Tuesday, 29 September 2026

Topics: interest rates; inflation; government spending; AI investment; Tax Back Guarantee.

E&OE……………………..

Patricia Karvelas: That's, of course, business presenter Alan Kohler with his reaction to the Reserve Bank's decision to increase interest rates to the highest point since 2011. For some reaction to the decision and the comments of the Reserve Bank Governor, I want to bring in the Shadow Treasurer, Tim Wilson. Welcome to the program.

Tim Wilson: Thank you for having me, Patricia.

Patricia Karvelas: The Reserve Bank Governor says the Iran war is making us all poorer. Isn't this result the consequence of some of these shocks that she talks about?

Tim Wilson: Now, the core driver of the problem of inflation that Australia is experiencing is coming from government spending. We had three interest rate rises this year before this one today, and of course the first one occurred before a single bomb had even dropped on Iran or Tehran. The problem we have is a persistent problem around government expenditure, which Alan Kohler correctly points out is stimulatory, which is borrowing from the future, spending today, and inflation is a reflection of too much money chasing too few goods and services. So the RBA has only one response, which is to increase interest rates. In fact, the RBA Governor has been pretty clear with the government that if they keep spending the way they do, she'll have her hand forced into increasing interest rates. The government played a game of interest rate chicken, and now, of course, Australian households are paying the price.

Patricia Karvelas: The Governor says no particular item is making their job harder. She was asked that. She said she wouldn't identify that. Like, you've been obviously clearer that you think something is the case and it's government spending. That aggregate demand is made up of public and private demand. Is that… Are you verballing the RBA Governor? Because she didn't say quite what you said.

Tim Wilson: No, not at all. I mean, one of the challenges we've got is the Albanese economic model is that we're seeing the increase in public expenditure, which is stoking private demand. And so this is where the Treasurer likes to play funny buggers with the Australian community. As people have pointed out, he's gaslighting the Australian community right now. We've seen a continued expansion in the public sector through forms of direct and indirect expenditure. That is stoking demand across the economy. That is increasing inflationary pressure. And that is why we're getting interest rate rises. If we had a productive economy that was outgrowing public expenditure, we wouldn't be seeing this. It's because we've got the exact opposite, and that's why Australians, when they go and pay their mortgage, will be paying more. When they go to the supermarket, they'll be paying more and getting less in their trolley.

Patricia Karvelas: Are you worried about AI investment stoking inflation? Because the RBA Governor was clear that's one of the reasons.

Tim Wilson: Well, she's talking about the global demand for capital, and I'm not disabusing anyone of that, but that only highlights why it's so important to be prudent. Internationally, we know bond markets are becoming very nervous about levels of government debt, which of course is fed by government expenditure exceeding the amount of tax they're raising. And of course, that's borrowing from the future and feeding today. So now is a time where we actually need to be protecting our country, securing our nation, and making sure that our economic policy is sustainable. Instead, we have a government that turns around to Australian households and says they've got to pull their belt in, but they're not prepared to do the same.

Patricia Karvelas: If we look at the policy suites that you've put forward, the opposition has put forward, including the indexation of the tax rates, wouldn't that fuel inflation enormously? Wouldn't that be the consequence?

Tim Wilson: I don't think that's right at all. Our focus on making sure that we have an end to government waste and expenditure that is hurting the economy, introducing integrity measures at the heart of big government programs…

Patricia Karvelas: With respect, I'm going to interrupt just to say I asked you about the indexation and the extra spending. That would actually put more money into the economy. Wouldn't it fuel inflation? It's inevitable. That's a sort of basic economic principle, isn't it?

Tim Wilson: No, I don't agree with that at all because that will be money that Australians have already paid in taxation because inflation is already a problem. We will be stepping through our offset measures in the lead-up to the next election. One of our big challenges is there's two potential budgets between now and the next federal election, and we need to make sure that government spending is under control because at the moment we have a situation where Canberra is living too well while households are increasingly told to pull their belt in. Inflation is a problem when the government is living too well, not when households are living too well.

Patricia Karvelas: Just to be clear, you're saying you're going to provide the equivalent offsets, you're going to pull a significant amount of money out of the economy and articulate where from to offset the indexation?

Tim Wilson: What we will be focused on is making sure we have appropriate offsets for our policy as part of a broad package of measures. And of course, the Tax Back Guarantee, which is meaning the government can't steal people's incomes through the silent thief of inflation, will be returning Australian households' money back to Australians.

Patricia Karvelas: Which would be inflationary.

Tim Wilson: Well, no. At the moment, what's happening is the government is taking that money and they're spending it elsewhere, and of course, they're going even beyond that and increasing the amount of money chasing goods and services in the Australian economy. So that's not a justified conclusion at all. In fact, what the government is currently doing is inflationary. People being able to keep their own money is not inflationary by principle.

Patricia Karvelas: Okay, but you will offset that, just to be clear, with the equivalent cuts?

Tim Wilson: We'll present our full package of offsets at the appropriate time in the lead-up to the next election.

Patricia Karvelas: But they will be equivalent?

Tim Wilson: But at the moment…

Patricia Karvelas: They may be equivalent?

Tim Wilson: What we'll be stepping through is our full range of offset measures in the lead-up to the next election. But one of the things that's very clear is we believe that Australians should be able to keep more of their money. The government should not continue to take people's incomes and use inflation as an excuse. I mean, if Australian households could only pay their mortgage with Jim Chalmers' excuses, they'd be a lot better off. And the problem we have right now is the government is not interested in being square with the Australian people, telling them the consequences of their active inflation agenda, how it's pushing up inflation and, of course, interest rates.

Patricia Karvelas: Okay, so we will get a really strongly articulated list of where all the cuts would come from, because there'd have to be enormous cuts to meet the objectives you talk about.

Tim Wilson: You're trying to box me in when we're actually going to develop a comprehensive economic plan to build the future of the Australian economy, Patricia. One of the biggest problems we've got right now is we simply do not have a productive economy. This is the point that the Reserve Bank Governor outlined in her press conference, and she made it very clear that if we don't have a productive economy, if government expenditure continues to outstrip private households and the productive economy, we will continue to have an inflation problem. That's what we're living in, and we're going to make sure that we address that.

Patricia Karvelas: We clearly do have an inflation problem. Thank you so much for joining us.

Tim Wilson: Thank you.

[ENDS]