John Howard warns about nightmare of inflation

John Howard has warned the post-pandemic economic recovery could be threatened by the nightmare of 1970s-style inflation.

Former Prime Minister John Howard. Picture: Britta Campion

John Howard has warned the post-pandemic economic recovery could be threatened by the nightmare of 1970s-style inflation and cannot entrench a legacy of emergency spending measures.

The former Prime Minister has congratulated all Australian governments on handling the economic and health aspects of COVID-19, even endorsing the principle of state lockdowns, but declared that pandemic-induced debt, government spending and trillions in US stimulus spending could create the problem of inflation and interest rate rises.

“The government had to intervene in an emergency but once the emergency is passed then you have to start to wind back the spending,” Mr Howard said on John Anderson’s Conversations podcast.

“This is where there is a forward leading role for the government and we are getting to that stage as the economy improves faster than expected and unemployment is falling faster then expected,” he said.

Mr Howard said the Morrison government has to concentrate on the vaccine roll out but it also has to prepare for new challenges because “there are always more shocks”.

He said a combination of Australia’s trillion dollar debt, the potential for global inflation and a rise in interest rates would be a real problem.

“I am afraid we have been complacent about it. I am not saying it is going to happen tomorrow but if inflation pushes up interest rates it is a problem. You can never assume inflation has been abolished,” he said.

“Inflation can come back.

“In the ’60s they may have thought that there wasn’t an inflation threat but then they found the nightmare in the ’70s which required crushing interest rate levels,” he said.

Click here to watch John Howard on John Anderson’s Conversations podcast.