WEBVTT - Australian Treasurer Jim Chalmers Talks Tariffs, Defense Spending

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio News.

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<v Speaker 2>We're just here outside of Durban for the G twenty

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<v Speaker 2>Finance Ministers in the Central Bank meeting that it's been

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<v Speaker 2>going on here for the last couple of days. Wrapping

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<v Speaker 2>up today, hopeful that there will be a bit of

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<v Speaker 2>solidarity and a communicate coming a little bit later. We're

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<v Speaker 2>very pleased to be joined by a guest that Jim Chalmers,

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<v Speaker 2>who is the Treasurer of Australia's come a long way

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<v Speaker 2>for this meeting, so thank you very much for taking

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<v Speaker 2>the time.

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<v Speaker 1>Thanks for the opportunity all of them.

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<v Speaker 2>Yeah, I think we have to stay with the elephant

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<v Speaker 2>in the room. Two weeks away from this Trump deadline.

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<v Speaker 2>What is the status of negotiations between Australia and the

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<v Speaker 2>United States right now?

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<v Speaker 3>Well, Australia has the baseline tariff of ten percent and

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<v Speaker 3>some additional areas like steel in aluminium, copper, pharmaceuticals, and

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<v Speaker 3>so we're engaging with our counterparts in the US like

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<v Speaker 3>almost every other country is in the world. We're pretty

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<v Speaker 3>well placed and we're well prepared to deal with these tariffs.

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<v Speaker 3>The direct impact is relatively manageable. Our bigger concern is

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<v Speaker 3>the impact on global man of all of this uncertainty

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<v Speaker 3>and volatility and unpredictability, which puts global growth and indeed

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<v Speaker 3>global inflation at risk. And so in our modeling, the

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<v Speaker 3>bigger risk comes from the impact on the global economy

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<v Speaker 3>rather than the direct impact.

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<v Speaker 2>OK, because ten percent is basically, as far as we

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<v Speaker 2>can tell, the lowest passible deal. It's effectively what you'll

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<v Speaker 2>have with the United Are you happy with that? And

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<v Speaker 2>does that warrant retaliation or no?

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<v Speaker 3>We've decided to go for resilience in our own economy

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<v Speaker 3>rather than retaliation. You know, the ten percent tariff is

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<v Speaker 3>the lowest of any countries, but we've made it really

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<v Speaker 3>clear that we think the appropriate tariff, consistent without trade

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<v Speaker 3>agreemen is zero. We see these tariffs as self defeating,

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<v Speaker 3>we see them as an act of economic self harm.

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<v Speaker 3>We've made that very clear. Bad for the US economy,

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<v Speaker 3>bad for the global economy, and therefore not good for Australia.

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<v Speaker 2>Do you see any progress passable on stealing aluminum?

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<v Speaker 1>It remains to be seen.

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<v Speaker 3>I mean we've been engaged more or less constantly for

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<v Speaker 3>some months now, whether it's still and aluminium or some

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<v Speaker 3>of the more recent announcements around.

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<v Speaker 1>Copper and pharmaceuticals.

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<v Speaker 3>Our approach to is to engage at every level as

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<v Speaker 3>much as we can to get a better deal for

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<v Speaker 3>our workers and our industries, our exporters, our industry and

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<v Speaker 3>our investors. And that approach will continue to guide us.

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<v Speaker 2>And in terms of the negotiations around pharma, we've for

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<v Speaker 2>two hundred percent as a possible figure from the United States.

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<v Speaker 2>Is the changes to Australia's pharmaceutical benefits scheme? Is that

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<v Speaker 2>something that's on the table because the Trump ad Mistress

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<v Speaker 2>have been very focused on non tariff barriers, that part

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<v Speaker 2>of the conversation.

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<v Speaker 1>Absolutely zero chance. You know, we couldn't be clear.

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<v Speaker 3>Our pharmaceutical benefit scheme is a crucial part of our architecture,

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<v Speaker 3>our policy architecture.

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<v Speaker 1>It's something we're very proud of.

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<v Speaker 3>We've made it really clear that we're not prepared to

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<v Speaker 3>negotiate or diminish or weaken the PBS in order to

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<v Speaker 3>get a deal.

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<v Speaker 1>We've been clear about that from the beginning.

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<v Speaker 3>We're working through the potential consequences of pharmaceuticals being caught

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<v Speaker 3>up in these escalating trade tensions. We do have quite

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<v Speaker 3>a substantial export offering into the US when it comes

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<v Speaker 3>to pharmaceuticals. But how this potential tariff might work. We're

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<v Speaker 3>working through with the industry and with the administration.

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<v Speaker 2>And I'd like to also get your appraisal of the

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<v Speaker 2>evolution of the multilateral kind of co op cooperative system,

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<v Speaker 2>because obviously it's been dealt quite a shark over the

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<v Speaker 2>last couple of months. You set sort of interestingly between

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<v Speaker 2>the nexus of a lot of different sort of spheres

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<v Speaker 2>of influence in terms of the conversations that are happening here,

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<v Speaker 2>how is the G twenty and the sort of larger

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<v Speaker 2>global framework of cooperation dealing with this US situation, and

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<v Speaker 2>what does the sort of potentially further cooperation look like.

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<v Speaker 3>Well, I've been involved in the G twenty in different

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<v Speaker 3>roles for a big chunk of the last two decades,

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<v Speaker 3>and we've been through four economic shocks in that period.

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<v Speaker 3>The one that's the reason this one, the fourth one,

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<v Speaker 3>is different to the first three is that it's primarily

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<v Speaker 3>induced by policy, by decisions.

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<v Speaker 1>Taken around tariffs.

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<v Speaker 3>And so I think what that means for this type

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<v Speaker 3>of multilateral engagement is that people recognize here that at

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<v Speaker 3>a time when there's lots of volatility.

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<v Speaker 1>Uncertainty and unpredictability.

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<v Speaker 3>The best defense against that, the best antidote to that,

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<v Speaker 3>is more engagement, more resilient economies, more robust supply chains,

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<v Speaker 3>more reliable markets for our exports. And so I think

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<v Speaker 3>that's really the color and the context for these discussions.

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<v Speaker 3>And from an Australian point of view, Australia is a

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<v Speaker 3>huge believer in multilateralism. We're a huge beneficiary of free

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<v Speaker 3>and open markets, and so we come to these discussions

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<v Speaker 3>in that light.

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<v Speaker 2>And so concretely, where do you see you kind of

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<v Speaker 2>the most motion sort of being affected that in terms

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<v Speaker 2>of different relationships with countries, ones that you maybe have

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<v Speaker 2>not talked to in the same way in the past, Well,

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<v Speaker 2>have you seen that sort of changing Concretely, I just.

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<v Speaker 3>Think there's a real recognition here that when these tariffs

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<v Speaker 3>and escalating trade tensions, the uncertainty that comes from that,

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<v Speaker 3>but also from conflict in the Middle East, conflict in

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<v Speaker 3>Eastern Europe, whole range of uncertainty.

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<v Speaker 1>I think heartening message from.

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<v Speaker 3>The colleagues here that we've been engaging with these people

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<v Speaker 3>are not retreating into their own corners. They're working out

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<v Speaker 3>how to make our own economies resilient. That's a big

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<v Speaker 3>part of the Australian agenda as well. But we're trying

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<v Speaker 3>to de risk these relationships without the coupling, and I

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<v Speaker 3>think that's a major theme.

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<v Speaker 1>It's a heartening.

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<v Speaker 3>Theme, because the alternative would be to pretend that at

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<v Speaker 3>a time when these trade tensions are escalating and these

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<v Speaker 3>conflicts and important parts of the world, to pretend that

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<v Speaker 3>we can just retreat into our own corners. That again,

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<v Speaker 3>I think would be self defeating. It's certainly not the

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<v Speaker 3>Australian strategy.

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<v Speaker 2>And you mentioned defense as one of these the sort

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<v Speaker 2>of issues has been a huge amount of pressure from

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<v Speaker 2>the United States for allies to spend more on defense.

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<v Speaker 2>You saw that most concretely a NIEDO a couple of

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<v Speaker 2>weeks ago, where you had that boost in pledges for

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<v Speaker 2>three and a half percent effectively of defense. Do you

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<v Speaker 2>think Australia could get to that figure at three and

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<v Speaker 2>a half percent? Do you think that would be appropriate

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<v Speaker 2>to join sort of allies at that level?

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<v Speaker 3>Well, first of all, I mean it is a big

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<v Speaker 3>part of the conversation here, particularly with European friends. You

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<v Speaker 3>know how they will find the three and a half

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<v Speaker 3>percent of GDP and how they'll account for the other

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<v Speaker 3>one and a half percent of GDP for national security

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<v Speaker 3>related spending. For Australia, we are already quite by our standards,

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<v Speaker 3>quite dramatically escalating our defense spending. You know, we're taking

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<v Speaker 3>it from two percent of GDP up to two point

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<v Speaker 3>three at the start of the next decade. That already

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<v Speaker 3>represents tens of billions of dollars in extra investment. It's

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<v Speaker 3>a much higher trajectory than when we came to office

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<v Speaker 3>three years ago. And so we are increasing our defense spending.

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<v Speaker 3>We make those decisions trading them off against all kinds.

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<v Speaker 1>Of other budget priorities.

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<v Speaker 3>But we say to American friends, and we say to

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<v Speaker 3>the world more broadly, we are already increasing our defense

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<v Speaker 3>spending because we think it's important at a time where

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<v Speaker 3>we are seeing this heightened uncertainty in the world.

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<v Speaker 2>And given just sort of the global volatility uncertainty and

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<v Speaker 2>the outlook, how continent about are you of your inflection

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<v Speaker 2>forecas and your growth forecast. How susceptible do you think

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<v Speaker 2>those are to downward revision book.

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<v Speaker 3>There's always an element of uncertainty when it comes to

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<v Speaker 3>forecasting economic outcomes, but especially when you know global markets

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<v Speaker 3>are extremely.

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<v Speaker 1>Volatile right now.

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<v Speaker 3>But one of the things we're very proud of as

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<v Speaker 3>Australians is there's only two countries here at the G

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<v Speaker 3>twenty that last year had continuous economic growth, inflation with

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<v Speaker 3>the two in front of it, and unemployment in the

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<v Speaker 3>low furs. No major advanced economy has been able to

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<v Speaker 3>over the last three years maintain that growth and have

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<v Speaker 3>those inflation and employment outcomes, and so why.

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<v Speaker 1>We're proud of that is we've made very.

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<v Speaker 3>Substantial progress on inflation now sustained progress on inflation. It's

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<v Speaker 3>given our central Bank the confidence to cut rates twice

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<v Speaker 3>already this year. But we've done that without paying for

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<v Speaker 3>it with much higher unemployment. Unemployment is now four point

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<v Speaker 3>three percent, historically low, the lowest average unemployment over the

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<v Speaker 3>last three years for any other government. In the last

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<v Speaker 3>fifty years, we've created one point one million jobs and

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<v Speaker 3>so our labor market's been a source of strength. We

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<v Speaker 3>had a little tick up yesterday in the unemployment data,

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<v Speaker 3>but we've got inflation down without paying for it with

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<v Speaker 3>a big spike in unemployment, and that's something we're.

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<v Speaker 1>Very proud of.

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<v Speaker 2>Well, Jim Cholemas, thank you so much for your time

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<v Speaker 2>here on the sidelines of the G twenty outside of

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<v Speaker 2>Durban and South Africa. Thank you very much so those

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<v Speaker 2>are the thoughts there from the Australian Treasurer. And sort

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<v Speaker 2>of multilateralism in the age of MAGA and the path

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<v Speaker 2>forward here at the G twenty