TOM CONNELL: Welcome back. The long awaited appointment as the next RBA Governor has been made. Michele Bullock takes over, she was the Deputy. She’s got the top job. There was a lot of analysis before this appointment, in particular some criticism from the Opposition. So let’s get their take right now by Shadow Finance Minister Jane Hume, who is also the acting Shadow Treasurer. Thank you for your time. What's your reaction to this appointment?
JANE HUME: Well first of all the Coalition would like to thank Philip Lowe for serving the country so diligently particularly through periods of time that have been very difficult economically and we suspect that those very difficult economic times may continue for some time after his term ends. We also want to congratulate and welcome Michele Bullock to the position of Governor of the Reserve Bank. We know that Michele is a very experienced central banker, she's a very capable economist and we have great faith in her abilities. So we think she's going to make a terrific Reserve Bank Governor. Now of course that doesn't change, you know, just changing the Reserve Bank Governor of course doesn't change the pain that Australians are feeling every single day at the bowser and at the checkout and when they pay their energy bills and when they pay their mortgages. It's going to be more than just a change in personnel. What we would like to see is the Government do more. The RBA has only got that one tool in the shed. It's only got interest rates to deal with inflation. But the government with its fiscal policy has a few more levers that it can pull. But right now, the Reserve Bank has got its foot on the brake. The Government seems to have its foot on the accelerator with $185 billion of additional spending just in the last 12 months alone and an additional 2 billion just in the last month.
TOM CONNELL: So okay, well, let's unpack that a bit. Let's just first of all, go to Michele Bullock because you did express some concerns around who might get this job. So the appointment of her, you'd have absolutely no issue with it. There's nothing political about this appointment. That's what you're saying?
JANE HUME: Well, she's a very experienced economist. She's a very experienced and highly qualified central banker. And we think that she's been in the room for all of this time, in particular in the last 12 months or so when inflation has been skyrocketing with a 7%, over 7% in three quarters in a row. And when the RBA has had to make those very difficult decisions to keep ratcheting up interest rates, it's had to do that, because that's what monetary policy is there to do. Because fiscal policy has let the RBA down and indeed all Australians.
TOM CONNELL: The review, well we'll get to that in a moment, the review of the RBA spoke a lot about sort of insider culture and a lot of big changes that are going to happen. The Coalition welcomed the Review in terms of those recommendations, is it a bit strange to then appoint a so-called ‘lifer’ to oversee them?
JANE HUME: Well, I don't think that the Review suggested that you don't chuck the whole lot out and start all over again. In fact, and had some very flattering things to say about the good work that the RBA had done in the past. It simply recommended some changes that would be more reflective of other jurisdictions and other central banks that have slightly different processes. Certainly the Prime Minister and the Treasurer have both noted that Michele Bullock has been a great leader in the past and is well respected within the organisation and is the right person to lead with those changes. Now we've said that we'll look at the Review's recommendations that we agree with them in principle, but of course the devil is always going to be in the detail. So we'll wait till we see what the legislation says.
TOM CONNELL: And just finally on the appointment element of this, you and your colleagues were critical when we learned of this potential shortlist that it included heads of department that they would have been political appointments. Does that mean you view anyone who's the head of a department right now because there's a Labor Government is having tied their colors to the Labor mast?
JANE HUME: No, I think that the RBA is a very unique case. We know it's really important to not just be independent and of course, you know, let's face it, those public servants I have huge respect for them. I know my colleagues do too. We've worked with them in the past. This is not a reflection on their character or their capability. It's simply about perception. If you have worked so closely with the government and delivered on their priorities, it's very difficult then to you know, particularly with the delivery of budgets and fiscal priorities. It's very difficult then to flip over the next day and be perceived as being fully independent. And we've seen this before, Tom, let's face it, you know, in the early 1990s, Paul Keating appointed his treasury secretary as the Governor of the Reserve Bank, that was Bernie Fraser. And then went on crowing that he had the you know, the Governor of the Reserve Bank in his pocket. Poor old Bernie Fraser had to go out there and do speech after speech, claiming that he was independent, and a few of them are still on the RBAs website. The economy was in crisis back then under the government, the economy is in crisis under this Labor government. We were reminding this Labor government not to make the same mistakes of the past.
TOM CONNELL: In terms of inflationary pressures in the economy right now inflation is dissipating. Well, what spending should Labor unwind, that's set to go ahead that would affect inflation in the short term?
JANE HUME: So you say that inflation is dissipating and yes, you're right, that headline inflation did come down last month, but in fact core inflation has hardly moved. It was 6.5% and now it's down to 6.4%. That's actually quite disturbing. That means that inflation is really sticky and there needs to be some pretty tough decisions made by the Government now as to what it's going to do to do its fair share of the heavy lifting to bring inflation back down. Because of course, we know that if inflation stays higher for longer because of the decisions that government are making, then in further our interest rates are longer and that causes pain for all Australians.
TOM CONNELL: The RBA under the previous Governor were saying they believe it's peaked, we'll see, but what are you saying? Specifically, what spending could be unwound to do that?
JANE HUME: We would hope it has peaked, but that doesn't necessarily mean that prices are going to go backwards or indeed that we'll see a reduction in interest rates anytime soon. Not unless the Government does its bit to do its fair share of heavy lifting to bring down inflation. Now the decision of what it is that the government is going to do, that's their decision. Now they've claimed all sorts of saves on the budget. We know that the NDIS save is essentially, you know, it's just mythological. They said that they're going to reduce NDIS spending from 14% growth each year down to 8%. But they haven't actually gotten the policies to do that. So we would like to see some concrete measures to wind back those spending ambitions of an incoming Labor government that's had nine years in opposition and build up an enormous wish list. It's up to the Treasurer and the Finance Minister to be that disciplined. It's their decisions to make. But we do want to see the $185 billion in additional spending is the problem.
TOM CONNELL: But if you're criticising spending that is out there and let's just note as well, the RBA said they believed there wasn't inflationary pressure out of that last budget. That's what Phil Lowe said. If you're saying spending is the problem. What spending are you opposing out of that budget that would actually affect inflation right here and right now?
JANE HUME: Well it wasn't deflationary, and I think that that's the most important issue here. We actually wanted to see the government go above and beyond, and create reducing inflation, a target. In fact, it removed reducing inflation from its fiscal priorities in the budget specifically, it was there in October and in fact, in October, Jim Chalmers said that fighting inflation was you know, that was enemy number one. He had to slay the inflation dragon by the time we got to May, even though inflation was much worse, all of that had shifted and then the onus, of course, was on the RBA to do all the work. That's what a budget is for, it's about decisions of government.
TOM CONNELL: The Coalition's budget which had a net increase of spending in 2022 as inflation had clearly already taken off. I'll just give you one more opportunity, though. Can you name a measure and say, 'here's what the government should not go ahead with'? You say it's up to the government but they've got their priorities out of there, put them out there. So what should they not be spending?
JANE HUME: Well, I'll tell you one thing that probably we wouldn't have done if we were in government, we wouldn't have appointed an additional 10,000 public servants. We wouldn't have spent that additional funds on ourselves, on the public service. We would have preferred that the private sector do its fair share.
TOM CONNELL: A lot of, there was a big savings there on not spending on outsourcing though. That's not a big save though?
JANE HUME: That's actually a significant, that's a significant spend. That's a significant spend to appoint all those public servants on a permanent basis. It's not something that we would have done. We certainly wouldn't have the interventions-
TOM CONNELL: But that would have meant more spending on outsourcing, like PwC.
JANE HUME: We wouldn't have introduced more market mechanisms into the gas markets which has obviously turned away new investment in the gas markets. That increases the cost of energy in not just the short term, in the long term, as well. We wouldn't have gold plated you know, the poles and wires and introduced transmission lines that are so ambitious that they're gonna essentially run around the circumference of Australia twice. So that's an enormous expenditure, an enormous project. These are things we wouldn't have done. All of those off-balance sheet funds, whether it be Housing Australia Future Funds, whether it be the energy fund, all of those we wouldn't have done. So yes, there is plenty of spending that this government could reconsider in order to bring inflation back under control.