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Transcripts
August 12, 2025
PATRICIA KARVELAS: I want to bring in the opposition, the Shadow Finance Minister James Paterson, is my guest. Welcome to the program.
SENATOR JAMES PATERSON: Good to be with you, Patricia.
PATRICIA KARVELAS: This is clearly a positive day, isn't it, for Australians? Third interest rate cut this year.
SENATOR JAMES PATERSON: Well, if you're an Australian with a mortgage, there's no question, you'll be feeling a little bit of relief today. If you have an average mortgage of about $600,000, you'd be about $100 better off every month. But the totality of your financial position since this government was elected is, in fact, you’re $1,800 a month worse off. That's because there has been 12 interest rate rises on this government's watch, but only three interest rate cuts. So that's the tune of more than $20,000 a year worse off for the average mortgage, and that doesn't even begin to account for the higher electricity prices, grocery prices, petrol prices, so many other expenses.
PATRICIA KARVELAS: But do you regard today's decision, which at the same time is being delivered in a context of low unemployment, as the Governor said, there are different understandings of where the unemployment rate should hit, but broadly it is a low rate of unemployment. Isn't that a sweet spot that you want the economy to be at?
SENATOR JAMES PATERSON: Well, the cut in rates is definitely welcome, and unemployment, being relatively low by historical standards, is welcome, though it has risen slightly.
PATRICIA KARVELAS: Cutting period to the third interest rate cut, and not a significant spike in unemployment.
SENATOR JAMES PATERSON: Well, interest rates being cut shouldn't increase unemployment; they should reduce the unemployment rate, all else being equal. What I am more worried about, though, is the RBA today lowering their expectations for productivity growth, down from about 1 per cent to 0.7 per cent. That is crisis levels of productivity growth. In the 80s and 90s, productivity growth was about three per cent a year. In the early 2000s, it was about two per cent a year. For most of the 2010s, it was at about one per cent a year. We're now talking 0.7 per cent a year, and the reason why that's a problem for your viewers is that's their living standards. If productivity doesn't grow, their living standard doesn't grow, and that means we'll be poorer than we otherwise should have been.
PATRICIA KARVELAS: The Governor said today's story is about another interest rate cut, and there was too much of a focus in the questions, that's not the news, she said, the productivity kind of forecast from the bank. What's your reflection on what she said?
SENATOR JAMES PATERSON: I heard her say that, but I think there's a good reason why so many journalists at that press conference were asking about it and why the government has admitted, themselves, that this is a problem. They're holding a productivity round table, or maybe an economic reform table, or a tax reform table. That's not completely clear. But anyway, they recognise it's a problem because it's so closely linked to living standards, and living standards did fall over the government's first term, as productivity did. In fact, we went back to 2016 levels of productivity growth. So that is a crisis for our living standards, for our wealth as a country, and we will go backwards unless we fix this. And the fact that the RBA has lowered their expectations for productivity growth is effectively a vote of no confidence in the government's economic agenda. They have no plan to fix this problem. I hope they can come up with one at their roundtable, but I am really worried they won't.
PATRICIA KARVELAS: Well, the Shadow Treasurer described it as a unanimous vote of no confidence in the government's economic agenda, but I watched that entire press conference from Michelle Bullock, and she didn't give any indication that that's what that vote was about.
SENATOR JAMES PATERSON: Well, of course, you wouldn't expect the RBA Governor to express it in those terms.
PATRICIA KARVELAS: Yeah, but the Reserve Bank Governor can be, you know, obviously not political language but critical of broadly an economic direction, and she wasn't.
SENATOR JAMES PATERSON: I admire Michelle Bullock, I think she's an excellent RBA Governor, she's very careful with her words and she would never want to stray into political debate and, nor should she, that's a matter for politicians like myself and Ted O'Brien to do. But if the Governor was confident about the future of the Australian economy they wouldn't be reducing their expectations for productivity growth down to 0.7%. That really is an astonishingly low number, and it means all of us are poorer unless we can fix it.
PATRICIA KARVELAS: Okay, on that, the productivity, rather, the Reserve Bank has said in their statement, "For some time our forecasts have implicitly assumed that productivity growth was temporarily weak and would gradually return to and be sustained at higher historical rates. More often than not, this is not eventuated." The Governor actually said it was about their forecasts, too, that were problematic. Isn't the case that they had their forecasts wrong?
SENATOR JAMES PATERSON: Yes, because the RBA was more optimistic about what would happen with productivity on this government's watch than has actually turned out to be the case. Productivity went backwards in their first term. It's not a surprise that it has because they re-regulated the labour market. They introduced 5,000 new pieces of regulation. They increased government spending to enormous levels. And although there has been jobs growth, and that has been welcome, it's overwhelmingly been in the non-market sector. About 82 per cent of new jobs created on this government's watch are in government funded industries, and productivity in those industries is very low compared to the market sector, so it's not a mystery why it's going backwards and that trend is very unsustainable. We have to fix it, otherwise we're all going to be poorer.
PATRICIA KARVELAS: I think it is true that productivity is an issue in our country, that is undisputed. And so it brings us to next week, because that's the key moment, is it not, where this is all going to be discussed. The opposition has taken the invitation in the form of Ted O'Brien attending, but also been quite critical. Isn't the onus also on the opposition to take this historic opportunity to try and do some big things, including potentially taxation reform?
SENATOR JAMES PATERSON: We're very open to tax reform, although we have a different set of principles to what the Treasurer has outlined. He said that any proposals for tax reform have to be budget neutral or better, by which he means better for him, higher revenues for him. We don't think that's better for Australia or for Australians.
PATRICIA KARVELAS: Better for the things that we've baked into our spending, right?
SENATOR JAMES PATERSON: Well, we think that the proposals should be budget neutral or better from the point of view of taxpayers. We want lower taxes for Australians. We don't think that Australians out there right now are not paying enough tax and should pay more tax. We think they pay plenty of tax already. So yes, the obligation is on us to be constructive and to propose ideas and we will do that. And if there are good ideas that come out of this process that the government wants to adopt, we will back them and we'll support them to do that. But what they don't have is a mandate for higher taxes because they didn't take that to the last election. And in fact, when we said during the campaign they might increase taxes, they said that's a scare campaign.
PATRICIA KARVELAS: So that brings me to if your view is neutral or you know taxpayers have more in their pocket but that should be the outcome, do you accept that that has to mean spending cuts?
SENATOR JAMES PATERSON: It certainly means that spending has to be much more restrained than it was in the government's first term. We are now at emergency levels of government spending. Outside of a recession, government spending as a proportion of the economy has never been higher than it is today. You have to go back 30 to 40 years to get to those levels again. Yes, spending as a proportion of the economy does have to come down.
PATRICIA KARVELAS: So it brings me to questions of all of the moments in the campaign where you said yes to the increases in health funding. There are consistently moments in that campaign, which wasn't that long ago, where you said yes to all of those promises. Will you have to pull that back now? If you are committed to lower taxes as your best case scenario, you have to change that, don't you? You have to change policies around that.
SENATOR JAMES PATERSON: I mean, the short answer is yes. We will have to demonstrate fiscal discipline, and we will have to say no to some proposals which might be a good idea in abstract, but are not affordable when considered against all the other expenses that the government has. But that doesn't necessarily mean big cuts in government spending, Patricia.
PATRICIA KARVELAS: How can it not, though?
SENATOR JAMES PATERSON: Well, let me explain. If government spending grows at a slower rate than the economy grows, then over time, government as a proportion of the economy declines without cutting spending. It just means it doesn't grow as fast, and the economy growing faster means you can get that budget into a more sustainable position. That's the kind of fiscal discipline that we're calling for.
PATRICIA KARVELAS: The Coalition on another issue has announced that you will revoke recognition of a Palestinian state. If you were to win in three years, which would be pretty ambitious, but let's say you would, or six years into the future of a newly established Palestinian state, how does that look?
SENATOR JAMES PATERSON: Well, I'm not sure a Palestinian state is going to be established-
PATRICIA KARVELAS: If it were to be?
SENATOR JAMES PATERSON: Well, just because Australia recognises a Palestinian State-
PATRICIA KARVELAS: But if it were to be, what does it mean?
SENATOR JAMES PATERSON: This is an important point, though. The Albanese government's decision to recognise a Palestinian State is not the same as the creation of a Palestinian State. That would require the agreement of Israel. And I think what the government has done has made that even less likely than it ever has been. They've pushed back that prospect. It's an incredibly remote one. We have a principled position that the creation of a Palestinian state should come at the end of a peace process.
PATRICIA KARVELAS: So you would revoke it as a new government?
SENATOR JAMES PATERSON: Yes, just as this government revoked the previous government's recognition of West Jerusalem as Israel's capital. New governments, elected on a different political philosophy, can change our foreign policy, and we would change it. We think it is a reckless decision.
PATRICIA KARVELAS: How would it contribute to peace in the Middle East to revoke Palestinian statehood in three or six years?
SENATOR JAMES PATERSON: Because it would restore the incentive for better behaviour from the Palestinian Authority. What the Prime Minister has done by effectively giving unconditional recognition to a Palestinian state is he's taken away the incentive, from Australia's position at least, for the Palestinian Authority to reform. Once they've got recognition, there is no incentive for them to democratise, there is not incentive for demilitarise, there's no incentive for them to stop funding terror and to stop funding hate against the Jewish people in their schools. All of those things Prime Minister has taken on a promise from a President of the Palestinian Authority who is 20 years into his four year term. I mean that's an extraordinary thing for him to accept on face value, and have no ability to revoke. So the Australian government should be prepared to say, if you don't do those things, we will revoke our recognition.
PATRICIA KARVELAS: And just to be clear, do you do you agree with Israel that the Palestinian Authority should have no role?
SENATOR JAMES PATERSON: No role in what?
PATRICIA KARVELAS: In the future of a Palestinian state?
SENATOR JAMES PATERSON: I'm not sure that is the policy of the government of Israel.
PATRICIA KARVELAS: Well, I’ve heard some... the government of Israel did articulate in its war aims in relation to Gaza that it doesn't want the Palestinian Authority to be part of that future. It's in one of the agendas.
SENATOR JAMES PATERSON: Yeah, that's a slightly different point.
PATRICIA KARVELAS: Ok.
SENATOR JAMES PATERSON: Scepticism about the Palestinian Authority's ability to govern Gaza is well founded because the Palestinian Authority was thrown out of Gaza in 2005 when Ariel Sharon withdrew Israel from Gaza and Hamas took power.
PATRICIA KARVELAS: So, just to be clear, do you agree with Israel about the Palestinian Authority and a future role in Gaza?
SENATOR JAMES PATERSON: Well, I think most states in the region recognise that this would have to be a multinational effort, that Arab states in particular have a leadership role to play in the rebuilding and the administration of Gaza after this crisis.
PATRICIA KARVELAS: How could you lock out one of the main players of Palestinian representation?
SENATOR JAMES PATERSON: Well, I'm not proposing that that's the case. I'm just observing they haven't been there for 20 years because Hamas threw them out. If the Palestinian Authority was to return, it would unlikely to be on their own. It would have to be with the support of the international community, including Arab neighbours.
PATRICIA KARVELAS: Thank you for coming in.
SENATOR JAMES PATERSON: Thank you.
ENDS