Source: Australian Parliamentary Secretary to the Minister for Industry
Jim Chalmers:
Prime Minister Albanese had an outstanding meeting with President Trump today. We’re very, very pleased with how the meeting went. And the critical minerals framework is really one of the most important bits of progress that we saw in those discussions. And what that’s all about is about helping to ensure Australia becomes a world leader in the export of rare earths and critical minerals. It’s all about making sure that we strengthen our trade ties with the US, that we strengthen supply chains, and that we make sure that this remarkable opportunity that Australia has with rare earths and critical minerals is properly maximised.
Haslinda Amin:
So, who will decide which projects are viable? Is the government choosing the winners here?
Chalmers:
This industry already, we think there are about $AUD13 billion of projects in the pipeline. A really extraordinary opportunity for Australia, a golden opportunity. And what the American administration and the Australian Government have agreed is that each of us will invest a billion dollars over the next 6 months, as you rightly said in your introduction, in some of these really important projects. We believe Australia can be and will be a world leader in the supply of rare earths and critical minerals. The agreement and the framework that was agreed with President Trump today is an important part of that effort. It’s a golden opportunity for Australia, and we intend to maximise it.
Amin:
The thing is, there is reason to think there could be competition between an American and Australian company. I’m just wondering, how will it be decided when it comes to that? For instance, if you have Lynas and MP Materials at odds, how will you decide?
Chalmers:
It’s not beyond us for the commercial arrangements to reflect the scale of this opportunity and our obligations to each other under this framework. Obviously, rare earths and critical minerals have a number of important applications, including in defence and technology, and in the industries that the US administration are very keen to work closely with Australia on. We intend to be a reliable supplier around the world.
But this agreement with the US is about strengthening trade ties with the Trump administration and the US more broadly. It’s about making sure that those supply chains are robust and reliable. We will have markets all around the world for these critical minerals, and that’s a good thing. But the American relationship is very important to us, and today we strengthened it.
Amin:
When you think about these rare earth deal and the projects which are coming up, we know that Gina Rinehart, for instance, has a finger in a lot of these pies. And some are raising the concern that perhaps, you know, taxpayers’ money would end up at one end of town, which is the richer end of town. I mean, how do you respond to such concerns?
Chalmers:
This critical minerals opportunity for Australia is a big opportunity for our workers, our local communities, for our businesses and our investors. And there’s more than one investor or owner of critical minerals resources in Australia. But whether it’s mining, refining, adding value, processing, working with our international partners – you shouldn’t see this as anything other than a massive opportunity for Australia. It’s why we put so much effort into engaging, whether it be with the US administration, whether it be here in APEC, with the 21 economies of our region.
We recognise that Australia’s got a lot to offer the world. We’ve got important relationships right around the region, and we intend to supply other economies with our critical minerals and rare earths in a way where the benefits in Australia are broadly shared, including amongst our world‑leading mining workforce.
Amin:
Do you think China overplayed its hand in imposing the curbs on rare earth supplies?
Chalmers:
I wouldn’t engage in that sort of commentary. We engage with the Chinese administration in good faith and in Australia’s national interest. We engage with all of our trading partners in that fashion. I’ll leave the analysis to others. Our interest here is making sure that we continue to be a reliable supplier, that we play an important role in strengthening supply chains in this industry, whether it’s in the United States or elsewhere.
But our relationship with China is important to us in economic terms as well. We’ve put a lot of effort into stabilising that relationship. The Chinese economy is not without its fair share of challenges, but we are confident that it will continue to be an important source of growth in our own economy in Australia. And we believe it’s possible to engage with the Americans in the way that we have been and to continue to stabilise and invest in that very important China relationship at the same time.
Amin:
Treasurer, so, it all sounds good for the Australian economy. Let’s take a look at your budget. What are the prospects of a narrowing of your budget deficit, given that, you know, the commodity space is doing really well? Take a look at where gold is in terms of tax receipts from miners. That should be, should be looking pretty good as well. How is that deficit looking for you?
Chalmers:
In our first term of government, in our first 3 years in office, we engineered the biggest positive turnaround in our budget in a single parliamentary term in Australian history, in nominal terms. We delivered 2 surpluses, and in the most recent year the deficit was around a fifth of what we inherited from our predecessors. And so, we’ve made good progress on the budget, but we know that there is more work to do. A big reason for that progress has been the strength of our labour market, but also we found $100 billion in savings, we’ve shown spending restraint, we’ve banked most of the upward revisions to revenue, which comes from a stronger labour market and relatively strong commodity prices. And so that has improved the budget, but we know that there is more work to do.
And when you spend time in these international forums, as I have been, in North America last week and in Asia this week, it becomes very clear that Australia’s budget is in much better nick, much better condition than a lot of other budgets around the world. In fact, the gross debt for the year just finished is $188 billion lower than was projected just 3 years ago. So, we’ve made good progress. We know there’s more work to do to make our budget more sustainable. But because of the progress we’ve made, we’ve got the debt down and we’ve got the debt interest down as well, and that’s been important.
Amin:
Is there a potential for a surplus, Treasurer?
Chalmers:
We’re not forecasting that for the coming fiscal year. There are pressures on the budget which are frankly intensifying, rather than easing, including in the care economy and elsewhere. But we will continue to manage the budget in the most responsible way that we can. We will build on the very substantial progress that we have made already. To continue to ensure that our budget is as sustainable as it can be in the face of all of this global economic uncertainty, and in the face of the spending pressures which are familiar to a lot of the economies that we’re engaging with here in Incheon.
Amin:
Treasurer Chalmers, all eyes on monetary policy as well. The market’s pricing in 2 more rate cuts. In your opinion, is that enough for the Australian economy?
Chalmers:
There are good reasons why Australian treasurers don’t engage in commentary about the future movement of interest rates. We don’t predict or pre‑empt decisions taken independently by our Reserve Bank board. Interest rates have already been cut 3 times in Australia in the space of the last 7 or 8 months or so. The market is expecting further interest rate cuts before long.
My job is to focus on the economic fundamentals, which are strong in Australia. We are genuinely an island of opportunity and resilience and reliability in a sea of global economic uncertainty and risk. So as to continue to tend to the macroeconomic fundamentals of our economy, the strong labour market, the fact that we’ve got inflation down considerably, that’s my focus. I’ll leave decisions on monetary policy to our independent Reserve Bank.
Amin:
So, when you take a look at the economic fundamentals in Australia, are you perhaps frustrated by the gradual pace? Because when you take a look at what other central banks around the world have been doing, they’ve been more aggressive in terms of the rate cuts to help the economy grow faster.
Chalmers:
Obviously, when interest rates are cut, that has a positive impact on the economy. I think that’s self‑evident. That’s economics 101. And because of the progress we’ve made in our economy, particularly on inflation, but we’ve been able to get that progress on inflation without paying for it with substantially higher unemployment. We’ve got real incomes growing again. So, there’s a lot to be proud of in the Australian economy and that has given the Reserve Bank the confidence to cut interest rates 3 times already this year.
Again, I’m not going to engage in anything that goes beyond that, or which could be misread as encouraging the independent Reserve Bank one way or the other. But I think certainly any objective observer of our economy over the last 12 or 18 months would recognise we’ve continued to see it grow, we’ve managed to get real incomes growing again, we’ve managed to keep the labour market relatively strong – certainly by historical standards – we’ve managed to get inflation down very considerably from its peak a couple of years ago. And when the Reserve Bank meets to take these decisions independently, they will weigh all of that up.
Amin:
And Treasurer, speaking of the economy, you have to talk about China, which is your largest trading partner. Its, I guess, economic recovery is pretty sluggish, and it’s been trying to reverse that. How are you factoring that into your own projections on growth going forward?
Chalmers:
Obviously Australia’s got a lot of skin in the game when it comes to prospects for the Chinese economy. As I said a moment ago, there are no shortage of challenges in the Chinese economy and its property sector and in other important respects. But we’re very confident that China’s growth will continue to be an important source of Australia’s economic success. We have put a lot of effort into stabilising that relationship, maximising that opportunity, given China is such a big and important trading partner of ours.
Like the rest of the world, we will watch closely the developments around the new 5‑year plan when that’s announced before long. But as I said, China will continue to be a really important part of Australia’s economic prospects. It warrants and receives a lot of our attention. That will be especially the case as we see the developments around the 5‑year plan, and when it comes to our forecasts, we’ll update them in the usual way in the budget update towards the end of the year.