Angus Taylor sounds alarm on high inflation and low growth

Angus Taylor says growth for 2023-24 will fall well short of the government’s budget forecast of 1.75 per cent, arguing the RBA and Treasury now had different views on the economic outlook.

Shadow Treasurer Angus Taylor says economic growth in 2023-24 will fall well short of the government’s budget forecast of 1.75 per cent. Picture: NewsWire/Martin Ollman

Angus Taylor says economic growth in 2023-24 will fall well short of the government’s budget forecast of 1.75 per cent while inflation will stay higher for longer, as Labor accuses Peter Dutton of a secret plan to slash spending and cut support for society’s most ­vulnerable.

Ahead of the return of parliament this week, the political contest over the economy has intensified, with opposition Treasury spokesman Mr Taylor saying the Reserve Bank and Treasury were now projecting different views about the economic outlook and were at odds about the impact of the May budget.

He said GDP would need to lift by more than 1 per cent in the three months to June for the budget’s annual growth forecast of 1.75 per cent to be achieved, but this would not happen.

He warned that the nation was facing a period of high inflation coupled with low growth.

In an opinion piece for The Australian, Mr Taylor says Labor’s spending is fuelling the problem.

“Since coming to power, Labor has added $315bn of spending – over $30,000 per household. In two years alone, spending grows by 16 per cent, double the pace of the economy,” he writes.

Labor on Monday will accuse the Coalition of harbouring secret plans to cut spending to relieve inflationary pressures, with Jim Chalmers calling on the Opposition Leader to “come clean with Australians about where the cuts will come from”.

“When he was a minister, we saw savage cuts to Medicare. And if he gets the chance, we know he’ll do exactly the same thing again,” the Treasurer said.

Mr Taylor said the RBA had made clear a rate hike was “absolutely on the cards” and that “compared to peer countries, we are at the back of the back in beating ­inflation.”

He said to meet the budget’s 1.75 per cent annual average growth forecast for 2023-24, the economy would need to grow by 1.1 per cent in the June quarter. “Growth in the final June quarter would have to be above 1 per cent, which simply won’t happen according to the RBA.”

He said the RBA was factoring in economic growth of just 0.2 per cent in the June quarter to meet its own forecast of 1.4 per cent annual average growth over the 2023-24 year.

“The RBA forecasts anaemic growth of just 0.2 per cent in the June quarter ... intensifying the household recession with no GDP per capita growth for six quarters,” he said. “That means more pain for households as they work extra hours, dig deep into their savings and cut back on spending. “How has government got it so wrong?”

Mr Taylor said after considering the May budget, the RBA’s forecasts for growth and inflation were now more out of sync with those of the Treasury. “During budget week, the Treasurer dismissed the RBA’s annual inflation forecasts, which were higher than Treasury’s 3.5 per cent,” he said.

“The difference, he said, was his budget. But just a few months later the actual figure proved to be much worse at 3.8 per cent.”

Federal Treasurer Jim Chalmers. Picture: NewsWire/Dan Peled

Dr Chalmers hit back at the criticism, telling The Australian Mr Taylor “wants higher interest rates and higher inflation so no one notices he has no policies or credibility”.

Labor says the $315bn in extra spending cited by the Coalition includes indexation for some of Australia’s most vulnerable, including for the Age Pension and other income support payments.

Finance Minister Katy Gallagher said “these calls for huge Liberal cuts to spending should send a shiver up the spine of ­anyone on an Age Pension or anyone who relies on the PBS to ­access their medicine.”

Dr Chalmers’s budget strategy was aimed at developing a broader growth plan by focusing on attracting private investment and developing clean energy opportunities, but Mr Taylor said Australia was “losing the economic battle on two fronts – persistent homegrown inflation and an economy grinding to a halt.”

AMP chief economist Shane Oliver said growth was “becoming weaker since both the Reserve and Treasury assessed things back in May … GDP has been softer but inflation still hasn’t gone down. Maybe there was less spare capacity in the economy than we originally thought.”