate rises because we have to work harder to get there? Is that going to be the reality and is that the right call right now?
JANE HUME: Well, speaking on behalf of mortgage holders everywhere, I think that that would be a terrible shame. Which is why we need to see the government do its fair share of the heavy lifting by using its fiscal levers to bring inflation black back down because the government keeps spending. They are blunting the effect of those interest rate rises and we will continue to have to have more interest rate rises which disproportionately affect those people that have borrowed, those families that have a mortgage. They'll have to keep raising interest rates in order to tackle inflation because the government isn't doing a fair share. That's why we need a plan to tackle inflation. That's what we want to see at MYEFO next week.
TOM CONNELL: Jane Hume, gotta leave it there. Thank you.