Wednesday, 28 October 2026

Topics: inflation; interest rates; spending; the Coalition’s Tax Back Guarantee; artificial intelligence; private health insurance.

E&OE……………………..

Patricia Karvelas: For a view from the Opposition, I'm joined this afternoon by the Shadow Treasurer, Tim Wilson. Welcome to the program.

Tim Wilson: Well, thank you for having me, Patricia.

Patricia Karvelas: The single biggest driver of higher inflation was higher fuel costs. Automotive fuel was up 9.4% in the month, which is pretty incredible, and it's 23.6% higher over the year, which is staggering. That's flowing through to all parts of our inflation crisis, right? It is the chief problem.

Tim Wilson: Well, that's the immediate problem now in terms of headline inflation. But when the Reserve Bank makes decisions about interest rates, they look at the underlying inflation problem. That has been above their target since July last year, a full seven months before a single bomb was dropped on Tehran, and that's been stoked by government spending. And it's sat now at 3.6%, basically consistently, broadly speaking, for about 12 months, which is what the data today shows. And that's why there's upward pressure on interest rates. Until the government addresses the spending problem, you're not going to get the inflation problem under control and you're not going to see interest rates decline. Now, headline inflation issues come constantly, and the Reserve Bank is designed to look through those. It doesn't mean that they don't exist. We all acknowledge that. But it's wrong to draw as a reference point rather than looking at the real problem, which is the underlying inflation.

Patricia Karvelas: Yeah, you're right about the underlying inflation rate, there's no doubt about it. But in terms of that impact, 23.6% on fuel since the crisis in Iran, which, you know, the US obviously with Israel began, doesn't that flow across the economy? Like, it is baking in a problem for us, isn't it?

Tim Wilson: I'm not contesting it has an impact on the economy at all. We know that…

Patricia Karvelas: It's not just fuel is my point. It has a flow-on effect to the rest of the economy.

Tim Wilson: I was about to outline that, we’re the highest consumers of diesel in the world per capita, it goes into freight of food, so that food goes from a farm to the supermarket, and it goes into how we produce our food, etc, etc, etc. So, that is a problem. I'm not contesting that. But it also doesn't outline the structural problems the economy has. This government continues to spend at the highest rate outside of a pandemic for the past 40 years. And every time you have a deficit budget, what you're doing is borrowing from tomorrow to pay today, and it increases the volume of money supply. So how much money is chasing the number of goods, when you have that, you have inflation. And the government has projected deficit budgets for the next 40 years. So, you've got to get spending under control.

Patricia Karvelas: Treasury Secretary Wilkinson spoke at Estimates today, so we've heard from some of the experts or the people who aren't just the politicians. And she said there had been a sharp and unexpected improvement in the budget bottom line. Do you accept that?

Tim Wilson: Well, what I accept is she's made a number of contributions to Senate Estimates today. One of the contributions she's made just now is acknowledging that inflation is under their control and they've got to look at the measures that are within their control. Other Treasury officials today have admitted they're spending over $100 billion more than they were, despite the government promising they're going to provide savings. They're actually spending more and continuing to contribute to inflation. Now, when you have inflation, you will also have certain areas of the budget which will see increases in revenue. I'm not contesting that. That's one of the reasons we put forward our Tax Back Guarantee, because one of the areas you also see it in is the amount of money that's taken out of Australians' pockets through taxes and goes into the Treasury, and we think that there should be an adjustment to reflect the fact that inflation shouldn't be a silent tax that increases the tax take government has on incomes without passing laws through parliament.

Patricia Karvelas: Let's go to that actually, because you've got your indexation of tax rates. That's a big policy you announced. If we are at the end of next year and we still have a stubborn inflation problem, because look at the forecasts, I don't know how we get out of this, we're in it next year, so we've got a stubborn inflation problem, how can you go to the election with a policy that will be inflationary, because the indexation of those tax rates will be inflationary, won't it?

Tim Wilson: I don't accept that at all. Inflation is about the aggregate demand across the entire economy. It's not specific to one tax policy…

Patricia Karvelas: It will put a lot more money in people's pockets and that will have an impact, won't it, on inflation?

Tim Wilson: Let's be very clear. We have made it clear, we've provided $31.3 billion worth of savings that we've publicly released now for three, four days, and no one's criticised them. In fact, they've all been costed by the PBO, that steps through specifically how we provide offsets. This is the difference between the approach we take versus the Labor government. The Labor government, for instance, cut fuel excise. We called for them to do that, but we provided inflation offsets. They did it without inflation offsets, so it became inflationary. And we want to provide offsets to address exactly these sorts of challenges, because I don't want more inflation. I actually want to defeat inflation.

Patricia Karvelas: No one wants inflation. I think that's right.

Tim Wilson: I'm sorry, I can't accept that when the government refuses to accept that they're the core driver of it and it continues to destroy the wealth of Australian households, is hurting the middle class, and more than that, is particularly punishing small businesses at a time where we already have record insolvencies.

Patricia Karvelas: So you won't be revisiting that policy even if we've got an inflation challenge? Because the thing about the way that the current system works, and I understand the critique of it, but it is a kind of repressor of inflation, isn't it? Because it means that it stabilises. I mean, most economists talk of it that way, that it doesn't actually, it creates this handbrake on people getting extra money in their pockets.

Tim Wilson: Except that's not true, because…

Patricia Karvelas: But it is true.

Tim Wilson: No, not when the government is taking in revenue and continues to take in more and more revenue, and then spends in excess of that…

Patricia Karvelas: That part is different. I'm talking about just that mechanism.

Tim Wilson: And that's where I contest. If the government keeps taking on deficit spending, they continue to borrow from tomorrow to feed today, you're going to have an inflation problem. That is why Australia has an inflation problem. And we have clearly outlined where there is going to be spending offsets to specifically address making sure that it's budget neutral, that we're in a better position, that we're growing the economy. Because we also need the private sector to grow faster than the public sector. That is not what is happening under this government. You're seeing the public sector grow faster than the private sector, and as a consequence…

Patricia Karvelas: But there's been a private sector recovery, that's what the figures show.

Tim Wilson: A one quarter embellishment here and there doesn't actually address the root cause of the problem. The government itself constantly points, "Oh, there's people building data centres over here." That is not a demonstration of a thriving private economy. We have record small business insolvencies. They're most likely to employ people proportionate to their size, they're most likely to drive innovation and diversity in the economy, they're most likely to be the productive part of the economy, and we're killing them under this government's higher taxes agenda.

Patricia Karvelas: The other interesting thing in the data is the AI boom and the way it's leading to inflation. Does that worry you?

Tim Wilson: Well, I'm very conscious of the impact AI is having on lots of things, including demand for capital, and of course, there's been a lot of announcements that are then being walked back around things like data centres. I think the impact on AI is still very uncertain with the economy. I don't jump to big conclusions, because where I see it likely having an impact for productivity and improving the economy is in small businesses. I think it's far less likely at the corporate level, the big company level. I do see there's potential in the public service to improve outcomes for taxpayers.

Patricia Karvelas: Actually, that's interesting. One of the Coalition's backbenchers, well, now he's an Assistant Shadow Minister, Garth Hamilton, has raised concerns about that huge data centre that's been greenlit, if that's the..

Tim Wilson: I was asked about this on 7.30 last night. You should have watched.

Patricia Karvelas: I was busy.

Tim Wilson: I'll tell David Speers.

Patricia Karvelas: No, I'll catch up tomorrow. But that is a concern of people, and it's a big issue in the United States. Does that worry you?

Tim Wilson: Well, I'm very conscious of it because I think what the physical constraints around artificial intelligence, where people see the industry growing and the rate they do, versus the physical constraints, which is data centres, spectrum availability, energy availability, have all not been resolved, and in fact are getting worse under the government's renewable energy-only solution. We actually, if we want to be a powerhouse economy where we have the infrastructure we need to have sovereign data, build out an AI industry, but make sure we have the affordable energy for industry, households, small businesses, and data centres, means a complete change of policy from what we've got now.

Patricia Karvelas: Yeah. Does it worry you, though, that so much labour is actually being sucked up by these AI data centres and not being able to be deployed on housing, which of course is a crisis?

Tim Wilson: I'm very conscious of that and that's a risk. The problem at the moment is nobody can make a buck out of housing, particularly based on the government's higher taxes in the last federal budget, and so we're seeing a major retreat in housing. When we need housing built, we need infrastructure and critical infrastructure built. And part of the job of the government is to make sure we've got the skills to do that. That's why our immigration policy is focused on not just getting the skills we need where we need them to make sure that we can build the future of the Australian economy.

Patricia Karvelas: Private health insurance change over 65s, that's a quite obvious budget saving, $3 billion, but you've stood up against it in the Senate. How can you argue that you want to pull back spending, and when the government tries something, you say no?

Tim Wilson: Because it's a complete false economy. People's healthcare expenditure is disproportionately at the end stages of their life because they have multiple conditions, they rely on more medications, they're often cross-managing different health conditions at the same time, as well as needing more time in tertiary care or hospitals. So, if you actually take that cost from the private economy or private health and move it onto the public purse, you actually end up with higher costs in the long run. It's not a logical thing to do. It also disempowers investment in further health infrastructure that we need. It's a complete disaster and was just designed for the government to give them a short-term tick to try and make it look like they're doing something. But they're actually going to hurt Australians' health, their welfare, and the nation's budget in the long run.

Patricia Karvelas: Okay. Thank you so much for joining us.

Tim Wilson: Thank you.

Patricia Karvelas: That is the Shadow Treasurer, Tim Wilson.

[ENDS]