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A
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B
I'm Jacqueline Maley and you're listening to Inside Politics from the Age and the Sydney Morning Herald. This week we're going to talk about the enormous global volatility the government is dealing with, courtesy of the war on Iran and whether or not we need to be worried about things like our fuel supplies, amongst many other things, like the interest rate rise that the Reserve bank handed down this week. I am joined by my usual podcast pal, our chief political correspondent, Paul Sakal. Paul Paul welcome from Canberra.
- [01:00]
C
Morning, Jack.
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B
PAUL British Prime Minister Harold Macmillan liked to say that events were the thing most likely to perturb prime ministers and rock governments. And this week the Albanese government is dealing with a few of those. Let's start with the Iran war. The strategic objectives of the war are still very unclear from the US side, but the effects of it are very evident on Australia as well as the rest of the world. The Strait of Hormuz is effectively closed for business and oil prices have gone up. At the time of recording, they're hovering about $100 a barrel US, maybe a bit above. And in Australia that means higher petrol prices, higher diesel prices and warnings of flow in effects for the price of food because of the supply of fertiliser which might be threatened. What is the government doing to deal with this potential crisis?
- [01:52]
C
Paul yeah, well, it's a good point on events knocking governments around. This is the second event in the space of a few months that's really jolted this government. After Bondi in December really upended their summer planning and their preparation for the budget. Just when they moved on from that, they've been struck by a huge international event that has again caused reevaluation of their plans and priorities and timings on things. The last two weeks has been a really intense period for the Cabinet. There's been National Security Committee meetings of Cabinet nearly daily and the main response from the government has been some pretty speedy changes to our fuel infrastructure. So the first decision was to release about 20% from memory of our fuel reserves, which do not meet international standards but are still quite significant, we've never tapped into them before. And so that was an attempt to calm down the sense of panic in the community to say there is a stockpile, it is being pushed out into the regions we see on Thursday morning. The ACCC is now taking action against all the major retailers because of the lack of supply and increase in price in the early days of this crisis. And the second thing the government did was reduce the sulphur limits that are allowed to be sold in fuel in Australia, which allows dirtier fuel, which we'd previously blocked, to come into the country to also increase supply. And after about a couple of weeks, the Prime Minister decided that a national Cabinet meeting was required. Since the conflict began a fortnight ago, my government has been working to protect Australians from the effects of the Middle east war. Today the Commonwealth has appointed Anthea Harris, who joins me here as the Fuel Supply Task Force Coordinator to support coordination across governments and sectors. Supply chains are will be appointed to ensure that not just fuel, but chemicals and plastics and fertilisers which could have serious effects on the construction, food, medical sectors in coming weeks if this conflict plays out. To try and get really quick coordination between states, industries, peak bodies in a similar way that we saw during the COVID pandemic. And some of the lessons there on speedy responses have been enacted in the last couple of weeks.
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B
I love a czar. I love the appointment of a czar. We haven't had any czars appointed in Australia, I don't think ever, certainly not in my living memory, but you know, it's time. The coalition has criticised the Prime Minister and his Energy Minister, Chris Poland, for not responding fast enough to the problem, being blindsided or maybe not taking the problem seriously. Chris Bowen's been very much at pains to reassure people that at the moment it's not a supply problem, it's a demand problem. So people are basically panicking and stockpiling petrol and diesel where they don't need to. Do you think the criticism from coalition is fair, that this is blindsided and they're a bit on the back foot with this?
- [04:54]
C
Yeah, I think if you look at the coalition attack, there's not a huge amount of detail on what measures the government has taken that they disagree with or policies that the coalition thinks the government should have proceeded with that labor has not themselves done. It's a kind of vibes based argument that the government was slow to take this seriously and the basis for that claim is that in the first couple of days of the last sit in week in Parliament, which was last week on Monday and Tuesday, you saw a few labor ministers, Chris Bowen being one, who were emphasising the right wing conspiratorial element of the community sentiment, which is that chiefly being put by one nation, which was that fuel was not actually entering Australia. So you saw Tim Ayers in the Senate and Chris Bowen in the lower house and in public comments from various ministers dismissing this idea that there was no fuel coming into Australia. I think one of the labor members in the upper house called the opposition tinfoil hat wearers for pushing this claim and they're right to say that claim is wrong. Fuel has been coming into the country and the supply problem has not hit yet. But because of the panic in the community and the huge increase in demand, there were outages and shortages in certain parts of regional Australia and in some outer metropolitan areas as well. So there was a problem that the community could see with their eyes when they rocked up to a servo and it took a few days for the government to meet the community where it was. I think there's a fair argument to that effect to just acknowledge that yes, while supply is still coming in, there was a problem and the problem could get worse. So I think that initial pugilistic, maybe tone deaf posture from the government allowed the opposition this talking point that labor was too focused on the cities, lacked touch with regional and outer suburban voters and was not serious about an issue that was in part caused by a long running concern about Australia's stockpiles, which was, which have not been boosted by either labor or Liberal governments.
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B
Yeah, so I want to ask you about that in the, in, in a minute. I mean, I guess I, I feel this responsibility as well and you know, in the media that although we're reporting on, we need to report on accurately. And as you say, there is no supply problem at the moment and there's no reason for people to be stockpiling. So you don't want to sort of foment panic. But at the same time, yeah, it's an issue and it doesn't look like it's going anywhere. It's impossible to see an end to this war at this point. It might come next week. It might really not. Questions are being asked about Australia's resilience capability. So that is kind of, you know, from an economic standpoint that means like how much oil we have stockpiled, our ability to provide food for ourselves, the supply chains get disrupted, basically our ability to be self sufficient as a nation if global trade and just global cooperation more generally were to break down. And this is something that people on the sort of the right wing have been talking about for quite a while, people like Andrew Hastie about having sort of industrial sovereignty. And some government ministers are now saying that the former Liberal government under Scott Morrison did a really bad job at this, really bad job at resilience planning. And then of course the coalition is saying, well the Albanese government doesn't seem to have a plan for it either. So can we sift through all of that blaming to what is the truth?
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C
Well, on the specific point of the fuel reserves which have been below international standards for a long time, it's a bipartisan failing. And Chris Bowen has made the point this year that Angus Taylor, when he was energy minister faced calls to increase the stockpile. Bill shorten had a policy in the 2019 election, one of the many bill shorten policies that never came to life, to drastically increase the fuel stock. The coalition at the time opposed that policy and said it would cost between $10 and $20 billion. So again, this is one of those policies where in a time of absolute crisis it becomes apparent how necessary it is. But when you're out of crisis, you look at that price tag and we're in a tight fiscal position and you think is it really worth it? There were two interesting interventions I thought on Wednesday from Labor ministers on this question of national resilience. In the morning the Prime Minister at a speech, I think it was in Melbourne at a car dealers association said that the hawk Keating reforms, you know, which so many commentators and more old school politicians yearn for, were driven by a sense that Australia needed to open up to the world, that we were too insular, that the shackles needed to be taken off the Australian economy. It was a time of economic liberalism, free markets, Thatcher, Reagan. The Prime Minister said that productivity and economic security questions at this moment required different solutions. He said we're not in the Hawke and Keating era.
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B
Well, just the downside risks of open markets and global trade are really showing themselves as that global order. I mean you need, it's like any relationship, you need trust and you need reliability for those systems to run. And trust and reliability on the international stage is breaking down before our eyes, it seems.
- [10:02]
C
Yeah, and I'll just on that point just mention Tim Ayres, the Industry Minister who's a former unionist, spoke at a conference in Melbourne as well on Wednesday night and said that this really three decade long push for efficiency which you saw exemplified in Australia over many decades by the Productivity Commission, regularly suggesting that subsidies to industries like the car industry were not worthy, that, you know, the production of Australian metals and chemicals and fertilisers and all these other things, because they're more expensive in Australia than they are in China and other places are not worthy of continuation. He said that that type of politics is not fit for purpose. That industry policy in an old school sense that we saw, you know, pre Hawken Keating, was now back in vogue because there was, in Eyre's view, a growing realisation that Australian industry is also critical for national security. So there's a tight change and you'll still have economists say that that money's not worth spending, so the tension won't go away. But there's a change in thinking here and as you say, it's also put forward by liberals, including Andrew Hastie, who are not old school, free market liberals.
- [11:11]
B
Yeah, I just want to pivot to the home front because we've got some action here too. On Tuesday, the Reserve bank delivered pretty bad news to a lot of people when it put up the cash rate to 4.1 and that's an interest rate rise that all the major banks said they would pass on. It's bad news for anyone with a mortgage, obviously, but it's also bad news for the government because there is persistent criticism that inflation is running high because the government's spending too much public money and basically pumping the economy full of too much money that it can't work through because of capacity constraints. And the RBA Governor Michelle Bullock also didn't rule out the prospect of recession. I mean, the headlines all sort of said that she warned of the risk of recession. I didn't quite see it as that, but she basically conceded that it might happen and they would deal with it if it did. What did Treasurer Jim Chalmers have to say after that Reserve bank decision, which was a bit of a sort of cream pie in his face?
- [12:04]
C
Yeah, yeah, I think you're right. On the reading of Bullock, she didn't explicitly go out to warn of a recession. She was answering a question and she kind of said it's not in her control, which it isn't. Well, at least not fully. Jim Chalmers is trying to prepare for what is his biggest budget as treasurer. It's. I think he's fourth.
- [12:25]
B
Yeah. Which defies the numbers because they sort of. They gave us an extra budget in there.
- [12:30]
C
Yeah, that's right. There's more budgets than there are years of this government. That's right. And this, this rate Rise comes at a critical time. Chalmers is trying to lay the groundwork for a big tax reform budget. He is looking at doing negative gearing, capital gains tax changes, potentially changes to trusts. They haven't landed on which formulation or combination of these changes they'll put. But the ERC is debating them as we speak. And if you look at the last few weeks as well as the, including the rate rise, there's a war on inflation might tick above 5% if you look at the most serious treasury forecast that Chalmers released on Thursday. So there's a new, much more precarious economic environment that Anthony Albanese is confronting, a more fractious electorate, a dampening of the, of the already not very enthusiastic mood among consumers. And so Chalmers is laying the groundwork for a big reform budget where he wants to try and rein in spending which he's been accused of letting run rampant over the last four years. And he also wants to do some major changes around intergenerational equity and tax. The Prime Minister is famously pretty cautious about putting big changes to the electorate. If there's a lower inflation environment, no war going on, you might assume that's a more palatable time to put some big changes to the electorate to make the case. But Chalmers on Sunday made a really interesting comment. He said the new international environment, the prospect of higher rates means that only gives us more impetus to act. We need to make savings, we need to make big changes to get the economy fit for purpose. So effectively the message from Chalmers to the PM is don't let all this scare you off. Let this drive an even stronger reform appetite.
- [14:18]
B
Yeah, so that, I mean that's really interesting because as you say, it's kind of counterintuitive when everything is so crazy globally. You might think, well look, we just won't change the settings very much. But Chalmers is basically, I'm not going to waste this crisis. I'm going to use it to, and also to push through these reforms that I want. I just wonder, I mean so much of the pre budget reporting and all these speeches that they roll out like Chalmers has got an important pre budget speech he's giving today on Thursday as we record how much of it is sort of like messaging. Well, so it's all messaging, but we might also call that government spin. We might also say that, you know, Jim Chalmers, it's very much in his interest to position himself as someone who's gonna be tough and he's gonna make tough decisions and you know, cut spending because Labor's big economic vul is that they have been spending too much.
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C
Totally. But I think having now embedded this message so firmly in the public mind, that this will be finally a truly frugal budget. Ministers are getting lots of requests knocked back at erc. They say they've never faced a process that's been so restrictive. Having set that argument up, if the government doesn't match up to it, they'll face severe criticism. So you would think that Chalmers is only making these arguments because he knows the path the government is going down, but the extent to which he delivers will only be able to be judged on the day.
- [15:43]
B
Yeah, yeah, it's going to be a really interesting budget in that sense because they're not going to be able to give away many goodies, even the rollbacks in tax cuts that they're going to make. So they'll, you know, be adding to government revenue. If they cut the capital gains tax discount, for example, that's. The coalition's going to come back and say, well, you're just adding to the tax burden of Australians. You're putting up taxes and they're not going to be able to. Yes, we're, you know, we're cutting this tax perk, but we're recycling it back to the broader community through income tax cuts, which is what they've been able to do in the past. I do want to ask you about the coalition. So how is the coalition sort of showing up in all of this? We haven't really checked in on opposition leader Angus Taylor since he won the leadership a few weeks ago. How's he sort of able to cut through with this when there's so much noise? How do you think he's going in his communication?
- [16:33]
C
Well, on his communication, firstly, he spent his first few weeks really in an Abbott style mode of message repetition. He was far more slogan driven than we saw under his predecessor, Susan Lee. And his key message was the Liberal Party is here to restore living standards and protect Australia's way of life. And my top priority as a new leader and James Will is to protect Australians from way of life and to restore their standard of living. The latter being a reference to Islamic extremism, the Isis brides bolstering security settings post Bondi, and the former being a reference to bringing inflation down and growing real living standards. In the last week he's been a little bit, a little bit out of the national debate because he's super focused on the Farah by election. This has not really become a major national talking point yet, but it's occurring on May 9, I believe. And everybody in the Liberal Party knows that it's really, really important that the Liberals have a decent showing there. If they're totally gazumped by one nation, it will be a humiliating exemplification of where the party's at. The Nationals also had a leadership change last week. And on the question of where Taylor goes next, there's a debate going on inside the coalition about the extent to which he leads the opposition's arguments against the government on their handling of the fuel crisis. Some are keen, some in the coalition are keen to turn this into a Covid style. I don't hold a hose moment for Albanese, though. There's clearly no trigger for that yet. But they are keen to put as much pressure on the government for its response as possible, given how long this might drag out for. But Taylor spent the first days of this week in Farah and hasn't really been putting huge pressure on Labour over the fuel issue. But that might ramp up, particularly if we start seeing shortages in key industries and if this drags on for longer and if there's any mistake or opening for the coalition to weaponise.
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B
Yeah, there haven't really been very many sharp attacks. Like, I think they've struggled to get a handle on it. The members of the opposition that I've seen or heard criticising the government, it's in very diffuse terms. It's sort of like, you know, they're not good at handling energy, they're not good at handling the economy, but they haven't actually said, as you made the point earlier, like this is what they should have done that they haven't done. So they're grappling with that a bit. And also, I mean, Farah's interesting, like normally by elections are referendums on the government. Right. And the government's like Labor's sitting this one out, so it's really a referendum on the Liberal Party. And the only polling that I've seen, which was really early from the Australia Institute, was just between. I think it was testing the waters between the Independent candidate, who's sort of like a Community independent, and the One Nation candidate. And I think they had the One Nation candidate nudged slightly ahead. But other people have been saying it's more likely to come down to a competition between the Community Independent and the Liberal candidate. I mean, do you have any skinny on that?
- [19:30]
C
Yeah. The sense among the parties involved is that it's likely to be between the One Nation candidate and the Independent if the Liberal Party candidate can bump up into second or just behind second place. They're expected to have stronger preference flows from the other candidates. I think the, the big concern and unknown about One Nation at this stage, and it will be explained to some extent in the South Australian election, which is on Saturday, is how well they go on preferences. They might have decent primary votes in a number of seats but if they preference, if they only draw, you know, 20, 30, 40% of liberal preferences and not many from other parties, they may fall short in some seats. So it'll be fascinating to see how it plays out. The climate. 300 independent in Farah has been in the field for weeks and weeks longer than anybody else. They've got a lot of money and they're a well known community member. Michelle Millthorpe is her name. The One Nation candidate told our newspaper last week that he's having, you know, tens of thousands of dollars flow in from Toorak and Woollara with people fed up with the Liberals and the libs and gnats look like they were on their heels and pretty late to get into the race, which is a sign of a lack of organisation and decisiveness in those parties at the moment.
- [20:38]
B
Yeah, it's going to be really, really interesting by election even for people who are not usually interested in by elections. Paul, that was fun. There's a lot of anxiety I think in the community about all of this stuff. So, you know, it's important that we put the facts out there and this kind of robust analysis. Thank you very much. I will see you next week.
- [20:58]
C
Thank you. Sorry I didn't have much good news to bring.
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B
Maybe next week. Maybe everything will be much better next week.
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C
One can only hope.
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B
You can read all of our political news on Our website websites, theage.com au or smh.com au Today's episode was produced by Chee Wong. Our executive producer is Tammy Mills. And our podcasts are overseen by Lisa Muxworthy and Tom McKendrick. Before you go, follow Inside Politics and leave a review for us on Apple or Spotify. I'm Jacqueline Maley. Thank you for listening.
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