Matt Canavan: The only thing Australia is not running out of is debt

The reason inflation is up again is because the government cannot seem to control spending, nor improve Australia’s woeful productivity performance, writes Matt Canavan.

Australia’s interest rates are the highest in the developed world, Matt Canavan writes. Picture: Martin Ollman

Australia now has the highest interest rates in the developed world, which is a problem as our government debt approaches $1 trillion, our productivity remains stagnant, and inflation creeps up again.

Our annual interest payments today are $27bn.

We are paying $10bn more each year now compared with during Covid on interest, as interest rates and our debt has increased.

And higher government interest payments will eventually flow through to higher interest rates on mortgages, meaning massive extra costs for families, too.

Mr Canavan says our productivity is down five per cent since the federal election.

One reason that Australian interest rates are on the way up is because inflation is on the way up, and markets are anticipating that the RBA will have to lift interest rates soon.

The reason inflation is up again, is because the government cannot seem to control spending, nor improve Australia’s woeful productivity performance.

The increased spending could have avoided an inflation outbreak if we had lifted Australia’s productivity.

However, our productivity has fallen alongside the decrease in real wages.

Our productivity is down five per cent since the election of the Labor government.

A few months ago, the government seemed to realise that our shocking productivity performance was leading to inflationary pressures.

They convened a productivity summit in Canberra. It now seems that the businesspeople, unionists and economists who attended wasted their time. The government has barely mentioned, or done anything, about productivity since.

Senator Matt Canavan at The Courier-Mail Bush Summit, at The Goods Shed in Toowoomba. Picture: Adam Head

The reason for that is probably that if Labor did look closely at our productivity performance, it would undermine Labor’s net zero agenda.

There are only two sectors of the economy that have recorded a negative productivity performance over the past 20 years, mining and manufacturing. Mining productivity tends to fall in a terms-of-trade boom because miners extract lower grade ores.

But mining productivity is also energy intensive, and it has also been impacted by our shocking 25 per cent fall in energy productivity over the past 20 years.

Energy is not everything in the economy, but it is almost everything.
Our pursuit of a net zero agenda, and its demonisation of fossil fuels, has denied Australian businesses access to affordable and reliable energy.

Net zero has pushed up the cost of everything, hurting families, costing us jobs and unleashing inflation.

In recent years, Australia has got away with a lazy and wasteful approach to our energy needs because the world was awash with capital that helped keep interest rates down.

A big reason for the excess supply of capital was that the Japanese government kept interest rates low. This led to the so-called “carry trade” where investors would borrow cheaply in Yen and lend to Western countries at higher rates.

The new Japanese government seems intent on ending the “carry trade” and thus ending the luxury of us being able to waste our resources.

If we do not wake up soon, and start to run our economy for Australians first, the luck of the lucky country might be about to run out.

Matt Canavan is LNP senator for Queensland