Economic Policy

Transcript | Sky News First Edition | 01 February 2024

February 1, 2024

Thursday 01 February 2024
Interview on Sky News First Edition
Subject: Potential rates cuts, stage 3 tax cuts lie

PETER STEFANOVIC: Let's bring in the Shadow Home Affairs Minister, James Paterson now. James, good to see you. Thanks for your time this morning. So, you know, all of a sudden we're talking about potential rate cuts this year, as I've mentioned, two, maybe even three. What do you think that's down to?

JAMES PATERSON: Well good morning Pete. Jim Chalmers might be popping the champagne bottle already, but I can tell you most Australian families are not. They have suffered many, many interest rate rises under this government's watch. Inflation is still far above the Reserve Bank's target range and far above most of the developed world, including the economies we most directly compare ourselves to, such as the United States and the United Kingdom. And on this government's watch, Australians have suffered one of the largest declines in real incomes in Australian history. They've been absolutely smashed by those interest rate rises, and mortgage repayment increases, by bracket creep, which is a stealth increase in their income taxes and by other rising costs of living and inflation. And it is really hurting them. The average Australian household in the last 18 months has lost more than $8,000 in real disposable income, about an 8% reduction in the household income. So that's why people are struggling right now. And if there was to be interest rate relief, it couldn't come a moment to soon. But I don't think we should be pencilling those in until we've got more economic data, until we can be actually confident that's going to happen, because it would be cruel to dangle that prospect for Australian people without actually delivering it.

STEFANOVIC: But the trend is good, is it not?

PATERSON: Well, inflation is still increasing. It's just increasing at a slower rate than it was in the previous quarter at over 4%. And it is still hurting Australian families. Certainly it is better that it's not increasing as fast as it was in the previous quarter, but it could have come down much sooner, as it has in many other developed economies around the world. If this government wasn't putting its foot on the accelerator with excessive government spending, which has put pressure on the RBA to do all the heavy lifting to tackle the inflation problem on its own. Because the Albanese government has been unwilling to exercise any fiscal discipline at all in helping the RBA with this task of getting inflation under control.

STEFANOVIC: The new problem might well be the stage three rejig. So economists now say that the changes to stage three tax cuts could even delay those rate cuts. Do you buy into that? Do you think that's possible?

PATERSON: I think that's a very real risk, with the haphazard economic management we've seen from Jim Chalmers and the Albanese government. I mean, this is a government which takes with one hand and gives back with the other. It has been taking by stealth through bracket creep and inflation for years, a very significant increase in income taxes. It's returning a little bit of that in its revamped stage three tax cuts broken promise lie. And actually, Australians are still going to be worse off even after the stage three tax cuts thanks to the election of the Albanese government which is totally contrary to the promises that the Prime Minister made when he ran at the last election. And so if this revised tax cut program makes it even worse by delaying reduction in inflation and therefore delaying reduction interest rates, Australians with mortgages are going to still be much worse off under this government.

STEFANOVIC: With that said, are you inclined to support the stage three changes?

PATERSON: Look, we're carefully considering it and we're not going to be rushed into making an announcement just because the Prime Minister has lied and broken his commitment on more than 100 occasions. We're carefully considering the impact on the economy. We're getting our own modelling done because frankly, you can't trust this government and the figures that it released, they've demonstrated that clearly time and time again. And in due course, we'll be making an announcement about what we are going to do. The principles we will be guided by are the fact that the Liberal and National parties always seek to lower taxes for all Australians at every opportunity. We also think you should keep your election commitments, and we think that, policy in this country needs to be fiscally responsible, and that will be the three things which will guide our response.

STEFANOVIC: Okay James Paterson, thank you as always.


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