Anthony Albanese and Jim Chalmers are being led into a fight over the economy that they didn’t want to have. It is one in which there are no winners other than the Opposition.
The federal government and the central bank now appear to be singing from different hymn sheets.
Michele Bullock may have made no new friends with her suggestion that consumer demand for haircuts and dentistry was now driving inflation.
This has invited mockery and ridicule and a re-enforcement of the public view that the central bank is operating in a universe parallel and distant to the one everybody else inhabits.
But it is the underlying point of what she is suggesting that can’t be ignored.
It has significant political implications for the Albanese government.
Bullock’s assessment is that inflation has now firmly shifted to being a homegrown problem, driven by aggregate demand.
It was now broadbased, home grown and persistent, she says.
This is now at odds with the Treasurer’s storyline that still seeks to pin prices on a global dynamic and what could now be considered ‘historical cause’.
Even Albanese on Thursday morning in response to Bullock’s assessment, repeated the mantra that inflation was a “global phenomenon”.
This was already becoming a difficult argument to sustain before the RBA’s re-posturing, considering inflation is coming down rapidly everywhere else but here.
And if it were in fact true, the inflation presumably wouldn’t be as bad here.
In her latest comments on the problem, most notably an address to the Australian Business Economists network in Sydney on Wednesday night, Bullock has belled the cat on what the central bank now warns will be a far more protected period of pain for borrowers.
This is kryptonite for Chalmers.
While being at odds with the central bank may have worked to a point during the demonisation of Phil Lowe, at some point the government was always going to run out of villains.
They can no longer blame the RBA considering Chalmers appointed the new governor.
Australians have already taken the biggest hit to disposable income among any advanced economy.
It is now at the back of the pack on the inflation fight. This must now reflect on the government.
Bullock is simply being honest in her calculation.
In the process she has evaporated Albanese and Chalmers’ narrative.
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