The Hon Jim Chalmers MP Treasurer TRANSCRIPT E&OE TRANSCRIPT TELEVISION INTERVIEW ABC INSIDERS SUNDAY, 4 OCTOBER 2026 SUBJECTS: Mid-year budget update, inflation challenges, bond yields, savings package in budget DAVID SPEERS: Jim Chalmers, welcome to the program. JIM CHALMERS: Thanks very much David. SPEERS: Inflation is being driven by domestic pressures, productivity is going nowhere. Is the Reserve Bank Governor wrong here? CHALMERS: Well, the comments that the Reserve Bank Governor made during the course of the week are consistent with the comments that I have been making. We have an inflation challenge in our economy, it's made much worse by the war in the Middle East. If you look at the statement issued by the board, if you read the full transcript of the Governor's press conference on Tuesday, you'll see multiple references to the war in the Middle East. Now that's not to contest that we have a productivity challenge in our economy. That's the big motivation behind the biggest and broadest productivity package in any budget in recent decades. We also have some domestic sources of inflation. We see that, for example, in the housing market, and that's the motivation behind an overwhelming emphasis on building more supply. So if you look at the comments that the Governor made, you look at the statement issued by the board after they raised interest rates on Tuesday, you can see that consistent with what the Government has been saying, yes, we have inflationary pressures here at home, they are made much worse by the war in the Middle East, and you can see that in the new inflation data which was released the day after. SPEERS: And I want to come to some of those domestic inflationary pressures, but just on the Middle East, I mean clearly you can't control what's happening in the Middle East, but what's your message to Donald Trump? Should he end this war? CHALMERS: Well, I'm not for giving free advice to the President of the United States. And I think it's clear, whatever the reasons were for going in, from an economic point of view the war in the Middle East has been a disaster. It's been disastrous from a cost-of-living point of view, and for Australians and indeed for people right around the world. And no serious observer of what's going on right now would conclude anything other than whatever the inflationary pressures here at home, and I've talked about those already, the war in the Middle East is putting very substantial pressure on inflation, not just in Australia but around the world as well. That's why we're seeing interest rates go up around the world as well. SPEERS: And if the war is prolonged, if it continues, could it drive the Australian economy into recession? CHALMERS: Well, from an economic point of view the end of this war can't come soon enough. It can't come soon enough for Australians and for their cost of living pressures. You would recall, David, that the anticipation at the beginning of the war was that it would be a matter of weeks, I think it's now in about its eighth month. So the longer this thing drags out the bigger the impact on the global economy and on the Australian economy, whether it's upward pressure SPEERS: Potentially a recession? CHALMERS: on inflation or downward pressure on growth. Well, it's certainly weighing on growth. We're not anticipating a recession here. If you look at the forecasts from the Reserve Bank, and we'll update the Treasury forecast in the mid year update towards the end of the year, we're not anticipating that here in Australia, but certainly it is weighing on global growth and we're not immune from that. SPEERS: Just coming to what you can control, the domestic factors that are driving inflation, you mentioned housing inflation, but what about government spending? It has grown as a percentage of GDP every year you've been in office. Is government spending contributing to inflation? CHALMERS: Well, in terms of a share of the economy, when we came to office it was almost a third of the economy, we got it down near a quarter, it's now in the high 26s, expected to go to the low 26s by the end of the budget period. I think it's really important to separate private demand from public demand. Nobody's contested that public demand is part of the aggregate demand calculation in our economy. But what we've seen SPEERS: And just to be clear what that means for people CHALMERS: if you compare the year just finished with SPEERS: lost in the language, that means public demand, government spending is contributing to inflation? CHALMERS: It means it's part of the aggregate demand calculation; nobody's ever contested that. But the important point here, David, if you compare the last year of demand in our economy compared to the year before, what you'll see is that public demand has halved over the last year while private demand has tripled. So for every $5 of demand in our economy $1 is public, $4 is private. We actually saw public final demand grow more slowly in the new figures that were released at the start of last week. And so what that shows is there are other factors at play here, because public demand growth has been coming down at the same time as inflation has edged up, and that is another reminder that there are a whole range of factors at play here. Budget settings are not the primary driver of prices in our economy; there's a whole bunch of other things going on. SPEERS: But I guess the question is, yes, that growth in public demand might be slowing, but it's still growing; real government spending has been growing. And you've got people like former Treasury Secretaries Ken Henry and Martin Parkinson, former Reserve Bank Governor, Phil Lowe, all saying the budget should really be in surplus right now. Why can't you get the budget into surplus? CHALMERS: Well, we've been able to get the deficits down much smaller, and we delivered a couple of surpluses in the time in office. I think the pressures on the budget are pretty well known and pretty well canvassed. You can see that in every budget and budget update. But let me be really clear about this, David, because too often this is skipped over. The last budget of our predecessors had no savings, we've found almost $180 billion in savings, more than a third was in the budget that we just handed down not that long ago in May -- SPEERS: Sure, but Treasurer, also CHALMERS: -- so there have been a lot of savings in our budgets. SPEERS: additional spending as well, that we can't ignore that side of the equation. CHALMERS: Well, if people don't want us to strengthen Medicare, for example, or cut income taxes or provide cost of living relief in other ways, then they should nominate where that should be cut. I think that's the point that Premier Malinauskas made during the course of the week. Where there's been additional spending it's typically been in areas like boosting bulk billing because that takes pressure off family budgets, for investing in housing and the like - SPEERS: But all of this is adding to spending into the economy, a lot of non means tested spending and more than $6 billion in GST top up payments and "no worse off" payments that the Productivity Commission says is a mistake. Are you saying there's no room to rein some of this in? CHALMERS: We are right now working on a savings package to be announced this year, and that's consistent with the fact that we've had eight budgets or budget updates in our time in office. Every single one of them has had savings in it, and the one that we release before the end of the year will have savings in it as well. I can make it really clear, there will be more savings in the mid year update, that is at most 10 or 11 weeks away and it's consistent with the savings that we found so far in our first eight budget updates. In addition to finding savings, we've been banking upward revision to revenue. The last two budget updates, our policy decisions in net terms made a positive contribution to the budget, not a negative contribution to the budget. And that's all to recognise that even though the budget settings aren't the primary drivers of prices in our economy, especially now at a time of all of this global turmoil, we can and we will continue to play a helpful role in the fight against inflation, and that's our focus, that will be the focus in the mid year update as well. SPEERS: So you've just said the mid year budget update at the end of the year will have savings. Are we talking about net savings; you will see as a result of government decisions an improvement to the budget bottom line? CHALMERS: Well, that work is underway right now. You would understand, David, that at the start of October we haven't typically finished the mid year budget update, but we will take into consideration all of the economic and fiscal pressures and the pressures on people and come out with the most responsible update that we can. The other really important factor here, which I'm sure SPEERS: But this is important, sorry, Treasurer, to jump in -- CHALMERS: Yep. SPEERS: -- Is it going to be a net improvement to the budget bottom line, or a deterioration? CHALMERS: That's what I was coming to, David -- SPEERS: Yeah. CHALMERS: -- Yep. That's what I was coming to, David. One of the most important pressures coming in the other direction, and we don't yet know how this will all net out, is you would have seen around the world this spike in borrowing costs in the major economies, will also play out here. And so you know that we've got almost a trillion dollars of debt in the budget, almost two thirds of that racked up by the Coalition, and when some of that cheaper debt rolls off it needs to be replaced with more expensive debt, these higher borrowing costs that every developed economy is dealing with right now. The good news is we've got a sliver of the debt that those other countries have had. The pressure will still come though on Australia, and you'll see in the mid year budget update a magnitude of some billions of dollars, unfortunately, in additional pressure coming from those bond yields which are changing so quickly that they put additional pressure on borrowing costs here and in all of our peer countries. SPEERS: Yes. I mean we don't often talk about bond yields on this program, but they have been moving pretty wildly over the last week or so. So you're saying this is going to add billions of dollars to interest payments on government debt? CHALMERS: I am saying that, David, and how those things net out remains to be seen over the course of the coming weeks and couple of months. To be upfront with your viewers there's very, very substantial and intensifying pressure, not just on our budget but on budgets right around the world. Now we will have a savings package in the mid year budget update, I've made that very clear today. We've had a savings package in every budget update so far. That's how we've racked up almost $180 billion in savings. How that all nets out with all of the intensifying pressures, including from this increase in bond yields and borrowing costs remain to be seen. We'll continue to do the work over the coming weeks. SPEERS: But will you spend more money on cost of living help? The Prime Minister seemed to flag there might be more cost of living help coming in this mid year budget update. Are you really going to be spending more money? CHALMERS: Look, from budget update to budget update we take into consideration the pressures on people but also the pressures on the budget and the economy, all of the economic conditions more broadly, and we weigh all of that up, we keep those settings under more or less constant review -- SPEERS: But surely CHALMERS: -- but I think people understand SPEERS: Sorry. CHALMERS: I think people understand that the mid year update will necessarily be a pretty tight ship and that's because of these pressures on our budget, the ones that are existing already, but also these additional pressures coming at us from around the world. And so we'll weigh all of that up. And also, the other important thing is that there is cost of living relief on the way already with those legislated tax cuts that our opponents voted against. So we're cutting taxes, we're boosting bulk billing, we're boosting wages, we're making the housing market fairer for first home buyers because we recognise that these cost of living pressures are still a feature SPEERS: But this is the thing, we CHALMERS: of family budgets SPEERS: Yeah, we. CHALMERS: but we have to go about all of this in the most responsible way we can. SPEERS: Yeah. With inflation where it is and the threat of more interest rate rises to come, it sounds from you, Treasurer, this morning as if you're saying don't expect more cost of living help at the end of the year to be announced. CHALMERS: Well, we haven't finalised the mid year budget update, but I am trying to be very clear with you and with your viewers, David, that one of the primary influences on the mid year update will be the need to find more savings, as we have been doing, but also the need to make room for these pressures which are coming at us from around the world, whether it's an increase in borrowing costs on the debt which was overwhelmingly racked up by our predecessors SPEERS: Okay, I understand. CHALMERS: we have to service that debt, and those borrowing costs are going up. SPEERS: Are you and the Prime Minister on the same page here? CHALMERS: Yes, we are. And we work very closely to make sure that each budget update is as responsible as it can be, providing cost of living help where we can, like we are via the tax system, the health system, the wages system and the housing market, but also making sure that we get the budget in the most responsible position that it can be, recognising that the big factor, the big feature of the economy right now is inflation, and we will continue to play a helpful role in that fight against inflation where we can. SPEERS: Treasurers are often more interested in being a bit more ambitious when it comes to reform. Do you, Jim Chalmers, personally support bolder reform to tackle inflation, to get productivity going, than perhaps some of your Cabinet colleagues, or indeed the Prime Minister would like to see? CHALMERS: Our Cabinet works very closely with the Prime Minister, and we've, you know, typically worked very hard together on the big productivity reform program, the big tax reform program, budget repair working with Katy Gallagher and other colleagues. I think our Cabinet understands right across the board the pressures on people, on the budget and on the economy, and we work closely together to address them in the most responsible way that we can together -- SPEERS: Would you like to go further? Would you like to go harder on reform? CHALMERS: I think you saw in the budget that I'm ambitious about reform, as is the Prime Minister. And I appreciate that you're trying to give a sense somehow that that's not the case, but right across the Cabinet from the Prime Minister down we're ambitious about reform. You can see that in the budget reforms that we announced, productivity, tax reform, budget repair in addition to cost of living and fuel security. Those are the essential elements. Now there's always more that can be done on productivity, there's always more that can be done on budget repair, we've been very upfront about that. You'll see some additional savings, for example, in the mid year update that we release, at most, in 10 or 11 weeks' time. SPEERS: Okay. Surely you must look at things like those GST top up payments that aren't about productivity and think, surely we could do something on that? CHALMERS: No, I think those top up payments are an important way to recognise that we can ensure and lock down a fair deal for Western Australia, such an important part of our economy, at the same time as we've been ensuring in recent years that other jurisdictions don't go backwards -- SPEERS: Okay. CHALMERS: -- Obviously when you look right across the budget -- SPEERS: Just coming back to that question of a surplus and CHALMERS: The States typically have a different view about the GST distribution, David, that's not a feature of the last few weeks. SPEERS: But so do all economists, the Productivity Commission as well, they all reckon what you're doing is wrong. But anyway on budget surplus, just coming back to that question, if you were to drive the budget back into surplus now, what would be the impact? Would that fix the inflation problem or would it crash the economy? What would be the impact? CHALMERS: I don't think the relationship is that direct, and we have evidence of that because when I handed down two surpluses at the start of this Government we saw inflation coming up at the same time, which shows that there are other factors at play, and similarly right now when we've got public demand growth easing in our economy, we've seen inflation edge up, and that's another reason why it's important to look, as you have in your -- SPEERS: So a surplus now wouldn't fix the inflation? CHALMERS: Not necessarily, I mean there's a helpful role that the budget settings can play in the fight against inflation, but the budget is not the primary driver of prices in our economy, it's not typically, it's certainly not right now. But we can play a helpful and responsible role, and that's our intention. SPEERS: Okay. When you temporarily cut fuel excise earlier this year you said it helped lower inflation. Many disagreed at the time. But do you still think cutting fuel excise can lower inflation? CHALMERS: Well, we saw it in the figures that that was the case. It took some of the sting off those higher petrol and diesel costs in our economy, I don't think that's an opinion SPEERS: So why not do it again? CHALMERS: I think that's a fact from earlier in the year. Well, we've got to weigh up all of the different considerations. I mean we transitioned from some of that temporary help, energy bill rebates, fuel excise relief, into more permanent ways to help people via the tax system, the health system, the wages system and the housing market, and so SPEERS: So could you do it again; could you lower the fuel excise again? CHALMERS: there's more than look, that's not something that we've been considering or discussing. Obviously, as I've said before in my earlier answer, we keep the full suite of policies under more or less constant review, but it's not our intention. We are providing cost of living relief in other ways, and in a very responsible way as well. When we think about these sorts of policies, David, we've always got to weigh up the pressures on people, the pressures on the budget and the economic situation more broadly, which at the moment unfortunately is defined by this inflation challenge. SPEERS: All right. Just before I leave this whole budget debate and your approach to managing the economy, should we interpret what you've said this morning about savings coming at the end of the year as any sort of change in direction from you, when it comes to responding to what we're seeing with inflation, with productivity, with falling real wages, is this signalling a change in direction for the Government or more of the same? CHALMERS: Well, when it comes to finding savings, this is a government that's done that at every one of the last eight budgets and budget updates. But we are responding to the circumstances, of course we are. We always respond to the economic pressures, and right now the economic pressures, the financial pressures on people are substantial because of this inflation challenge made worse by what's happening around the world. So of course we're responding to that, of course all of the work that's going into this savings package that we will announce by the end of the year is heavily influenced by our inflation challenge, and the helpful and responsible role that we intend to play to see inflation come down over time so we can get real wages growing again, and so some of this pressure can come off people. SPEERS: A couple of other things just quickly. Trade Minister, Don Farrell, has raised the prospect of Australian superannuation funds investing in the US lamb industry as a sweetener to avoid more Trump tariffs being imposed on Australia. He's argued super funds have an obligation to assist in the national interest, which is news to the super funds, their obligation set in law is to invest in the interests of their members. Is this something the Government's seriously considering? CHALMERS: Oh, we're not changing the obligation that superannuation funds have to their members, that will always be the case that the obligation that funds have is to get good returns for their members to build decent retirement incomes. The only risk to that obviously is any Coalition or combination of One Nation, the Liberals and Nationals -- SPEERS: What about Don Farrell, what's he talking about then? CHALMERS: -- what Don is referring to I think what Don is referring to is that our superannuation funds are a big advantage for us. In our economy and in the world there are opportunities for super, but they will only ever and should only ever invest in opportunities which discharge their obligations to their members, to get good returns, to boost retirement incomes, and in that regard the Government and the super sector is at one. You now, it is an astonishing part of the Intergenerational Report that this country will be delivering higher retirement incomes at the same time as the pension bill as a share of our economy comes down. That's the absolute genius of superannuation, that's why we support the system, or one reason we support the system. But we will never interfere with the obligations that funds have to their members. SPEERS: Well, it sounded like that's what the Trade Minister was suggesting. Does that risk undermining trust in super, those sort of comments? Did he get a bit carried away? CHALMERS: I don't believe so. I think he's reflecting the view that a lot of the funds have, and that I have, that there are opportunities for super right around the world. SPEERS: All right. CHALMERS: And superannuation from a national interest point of view is a real force multiplier for us in our economy and in the world more broadly, there are a lot of opportunities, and super funds will typically weigh up all of those opportunities as they go about discharging their obligation and responsibility to their members, which we support. SPEERS: Finally, Treasurer, you're about to take off to Japan, where you'll be trying to attract investment in Australia. Is this a relationship that needs more attention? CHALMERS: It's an outstanding relationship and we intend to make it even stronger. This will be a brief but busy set of engagements, a really big opportunity for me to meet with my counterpart, Minister Katayama, with 30 CEOs from some of the biggest and most important companies in the world, and with investors who control something like $4 trillion of assets. This is all about strengthening cooperation, it's all about boosting investment, it's about building resilience in both our economies in Australia's national interest, and that's why this set of engagements is going to be so important. SPEERS: Treasurer, Jim Chalmers, thanks for joining us this morning. CHALMERS: Thank you. ENDS