Treasurer ‘delusional’ on inflation and jobs

Federal Treasurer Jim Chalmers at Parliament House in Canberra. Picture: NCA NewsWire / Martin Ollman

Denial isn’t just a river in Egypt. The Treasurer’s comments this morning that Australia is enjoying a “rare trifecta” when it comes to inflation, wages and jobs is borderline delusional. More concerning for his Labor colleagues it’s politically deaf.

I doubt too many Australians struggling under the multitude of cost of living pressures right now wants to hear triumphant soundings from the Treasurer. Much less when doing so is sketchy analysis at best. Inflation remains above the Reserve Bank target range, meaning that the only way interest rates come down soon is if the economy crashes. High inflation is sticky and domestic factors are the primary reason. It is higher than in countless like for like developed countries around the world.

Yes unemployment is low which is a good thing. It’s been low in Australia for a very long time. That’s because of labour shortages which will only get worse as immigration gets cut, which the government is doing to ameliorate the housing crisis it hasn’t solved despite bold pre election promises.

Wages have only gone up in certain industries, and even then often at a rate below inflation, meaning that for many Australians real wages continue to decline. But even for those whose wages have improved ever so slightly, that’s a sugar hit in the midst of a long-term decline in real wages. As UNSW business school professor of economics Richard Holden says:

“The legacy effects of inflation loom large and the cost of living crisis hasn’t gone away. By the time we get back to target inflation, prices will be about 20 per cent higher than what they were when we emerged from the pandemic.”

Twenty per cent higher! No wonder people are struggling with the cost of living, which includes rising energy prices when Labor promised to bring them down if elected. Oh, and we’re currently in a per capita recession which would also be a technical recession if immigration rates weren’t sky high at the moment.

So there you have it, Jim Chalmers should be more careful when patting himself on the back for Australia’s economic “rare trifecta”.

Throw in the fact that his broken promise on stage three tax cuts will see millions more Australians enter the top marginal tax bracket in the years ahead, and if you’re trying to survive the current economic woes the last thing you want to hear is the musing of a triumphant treasurer.

Not when the need for tax reform continues to grow, as a timid political class refuses to go anywhere near there. Nor when the tax mix between the commonwealth and the states is broken, but federation reform is also off the table.

I have my own trifecta that needs highlighting: weak politicians more focused on spin than substance, coupled with a profound disregard for keeping political promises. If only that trifecta was rare.

Peter van Onselen is Winthrop Professor of Politics and Public Policy at The University of Western Australia.