Topics: Wages growth; RBA commentary on inflation; Interest rates
Jim Wilson: Finance Minister Simon Birmingham joins me on the line this afternoon. Minister, welcome back to Drive.
Simon Birmingham: Hello, Jim, it’s great to be with you again.
Jim Wilson: Well, it’s good news, isn’t it? A growth in wages is great news. It’s a real boost to the economy. And at the beginning of the latest delta outbreak, would you have expected an increase like this?
Simon Birmingham: Well, this is a little bit above what we had forecast in the budget. The budget forecast was for 1.5 per cent growth. This through the year is showing a 2.2 per cent growth in wages. It’s another factor that is that is a plus in terms of how our economy is recovering and performing. It’s why it’s so important that we continue to focus on the policies that do secure Australia’s economic recovery from COVID to secure us against future shocks. Be they shocks in terms of other unforeseen events like COVID, be they the challenges we see in terms of the security and stability of our region and some of the adverse decisions that China, for example, has taken in our trade relationship. These are all uncertainties we have to continue to battle against, and it’s great to see that the policies we’ve put in place to keep Australian jobs secure during COVID and to get our economy performing strongly post-COVID are working. And as I say, this is just one. The Reserve Bank recently upgraded the growth forecast for next year from 4.25 per cent to 5.5 per cent, again indicating that the independent forecasters think that policies are working and that it’s delivering for Australians.
Jim Wilson: Now there’s been a surge in inflation levels over in the US. Are you confident this won’t affect us here in Australia?
Simon Birmingham: Again, don’t just take my word for it, but look at some of that independent analysis. The Reserve Bank governor yesterday seeing that both he and many of the international central banks and independent international economic agencies think that these inflationary pressures are more temporary by nature and that certainly the Reserve Bank governor doesn’t believe that any of the latest data or forecasts are likely to see an increase in the interest rates set by the Reserve Bank during 2022, and that it’s still plausible that we won’t see any increase until early in 2024. So, you know, the very low, historically low interest rate environment we’re working in is one that is expected to continue. But still, it’s something that can’t be taken for granted. And it’s why the policies that we’re delivering as a government in terms of driving investment in manufacturing, in terms of encouraging businesses to bring forward their investment, they’re all about working in sync with the Reserve Bank’s policy settings so that we can actually keep getting that jobs growth that can drive the wages growth for the future as well.
Jim Wilson: You mentioned interest rates. I mean, that would have a huge impact any rise on people’s ability to pay back their mortgage. How concerned are you about that?
Simon Birmingham: Well, Jim, it’s why certainly we welcome the Reserve Bank governors statements, and we’re very mindful of that. Policies that we’ve delivered as a government have helped to see an uptick in first home ownership. That’s really welcome. And we’ve made it easier for people to be able to get their deposit, get a first home without the need for mortgage insurance or the like through a range of different programmes that we’ve put in place. And that’s critical for us to continue to empower Australians to do so. We know that many Australian families will be doing it a bit tough in terms of looking at the challenges they’ve had through COVID, dealing with some of the pressures that exist around the economy at present. And that’s why things like the tax cuts that we’ve legislated for, which will see close to 95 per cent of all Australians pay no more than 30 cents in the dollar. Tax rates in the future are so crucial to help people’s bottom line and hip pockets, but also so crucial in terms of the confidence that brings for people to be able to invest in the future and to make those decisions with confidence.
Jim Wilson: So you’re confident, just in closing, that the RBA won’t raise that cash rate in 2022?
Simon Birmingham: I thought the Reserve Bank governor was very clear yesterday in terms of the confidence he proposed for 2022 and stretching through into 2023. So, that should give people a high degree of confidence, not just those in the housing market. Where we’ve taken and seen regulators take careful steps to make sure we keep a sense of balance in that housing market. But crucially, what we want is for these low interest rate environments to encourage small businesses to invest and to become medium sized businesses. That’s why the budget had tax policy settings that encourage more investment in plant, machinery, equipment – the things that enable businesses to grow. And it’s wonderful to see the fact that they have been taking up that opportunity and that it is helping to spur this sort of growth across our economy.
Jim Wilson: Minister, as always, thank you for your time this afternoon.
Simon Birmingham: Thanks so much, Jim. My pleasure.