Jim Chalmers admits households aren’t sharing the joy in his beautiful set of numbers.
The Treasurer boasts that he has spared the nation a recession through fiscal intervention and is now fulfilling his pledge to pop the inflation bubble before Christmas.
Yet he knows the government can’t hide behind selective national economic numbers as heroic claims to economic management when to many, it is meaningless and potentially affronting.
Chalmers admitted as much in question time on Monday, with an acknowledgment of the intellectual chasm evolving between Canberra and most everybody else. “Despite good progress we are making in the national numbers, we know that doesn’t automatically translate into how people are feeling or faring in the economy,” he said.
This is a significant admission.
It demonstrates that at least the Treasurer has a grasp of the primary political problem, if not the economic reality, that the Albanese government is facing ahead of the election.
His fear must now be that the legacy he will be remembered for may not be the two budget surpluses he delivered and the state-sponsored reduction in headline inflation.
Chalmers’s acknowledgment is a product of the prolonged pain households are feeling.
It is an appreciation of the fact that if the government doesn’t get its language right on all this, it will be remembered for presiding over the longest-running fall in GDP per capita and household wealth since the 1950s.
It’s now a Dickensian dilemma. There is the Canberra narrative and the lived experience. Chalmers’s story is the only one Labor can tell, politically. The economy is still growing, inflation is coming down.
The story of households is told through another set of numbers. The longest run of negative GDP growth on record, living standards in unprecedented decline. But are household numbers significant?
“Of course they are,” says economist Saul Eslake. “Real household disposable income is a tangible measure of people’s material living standards and its why all the opinion polls say that cost of living is the top issue.
“GDP per capita may not be as salient as disposable income but since household disposable income is generated by GDP, the two are very closely linked. It’s an indicator the economy is performing poorly.”
This is a storm that has been in the making for some time. The problem for Chalmers is that Labor now owns it.
Eslake makes a point rarely conceded by either side of politics.
“Even prior to Covid when we were boasting about 30 years of economic growth without having had recession, a lot of what Australia was reporting as above-average growth was from above-average population growth,” he says. “In the 20 years to 2019, Australia’s population was growing by 1.6 per cent a year whereas the OECD average was 0.6 per cent, so for all that period our GDP per capita growth was actually below the OECD average.
“The fact we are now experiencing negative GDP per capita growth is an extension of a trend that was happening well before Covid but has become exacerbated by the downturn in economic growth around the world, prompted by the timing of monetary policy to deal with inflation.”
The public policy consequences of this are obvious, for both sides of politics.
So far, Chalmers has probably succeeded in deflecting total blame from the government, but this is largely because the Coalition has failed to convince enough people that it is all the government’s fault.
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