27 July 2022


E&OE Transcript
Radio interview
ABC Melbourne Drive
Wednesday, 27th July 2022

RAFAEL EPSTEIN (HOST): Stephen Jones is part of Anthony Albanese’s financial team. He is the Assistant Treasurer and also the Minister for Financial Services. Good afternoon.


STEPHEN JONES: Good afternoon, Raf, good to be with you.


RAFAEL EPSTEIN: That just over six per cent figure, how much of that is good old‑fashioned 1970s, 1980s, inflation, wages and prices going up and how much of it is all the weird and wonderful post‑pandemic invasion?


STEPHEN JONES: Just about none of it is 1970‑style inflation. It doesn’t mean we shouldn’t be complacent. In the 1970s we saw a price‑wages spiral, so wages continually chasing price increases and feeding into price increases. We’ve got a very different phenomena now. Most of the inflationary pressure is imported and as a direct result of either energy shortages arising out of the Ukrainian war or supply constraints arising mainly from China but not exclusively there, everything from cars to medical devices, some food products in shortage of supply, and that’s what is driving it.


RAFAEL EPSTEIN: A big part of it is housing, though, the massive house price rise, that’s not imported.


STEPHEN JONES: Look, a significant part we’ve seen over the last three years prices up 20 and 30 per cent and that’s going to start feeding into rents as well. So, there’s no doubt a part of it is housing but the next thing that’s going to kick housing price inflation along if we don’t get it under control is going to be supply shortages and it’s already doing that. You’re seeing in the building industry quotes good for a month or so and then they are readjusted as the builders bring the bad news about what’s happening to building supplies.


RAFAEL EPSTEIN: I will just read a text here, if I can Assistant Treasurer: “I’m saving generally for a house deposit but also just in case of a job loss and recession. I’m on contract work and who knows if I’ll have my job next year.” So, Stephen Jones, that’s the sort of fears people have. How much should people worry about inflation?


STEPHEN JONES: Look, we’re all concerned about inflation getting out of hand and away from us, which is why the Reserve Bank is really leaning into this challenge and against all predictions jacking interest rates up to try and tame inflation. It’s in the interests of every single Australian that we get this under control. Nothing hurts working people more than seeing the price of essentials go up and up and up and their wages not keeping pace, so it’s in all of our interests to try and tackle this, bring it down over the course of the year and hopefully some of those supply side shortages next year start to ease, we see prices returning back to normal.


RAFAEL EPSTEIN: Why does the Government think inflation won’t be as bad next year? 


STEPHEN JONES: There are two things firstly, as I just said, seeing supply chains normalise after the pandemic, and particularly out of Asia, but not exclusively there, seeing some of those components, manufactured goods, all of that baggage of goods coming, returning to more normality, everything from shipping to factories in China and everywhere else, seeing that normalise. Secondly, and this is very much leveraged off what comes out of the war in Ukraine, seeing energy prices return to some normal as well. Now, the big caveat in all of this is that Australia is not immune from what’s going on in the rest of the world.


RAFAEL EPSTEIN: Can I interrupt, Stephen Jones, that sounds entirely reasonable – supply chain, Ukraine, but no‑one saw this coming last year, so why on earth should we trust that Treasury or the Reserve Bank knows what’s going to happen next year this time around? Why should we trust any of the predictions?


STEPHEN JONES: We’re not making rock-solid guarantees about what is going to happen in the rest of the world. All we can make is guarantees about how we are going to respond to the challenge. I’ve mentioned two supply-side challenges, the first being what’s happening in the traded goods sector, the price of everything from automobiles, automobile parts, medical devices, all of that. But we’ve also got a challenge in our labour force as well. Businesses, we met with the BCA, the Business Council of Australia, today. Their number one issue is being able to get the workforce they need to grow. So, and the simple fact is we’ve been over-reliant on importing workers to fill skill shortages and importing products because we’ve essentially closed down our domestic manufacturing industry. We’ve got a strategy to deal with both of those things, upfront and frank as soon as we turn them on – and we started turning Jobs and Skills Australia on today by moving legislation in the house. We’ve still got a two-to-three‑year glide path before some of those start really delivering, with you it’s – 


RAFAEL EPSTEIN: Are you effectively saying there to people who voted for you: you’ve got to give us two or three years for the strategy to bear fruit? Like you’ve got to wait two or three years before wages rise faster than prices?


STEPHEN JONES: No, I’m not saying that at all. Our very first act in coming into Government was to say to the lowest paid Australians: we want your pay to keep pace with inflation, and we’ve backed in the 5.3 per cent wage increase. We also backed in a 0.5 per cent increase in superannuation, so in total the lowest paid Australians have had an increase in pay of close to six per cent. We’ll review next year’s figures next year, but the challenge is this: we’ve got some long‑term structural challenges in the economy; shortages of skills.


RAFAEL EPSTEIN: Excuse me, Stephen Jones, I’m not generally not asking this in a gotcha way, I’m just – 


STEPHEN JONES: No, I didn’t take it that way.


RAFAEL EPSTEIN: You’ve only been there nine weeks. When does the reasonable person, when can a reasonable person expect wages to start rising consistently faster than prices? What’s a reasonable expectation for that?


STEPHEN JONES: In some parts of the labour market that’s happening right now. In professional services, in a lot of the skilled parts of the workforce, that’s happening right now. And in other parts of the workforce, particularly in the caring workforce, they aren’t and the retail parts of the workforce, they aren’t keeping pace with inflation, so there is a lag there. But there’s no doubt that in some part of the workforce those wages are galloping ahead and in some parts significantly ahead of inflation. Again, businesses are telling us that as we meet with them as late as today.

But, look, the point I want to make is this: Labor wants to deal with the immediate‑term stuff by putting in place relief, whether it’s relief for the lowest paid workers and ensuring that we’ve got some of those structural adjustments that we put in place as we make a transition. But if we’re going to beat this once and for all, we’ve got to reboot manufacturing in this country and that’s what our National Reconstruction Fund is all about – $15 billion to work with industry to reboot manufacturing. And Skills and Jobs Australia, which is about saying, “yes, we’re going to need immigration as a part of the solution to skills shortages, but we also need to train our own,” and that’s a five to 10‑year project, but it’ll be a five to 10‑year project from whenever you start, so let’s start today.


RAFAEL EPSTEIN: So, when should the reasonable – you mentioned retail there and you gave, I guess, a pretty comprehensive explanation or a diagnosis of the issues we’ve got in your way of dealing with them. But other than professional services, what can the reasonable person who’s working in retail or trucking, those sorts of things, when can they expect to think, “Yep, you know what, my wages will go up just a bit more than prices consistently?” Like, is that next year, is it five years? Can you give an answer to that question?


STEPHEN JONES: Can’t give a categoric answer. I’m not trying to wheedle out of any of the reasonable questions you’re asking and your listeners want to hear. But you’ve mentioned trucking and you’ve mentioned retail – actually quite organised sectors. Those agreements, they’re quite lumpy, they’re generally three‑year agreements. They’ll start coming off over the next year. They’ll be renegotiated and the unions responsible in those sectors will be factoring in cost-of-living increases into the next three‑year agreements that they would make. So that’s in the sector where you’re bargaining for wages. In the professional services, those wages are already going up and over the course of next year we expect prices to come back down again, but wages will remain stable. So, prices have gone up in a spike. Like a wave, they’ll have gone up over the course of this year, come down again next year, but wages, because they’re contracted and dealt with by legally binding agreements, they should stay steady or increase over the course of that period of time.


RAFAEL EPSTEIN: You can, as a Government, consistently tell everyone there’s a billion dollars' worth of debt – sorry a trillion dollars’ worth of debt on the books or at least there will be soon. Doesn’t that mean you can’t afford those stage three tax cuts? They don’t come in for a bit, but isn’t everything in the economy telling you that they are unaffordable?


STEPHEN JONES: A couple of things on that. Firstly, trust in politics matters and if we said we’re going to keep those arrangements in place, we’ll keep them in place. You can’t promise one thing before the election and do the exact opposite a couple of months later. Trust in politics matters so we’ll do what we said we are going to do. The second thing: they’re not deliverable for a couple of years and the inflation problem is right now. So, they’ll have no impact on inflation today even if we said – which we won’t – that they should be cancelled. So, we’ve got to put in place and use other levers for dealing with the inflation now and we’ve got to have an honest conversation with the Australian people about the services they expect and what it’s going to cost to pay for them.


RAFAEL EPSTEIN: Stephen Jones if I can ask you a procedural question. Anthony Albanese’s promised as Prime Minister to bring us some different politics. I just want to play an entirely predictable and frankly I think little dreary part of Question Time. Here’s what is classically known as a Dorothy Dixer in the first Question Time today.


TANIA LAWRENCE (LABOR MP, TAPE): My question is to the Prime Minister. In May, the Australian people voted for an Albanese Labor Government with real plans to build a better future. Can the Prime Minister update the house on how the Government is working toward that is goal?


RAFAEL EPSTEIN: Stephen Jones, that’s your colleague Tania Lawrence. I know you don’t want to cede all the territory during Question Time, but does that question serve any useful purpose?


STEPHEN JONES: I think it is important that – Question Time is actually the one time when more Australians are listening to what goes on in Parliament than any other time during a sitting week, so what gets said in Question Time actually matters. And if I could put your question to me back to the Opposition. If we had a Question Time that was characterised like the Question Time today, where we legislated today for aged care, for Jobs and Skills Australia, for veterans affairs, for climate change – four really big things that matter a lot – you’d have thought we’d have got one question, one question on any of those things, or maybe the inflation numbers, or maybe the IMF assessment of international growth. Not one question on any of those things that matters more to the Australian people than the guff that we got thrown up by the Opposition in Question Time today. So, when we’re operating in such a quality of questions vacuum, I think questions from the cross-bench, which we’ve increased and questions from Government MPs help to fill out the information available to Australian people.


RAFAEL EPSTEIN: Don’t have much time, a very quick one: were you surprised a lot of the coalition weren’t wearing masks?


STEPHEN JONES: I’ve got to say that if the Prime Minister put around a recommendation that MPs wear pants into Parliament, you’d see most of the opposition turn up in their underwear. It really is quite silly. Yes, I am surprised. Frankly, I’m surprised. This is a public health measure. We don’t want to be turning it into some of the other countries around the world where basic public health measures are politicised. I think it’s dumb.


RAFAEL EPSTEIN: Please make sure the Prime Minister doesn’t make that recommendation, though; it’s not – 


STEPHEN JONES: About pants?


RAFAEL EPSTEIN: Yes. Don’t let that happen. Thanks for your time.


STEPHEN JONES: Good on you.