While it’s understandable that Peter Dutton’s nuclear policy announced on Wednesday stole all the political attention this week, what really mattered was what happened before.
Reserve Bank of Australia chief Michele Bullock has criticized Treasurer Jim Chalmers and the way he has tried to characterize the budget.
Bullock did what RBA governors rarely do: he weighed in on what he clearly sees as inappropriate and unhelpful fiscal adjustments by Chalmers and his state colleagues.
For a public official, she didn’t mince words either. Bullock said the path back to low inflation will be a “slow one” and that the way state and federal budgets are spending money was unhelpful.
The path to fixing the economic mess we’re in without causing a recession is “getting narrower and narrower,” he said, adding that “we need a lot to stay on track” to get inflation back to where it needs to be.
RBA Governor Michelle Bullock (pictured) has taken aim at the fiscal management of federal and state treasurers.
Not happy Jim. Treasurer Jim Chalmers (pictured) wasn’t too happy when the RBA governor threw some home truths at him.
Unfortunately, “recent budget results may also have an impact on demand,” he said. Translation: The way Australian governments continue to stimulate the economy with their spending is pointless.
The economic vandalism he warns of is something that is made worse by state government spending. So Chalmers wasn’t being singled out. In fact, he would suggest that the out-of-control spending of some state administrations makes Chalmers look like a fiscal conservative by comparison.
Bullock reserved most of his criticism for state treasurers, not Chalmers. Not that you’d know that from his quick response to being called part of a collective failure.
Chalmers called a late press conference, ostensibly to respond to criticisms being leveled.
“I don’t tell the governor how to do her job and the governor doesn’t tell me how to do my job,” Chalmers spat.
Sorry buddy, but that’s EXACTLY what he did. But only because he believes Chalmers isn’t getting the message.
Furthermore, Chalmers couldn’t even finish his press conference without contradicting his own words about not telling the RBA what to do. Shortly after delivering them, he declared that the RBA’s rate hikes are “already hitting the economy.”
He may not have explicitly told them “what to do,” but he made it clear that the economic challenges are their doing.
Buck passes by the 101 right there, next to one of our top political leaders.
This is not the first time the RBA has issued a warning about the way governments are spending. It’s just a little pointier than usual.
Instead of getting the message, Chalmers chose to fight, disagreeing with the scathing assessment of where things are and the advice given on what to do about it.
To some extent I can understand why. His budget was poorly received by most economists, certainly by those who did not have a partisan or left-wing ideological agenda.
However stinging that criticism may have been, when the RBA governor joins in, there is a risk of much greater political damage. The view that the wheels of the RBA and the Treasury turn in different directions is far from good, not to mention dangerous for the stability of the economy.
Chalmers’ message that he is doing a good and appropriate job of getting inflation back under control with his budget is now in tatters. So is its effectiveness in reducing cost-of-living pressures.
If the RBA raises rates later this year, that could be a decisive political moment ahead of the next federal election.
He must have been very happy when Dutton stood up to announce a nuclear energy policy with a big goal. The distraction was political manna from the blue for the underperforming Treasurer.
To not be eaten by the lion, all you have to do is run faster than the other. Chalmers was last, but after the nuclear announcement he may have overtaken Dutton.
So, can there be something that brings the state of the economy and inflationary problems back to the foreground? Or has Dutton’s new policy stolen all the attention between now and the election?
Australians still care more about their daily financial struggles than any half-baked policy the Opposition has come up with on nuclear energy. But fear campaigns can be effective and the Labor Party is just getting started.
Add to that how difficult it is for opponents to win in a first term, not to mention when selling a far-reaching political agenda, and it’s hard to see how anything can distract from Dutton’s self-inflicted political wound.
All that could do is worsen circumstances for Australians suffering from cost-of-living pressures. An increase in interest rates, for example, could do this. Or the start of a technical recession, although we’re running out of time for that before the election.
So will the next election be at the end of this year or early next year? The government will weigh up what is the best time for them.
Do they want to ‘do Dutton slowly’ by dragging it out until next year, giving them enough time to dismantle their nuclear agenda?
Or does Labor leave early, before the bad economic news gets even worse and before another round of criticism from Bullock, suggesting that Chalmers is simply not up to the role he has been given?
