ACCI Westpac doorstop at Parliament House
Transcript: 16 June 2026
Pat Bustamante:
Well, the ACCI Westpac survey shows exactly how difficult the policy background is for policymakers today. So on the one hand, we're seeing activity stall. So we saw employment intentions, investment intentions, and activity all fall in the June quarter, but at the same time we're seeing cost pressures remain elevated and expectations of future cost pressures are also high amongst the manufacturing sector. So that's a predicament we're in and I guess the economy, our view is that economy's going to slide further on the back of what we've seen overseas. And I guess the only way to rectify this is to get productivity growth, kind of reigniting productivity growth across the economy. And that's what the government should focus on supply side measures, boost productivity and support growth without necessarily leading to more inflation.
David Alexander:
Thanks, Pat. Yeah. David Alexander, Chief of Policy and Advocacy at Australian Chamber of Commerce and Industry. So what this survey shows is a deterioration in business conditions in manufacturing and also a steep decline in confidence. We're seeing two factors at play here chiefly. One is cost pressures, a lot coming through from the Persian Gulf crisis with fuel freight, supply chain inputs. You're also seeing the impacts of the Reserve Bank's interest rate increases over recent months. So both of those are feeding through and impacting directly on business conditions and investment intentions and confidence. So we would hope that the government takes into account the serious challenges that are confronting the business sector as it's looking at changing the tax system to put further taxes on investment in business. Thank you.
Journalist:
On the two factors that you mentioned there, one of them being fuel, do you think that the government should extend the fuel excise past the end of the month?
David Alexander:
So the government introduced the excise (cut) in March as well as a cut in the road user charge. And those measures have been effective in reducing the cost to consumers and businesses. Since the peak of the price problem, prices have come down a fair way. We think there's still room for the government to consider some sort of extension of the road user charge as it's a key underlying factor in freight costs across Australia.
Journalist:
So just the road user charge though, not the fuel excise?
David Alexander:
The government should consider as it's leading up what the outlook is for fuel prices as we see the agreement struck in the Persian Gulf and whether shipping's going to flow. Our hope would be the agreement is struck, the ships start to flow, that it's downward pressure on prices through the supply chain. That will come right through to the bowser at Australian pumps.
Journalist:
So you hope that there won't be a need for it, but how do you think the government should play this? Can they afford to wait and see?
David Alexander:
Well, it's going to have to consider how this is going to play out over the next few weeks and that is a very unstable situation. If prices look like they're coming down, there's less of a case for an extension for the fuel excise cut, but if instability continues and resumes, then obviously they need to look at it in a new light.
Journalist:
But you think there's a stronger case for the road user charge?
David Alexander:
There's a stronger case for the road user charge as a targeted measure, specifically for freight to keep costs down and that goes through to consumers as well.
Journalist:
We've spoken so much about the Middle East conflict having a long economic tail. Considering where things are at at the moment and even if all goes well with the signing and that it sticks, what do the next few months look like for Aussie businesses?
David Alexander:
Quite challenging. We're heartened by the Persian Gulf deal that seems to have been struck and we hope that that leads to reduction in fuel costs, energy costs that will flow through. That should be a good development. There are some other things going on. On July one we've got wage costs are going to go up in advance of inflation. That was a decision of the Fair Work Commission just recently. We've got payday super challenges coming in, which will impact on a number of small businesses. We potentially have this capital gains tax measure coming in and that in itself, if it's enacted, will weigh on business intentions and investment. So we're concerned about those challenges along with everything else, but the fuel development is very heartening.
Journalist:
Pat, obviously the Reserve Bank is meeting today. What do you think the Reserve Bank will do today and then what do you think it'll do in the future?
Pat Bustamante:
Yeah. So our view is that today they will hold. So after increasing rates three times this year, we think that it's a kind of pause and wait month. It's not a statement of monetary update month as well. So in August we'll get an update set of forecasts where they'll put together what we've been seeing is a weaker growth in the economy, a bit more loosening in the labour market. So they'll put those forecasts together and they'll have implications for inflation and rates going forward. So in terms of where we think rates will go, we still think there's a risk of further hikes one or two and that's not on the back of domestic pressures, it's on the back of what we're seeing in terms of imported inflation. So we're still expecting even with the truce, we're still expecting oil prices to remain elevated to the end of 2027.
As you said, it's got a long tail. So our forecast advice is returning to where they were pre-conflict by the end of 2027. So that's just going to increase pressures across the economy as well. So we think that that could potentially feed into inflation expectations becoming unanchored add to it, I guess the Fair Work Commission, the award increase of 4.75 per cent this year. That was a touch stronger than what we were expecting as well. So that could potentially be inflationary as well. So just given those considerations, we think there's that risk that they have to go further in August and September, but it'd be based on those kind of, as I said, importing inflation mainly.
Journalist:
You're somewhat of an outlier. A lot of the other banks are thinking that the next move will be a cut prior to not until next year. When do you think you'd start seeing the rates come down?
Pat Bustamante:
We are an outlier and that's because I guess most of the banks are reactive to the weak kind of points we've seen on the economy, like the economy is quite weak. Our concern is that we've seen kind of price pressures through the pipeline. That's what our ACCI Westpac survey shows today and that's why there's a risk that we have a few more hikes. In terms of when rates are going to come down, we think that the Reserve Bank will take a cautious approach and remain on hold throughout most of 2027. And that's when we're expecting by the end of 2027 for underlying inflation to be coming down heading towards the midpoint of the Reserve target and we're expecting cuts in 2028. So it's a long kind of whole period we're expecting at the moment.
Journalist:
And how does the fuel excise play into your rate expectations?
Pat Bustamante:
So at the moment, all our forecasts are based on assumption that the cut ends end in June, so from 1 July if fuel excise rate applies. So if there is an extension of the cut, we think it's a reasonable policy for the government to actually announce. So we know that we're a net energy exporter, so we know that the higher commodity prices are actually improving our terms of trade and government revenue. So how can the government spend that or use that? And a way to do that is by extending this excise cut. So we actually think it's a reasonable policy and that will feed into inflation forecasts and at the margins, what do we see the RBA doing because that's going to reduce that import of inflation. So potentially we'll revisit that call about the future rate price.
Journalist:
When you say you think it's a reasonable policy, do you mean you think it's reasonable to extend it?
Pat Bustamante:
That's right. Yes. Yep.
Journalist:
How much longer do you think it should be extended for?
Pat Bustamante:
Well, it really depends on what the forecast and what we see. We see prices of oil going over the next three months or so. But I guess as a way to provide a bit of support and as it bridges over to the other side of a conflict where prices begin to stabilise and normalise, I think very much is something that's kind of reasonable at this stage. As I said, this energy commodity shock is actually a positive for the broader economy because of the terms of trade and we've seen that in government revenue. As a way of redistributing some of that revenue, we don't see it as a bad policy, but it needs to be kind of a temporary and not kind of ongoing and given prices remain elevated, that's something that we think it's a reasonable policy at this point.
Journalist:
Yeah. And just to clarify, was it reasonable to extend for another... when you said three months, you mean reasonable to extend for another three months to help businesses through the....
Pat Bustamante:
That's right. Still elevated prices coming down, still a lot of that compared to where they were pre-conflict.
Journalist:
Great. That's all I need. Thank you very much guys.