By Shane Wright
Of Australia’s 41 federal treasurers, Ted Theodore was the unluckiest.
Theodore was a member of Jim Scullin’s Labor government that came to power at the election held on October 12, 1929. A fortnight later, the Black Tuesday crash wiped almost 13 per cent off Wall Street and the Great Depression was on its way.
Australia’s unluckiest treasurer, Ted Theodore, faced enormous economic challenges. Jim Chalmers problems are almost as serious.Credit: Staff photographer
The Australian economy was already in recession. Black Tuesday just ensured the new government and its new treasurer faced the harshest of all baptisms.
Jim Chalmers may think he’s got a tough situation facing him right now, but it’s not at Theodore levels.
Wednesday’s inflation figures, showing prices climbing at a 21-year-high rate of 6.1 per cent, were bad. The underlying measures of inflation, both running above 4 per cent, were even worse as they confirmed price pressures are broad and wide.
Everything from the cost of looking after your dog to the olive oil splashed on your expensive lettuce is growing at record or near-record levels.
Motorists know the price of petrol has jumped a third over the past 12 months. The same motorists are feeling the biggest rise in vehicle maintenance costs since the introduction of the GST.
For a government that argued during the recent election campaign that the cost of everything is going up except people’s wages, the figures confirmed its message while they also confirmed the problems in dealing with a substantial political and economic issue.
The Reserve Bank is doing its bit. Next week, it will add another half percentage point to the official cash rate, taking it back to where it was in early 2016.
Theodore recognised early that the Great Depression required a change in economic thinking. He wanted to extend credit to farmers and small businesses as a way to boost economic activity to keep the economy ticking over.
A conservative Senate blocked the idea. Labor fell apart and the policy agenda of an economically orthodox Joe Lyons contributed to an unemployment rate that nudged 30 per cent.
Chalmers’ challenges don’t go to the very nature of economics as the Great Depression did.
But he, and the new government, have to find a way to deal with the clear inflationary pressures in the economy. Some of those are being driven by events beyond Chalmers’ control, such as the war in Ukraine and China’s zero-tolerance approach to coronavirus.
But some of Australia’s inflation rate is home-grown. A jobless rate of 3.5 per cent, low interest rates and plenty of government stimulus has the economy running fast enough to be blowing steam.
The two capital cities that got through COVID in best shape, Perth and Brisbane, have the highest inflation rates (7.3 per cent and 7.4 per cent respectively).
Unlike Theodore, Chalmers has to find a way to reduce government spending while tailoring the spending it will undertake into productivity-enhancing areas.
Theodore’s troubles in dealing with the Great Depression contributed to him losing his seat at the 1931 election. Until this year, he was the only treasurer to lose his seat at an election.
Chalmers has to balance the government’s agenda with the new economic reality.
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