Interview with Sky News AM Agenda

Journalist: Well, as Australia deals with the worst inflation figures – or the highest at least – in two decades, the Treasurer is warning the economy will slow, more people will be out of work and real wages will take a hit. Jim Chalmers will use a ministerial statement today to release forecasts predicting price growth will exceed the Reserve Bank's peak of 7 per cent by the end of the year.

Joining me live is the Assistant Trade and Manufacturing Minister Tim Ayres. Thanks for your time. It all sounds pretty dire, and the government's sort of saying, “Well, we can't do too much about it. We can't spend our way out of this.” Are Australians being told here you've just got to brace for tough times for a while?

Tim Ayres, Assistant Minister for Trade and Assistant Minister for Manufacturing: Well, this certainly is tough economic news. And unlike the previous government, we are going to be upfront with the Australian people and explain the nature of the economic circumstances that we're in. You know, it's very challenging being in a high inflation, low growth environment. We have inherited a legacy of a decade of low wage growth, real wage decline in some areas of the economy, a trillion dollars of debt without anything to show for it really and now a very challenging set of inflation figures.

Jim will set that out in real detail and do it in a way that's, you know, directly communicating with the Australian people about the position that the economy's in today.

Journalist: One of the strongest or most often said issues Labor identified was wages – that wage growth was either sluggish or just at the end of the government – not for most of it but right at the end – it was tipping into negative territory. Are we going to hear today from the Treasurer when we'll get real wage growth again in Australia?

Assistant Minister for Trade and Manufacturing: I caught a bit of Jennifer Westacott's interview today, and I – just earlier. I was encouraged by the way that she was approaching some of those issues. So, there is a medium-term agenda that the Jobs and Skills Summit will be dealing with in terms of the future of productivity, how bargaining can deliver higher wage outcomes, real productivity outcomes.

Right now, what we have to do is to put our shoulder behind growth in wages as a government, and we've been pretty clear. You know, one of the first things the government achieved was a submission to the Fair Work Commission that supported the Fair Work Commission lifting the wages of the lowest paid workers by a dollar an hour. That's not –

Journalist: It's still behind inflation, though.

Assistant Minister for Trade and Manufacturing: Yes, it's still behind inflation. We've got to put upward pressure on wages, downward pressure on inflation. And it's only when those two lines meet, you know, that we'll start to see real wage growth.

Journalist: But this is the question about when they meet. Because people right now are going, “Okay, interest rates, they're headed for about 3 per cent by the end of the year. Inflation, 6, 7 per cent.” They're trying to figure out what they'll be able to afford – maybe making a decision about where they'll send their kids to school next year. Are we going to hear today from the Treasurer at least a forecast of when real wages growth will return?

Assistant Minister for Trade and Manufacturing: What you're going to see, Tom, we're not going to muck around with people here and try and sloganeer our way out of this issue. Upward pressure on wages, downward pressure on inflation, that is the only answer. What the previous lot would have done –

Journalist: But a timeline.

Assistant Minister for Trade and Manufacturing: Remember what the previous lot would have done. They said no wage growth was the design feature of their model of the economy. So right here –

Journalist: That was quite a while ago.

Assistant Minister for Trade and Manufacturing: Right now, when –

Journalist: That was Mathias Cormann about eight years ago.

Assistant Minister for Trade and Manufacturing: Yeah, when inflation was rising the last lot would have been all about downward pressure on wages. Now you're right to say there are challenges for families and for workers right now as costs go up and inevitably the Reserve Bank signalling interest rates to go up as well. The only thing that we can do in an environment where inflation is, you know, hovering around the 6s and 7s and, you know, the projection that Jim's going to talk about will be about inflation getting worse before it gets better –

Journalist: But what about that projection on wages? Nobody has more information at their fingertips than Jim Chalmers. Will he give a prediction to families on when they can get real wage growth again?

Assistant Minister for Trade and Manufacturing: I don't think that he'll be talking about months ahead on that issue. There will be –

Journalist: What does that mean? Years?

Assistant Minister for Trade and Manufacturing: We'll wait to see what it is that he says about that issue. But remember–

Journalist: But beyond a year essentially is what you're saying?

Assistant Minister for Trade and Manufacturing: – the Reserve Bank has projected real wage growth many times over the course of the last decade. It's been elusive real wage growth. But there are going to have to be –

Journalist: But there has been real wage growth –

Assistant Minister for Trade and Manufacturing: There are going to have to be medium-term –

Journalist: There has been real wage growth before the past term I think for every year except one under the Coalition. There has actually been wage growth.

Assistant Minister for Trade and Manufacturing: What we have to do is deal with the changes that we need to make in the bargaining system, deal with the changes that we need to make lifting productivity. And, of course, one of the differences between us and the last government is we're determined to do that together with the business community and the trade union movement and civil society. And that is one of the biggest changes in not just tone, but it will deliver real changes in the what. You know, what it is that we're going to deliver that's going to lift real wages and put downward pressure on inflation and start, finally, to lift productivity in Australian workplaces.

Journalist: You've been spruiking PACER Plus – for those playing at home, the Pacific Agreement on Closer Economic Relations – more members, more countries getting on board. Is it a key part of the influence battle with China in the region – we're actually a part of this, they're an outsider?

Assistant Minister for Trade and Manufacturing: Well, all of the focus in trade is, you know, often on the big picture agreements. You know, the India agreement, the UK agreement that will be coming through the parliament in the last part of this year. Don Farrell as the Trade Minister is focused very closely on the EU FTA. Negotiations will be travelling through the rest of this year and, of course, on the Indo-Pacific Economic Framework Agreement.

These regional agreements, smaller agreements with Pacific nations, are a really important development and economic tool. And you're right – lifting the resilience and capability of these economies does mean that we're protecting sovereignty in the Pacific. It does mean that it does have a regional security dimension to it, of course.

Journalist: Tim Ayres, got to leave it there. Thank you.

Assistant Minister for Trade and Manufacturing: Good on you, Tom.