TOM CONNELL: The Reserve Bank fears unemployment will rise next year as Australians feel the full effect of rate rises. The predicted uptick in unemployment is a key reason the RBA minutes were released for keeping the cash rate on hold at 4.35% this month. The Bank also expects inflation to stay higher for longer, not reaching the band of two to three per cent until the end of 2025. Joining me now live as is Shadow Finance Minister Jane Hume. Thanks for your time. Look, I know you're going to focus on Labor's role on inflation but I want to ask on the RBA's view of this if they believe inflation will stay above target until the end of 2025. Is that acceptable to sit in to have inflation that high? That long? Should they have ambition to bring it lower earlier?
JANE HUME: Well, the RBA have already said that they have a very low tolerance for sustained inflation and inflation staying above that two to three per cent band any later than the end of 2025, which is when they predict it will come back into the band. Of course their frustration is compounded by the fact that they are doing all the work to get inflation down. And they try and do that without pushing the economy into a recession. Now we're already in a per capita recession. If it wasn't for those high migration figures, we would in fact see GDP going backwards in this country. However, the RBA are acutely conscious that if they keep pushing rates up that bit higher every single time well, that can have some detrimental effects on the economy. The reason why they have to do that time and I know you and I have spoken about this a lot before is because you've got two tools in the shed not just monetary policy, fiscal policy as well. And the government isn't doing its fair share of the heavy lifting. That's why the RBA has to keep doing more and more to try and tame inflation, bring it back down into that two to three per cent band, even if it is taking longer. Of course the longer it takes, the more it hurts your hip pocket because it erodes your savings that needs it your purchasing power and unless they do all that work, well, they have to do it because the government isn't.
TOM CONNELL: Okay. So you've said your element on the government, understand that, parking that for a moment. Should the RBA have grander ambitions and not see end of 2025 for inflation to get back just at the top of that target pan? Not within it? The top of it? Is that too late?
JANE HUME: You can sense their frustration can't you. Of course that's their job is to keep inflation in that two to three per cent band. But you keep saying don't talk about the government, but the government isn't making their life any easier. That's why it's taking into 2025. If the RBA moves too hard and too fast-
TOM CONNELL: Well that's part of it, there's two elements.
JANE HUME: -to bring inflation back down into band.
TOM CONNELL: So does the monetary policy settings-
JANE HUME: It's not just up to monetary policy settings. This is the thing Tom. Monetary policy is really powerful, but it's also a massively blunt instrument. It only affects certain proportion of the population and that's the proportion that are really feeling this cost of living crisis.
TOM CONNELL: I understand that. My point is-
JANE HUME: If the Government used its fiscal policy power, it could be far more targeted.
TOM CONNELL: What I'm saying is you've mentioned fiscal policy, what about monetary policy? Are we not seeing enough ambition given with the settings at the moment, apparently two more entire years of inflation above target?
JANE HUME: Yeah, that's extraordinarily frustrating. But if the RBA moved any harder, they could push the economy into recession because of the disproportionate way that monetary policy affects Australian families and households, but also businesses as well. Businesses that, you know, rely on borrowings to to fund their operations or to fund their capital investment. So that will slow the economy right down if the RBA pushes too hard and too fast. Which is why we've been calling on the Government to use fiscal policy to try and get to a stage where that reduction in aggregate demand is more evenly shared across the economy that will bring inflation back down under control. Hopefully before that end of 2025, so that it doesn't disproportionately affect particularly mortgage holders. But also though that knock on effects to people like renters, because of course, landlords are affected by high interest rates as well that gets passed on as high rent.
TOM CONNELL: Okay, all the sort of thing we'll be debating the lead up to the next budget look with where it's the last time we'll talk to the program this year. It's a season of generosity Jane Hume. Anything you want to say the government's done well, this year from an economics point of view?
JANE HUME: Oh, gosh, you really have put me on the spot here. I can tell you a few things that they haven't done. Well, they started the year right.
TOM CONNELL: No, no that's not the question Jane.
JANE HUME: No wait, they started the year right-
TOM CONNELL: Come on, pluck one out.
JANE HUME: Anthony Albanese said that his New Year resolution was to get the cost of living under control. Well, he's profoundly failed in that duty. He's taken his eye off the ball. And in fact, this is a government that's had all the wrong priorities, all the wrong priorities. So I'm afraid I'm not feeling particularly generous today, particularly with the release of a now another convicted terrorist, the mess up in migration.
TOM CONNELL: Yeah I don't think we can call that a positive.
JANE HUME: This has not been a positive week and this hasn't been a positive month.
TOM CONNELL: Alright.
JANE HUME: But I will say, it's been an extraordinary pleasure being on this show, Tom.
TOM CONNELL: Well, there you go. There's ending on a positive. Although I'm supposed to make politicians uncomfortable. Perhaps I'm failing. Let's end on a different note then because, you know, it's the time of year when politicians do begin to get away. I'm wondering how you relax and let's just take us back to COVID. I'm not trying to give people with PTSD but this is when voters started to learn that Jane Hume knew a few different cocktail recipes. Let's have a look.
(footage excerpt) JANE HUME: Squizzle it around with your knife. Look at that. Lockdown heaven. That's Friday night taking care of.
TOM CONNELL: More like a gondola than a glass. Jane Hume what's on the menu this summer?
JANE HUME: Well, can I tell you I will have a Christmas cocktail for my family. I'm actually hosting my entire family for Christmas this year, which makes me a little bit white knuckled and of course the compulsive obsessive in me too means that I feel very funny about handing out tasks to other family members who I know won't step up and do it the way that I would like it to be done. So I don't think I can relax until Boxing Day. I don't think I can relax until Boxing Day but I tell you-
TOM CONNELL: So it's not just Labor you mark harshly, you don't trust your own family.
JANE HUME: Oh no, who trusts their own family. No, they're all lovely people just, you know, leave the organisation up to me. But that cocktail actually looks pretty good. Maybe Boxing Day I'll indulge again.
TOM CONNELL: All right. Good to know. We might keep an eye out for those new recipes. Jane Hume appreciate your time today and this year on the program. We'll talk next year.