Anthony Albanese’s rate cut dream undermined by Labor jobs boom

Treasurer Jim Chalmers says no other government has ‘overseen the creation of a million new jobs in a single parliamentary term’ after ABS data revealed the unemployment rate remained steady at 4.1 per cent. Picture: Martin Ollman / NewsWire

Anthony Albanese’s chances of holding on to majority government have become even slimmer, with economists pessimistic about a pre-election rate cut amid booming growth in public service jobs and government spending.

While the Prime Minister and Jim Chalmers crowed about one million jobs being created under Labor, the tight labour market risks undermining the RBA’s aim to sustainably return inflation to its 2-3 per cent target band.

RBA governor Michele Bullock last year said the jobless rate must rise to about 4.5 per cent to rein in inflation. Central banks across the globe have started cutting rates in response to weaker labour markets and faster falling inflation.

In typical circumstances, lower unemployment and more jobs would be a massive boost for an incumbent government but with households struggling to pay bills and businesses shutting their doors under pressure from a prolonged cost-of-living crisis, federal and state Labor governments stand accused of fuelling inflation via higher spending and swelling bureaucracies, which are distorting employment numbers.

At a time when voters are increasingly sceptical about the federal government’s cost-of-living relief measures, pressure is building on Albanese and Chalmers to deliver tangible support beyond Australian Competition & Consumer Commission reviews and thought bubbles.

Expectations that Albanese could skip the government’s scheduled March budget and call an election earlier than May were formed on the basis the RBA would cut the 4.35 per cent cash rate at its February meeting.

Confronting sustained cost-of-living and housing crises, Albanese and Peter Dutton will be challenged by voters to put forward pre-election economic policies outlining how their parties will lower inflation, lift productivity, create jobs and turbocharge growth.

As the government’s economic messaging flounders, the Opposition Leader and Treasury spokesman Angus Taylor are working towards unveiling key planks of the Coalition’s economic manifesto by December.

With punters seeking inspiration and help, it is in the interest of Dutton and Taylor to put forward an economic blueprint that promises major reforms to combat structural spending pressures and put more money in the pockets of workers.

The Albanese government, which has flagged more cost-of-living supports ahead of its mid-year budget update, is under pressure to be more courageous and honest about new sweeping economic reforms that don’t bake in new layers of red tape and damaging taxes such as those proposed by the Greens.

A rate cut is no panacea for Albanese but it would help Labor make the argument to voters that there is light at the end of the tunnel.