It is quite extraordinary how both the Treasurer and the Prime Minister insist that black is white when it comes to the inflationary impact of their budget decisions.
They are even trying to deny that our central bank is suing them.
Whether Albo and Jim like it or not, they now own Australia’s high inflation figures and the long period of time until interest rates are likely to eventually come back down.
The pain Australians feel is theirs and will be for the foreseeable future because they have failed to rein in the spending, handouts and tax cuts that are fuelling rising inflation.
The Reserve Bank of Australia (RBA) is beginning to call out Labor’s counterproductive spending with a candour not often seen from central bankers.
Not that you would know that if you only listened to the Prime Minister and the Treasurer. Asked directly about the RBA blaming state and federal government spending for worsening inflation, Anthony Albanese replied: “That’s not what they said.”
Seriously? Let’s explain what the RBA said, shall we? Then we can reassess the veracity of the Prime Minister’s denial.
Explaining why inflation was not coming down and rates remained high, the RBA identified a “stronger outlook for domestic demand, led by public demand.”
Note that the RBA identifies domestic demand as the problem.
Jim Chalmers has been trying to claim that inflation is a global problem when in fact it is falling in other parts of the world but rising in Australia, according to the latest data.
So what is “public demand” and what makes it stronger? First of all, stronger demand is not a good thing.
Greater public demand puts upward pressure on inflation and interest rates.
According to the RBA, “the stronger outlook for public demand reflects continued spending and recent announcements by the federal and state and territory governments.”
The central bank could not be clearer on this point. It makes clear that the problem is excessive spending by state and federal governments.
Albanese and Chalmers hope that the general public will be too stupid to see through their fraudulent scheme. Frankly, it’s becoming insulting.
The Reserve Bank of Australia (RBA) governor also made it abundantly clear at her press conference after the latest board meeting that government decision-making was putting upward pressure on inflation.
“Make no mistake: inflation remains too high and the board remains concerned about the degree of excess demand in the economy,” said Michele Bullock.
Excess demand comes courtesy of government policies: tax cuts, handouts, overspending. Even inflation-supporting wage rises in many professions has been part of the Labour Party mantra.
Bullock said raising fares was seriously considered at the board meeting earlier this month and also noted that fares will not go down for at least another six months.
This is no one’s fault except the Prime Minister and the Treasurer.
Yet, like Monty Python’s Black Knight, Chalmers and Albanese continue to fight on, denying the undeniable and claiming that the high inflation figures (revised upwards and higher than in similar countries abroad) are unrelated to their decision-making.
It’s getting embarrassing to watch.
Anthony Albanese (pictured) says his economic policies are “in lockstep” with those of the Reserve Bank, even though the latter says otherwise.
Although the RBA governor made it explicitly clear that there are domestic factors behind inflation remaining too high, denials continue.
Facts simply don’t matter when it comes to Albo and Chalmers trying to evade the consequences of their political actions.
The Prime Minister even used a media appearance to claim that his government is “hand in hand” with the RBA. Nothing could be further from the truth. His claim is completely ridiculous and everyone should be able to see that by now.
And we all thought Scott Morrison was speaking the truth without thinking.
When the government and the RBA send fiscal and monetary policies in different directions, they are certainly not “arm in arm” as Albo would have us believe.
It’s like an orchestra playing out of sync. It sounds horrible.
Or the driver pressing the brake and the accelerator at the same time. It just doesn’t work.
It is hard to overstate how bad it is for the economy and confidence in our political and policymaking institutions that the RBA and the government cannot agree on what is inflationary and what is not, that their approaches contradict each other, and that the government ignores the central bank’s warnings.
Treasurer Jim Chalmers (pictured) is fuelling inflation with his spending, but won’t admit it.
Simply put, if state and federal government profligacy continues, the RBA may be forced to raise rates when it would rather not, knowing that doing so risks causing the economy to collapse and triggering a recession.
It may be forced to do so because the alternative – letting inflation spiral even further out of control – is even worse.
The current Labor governments at state and federal level do not seem to understand the position they are putting the RBA in with their excessive spending.
The spending, which is partly a result of excess spending caused by the pandemic, is designed to help Australians struggling under cost-of-living pressures.
Albo and Chalmers therefore no doubt think they are being virtuous, but that is only a product of their lack of economic understanding, as a host of economists now complain.
Attempts to spend to help people when inflation is out of control are a mistake. Like it or not, governments cannot buy their way out of times of high inflation.
Reserve Bank Governor Michele Bullock (pictured) has made clear that government spending is keeping inflation too high
When they try, as state and federal governments are now doing, they make a bad situation worse and prolong the pain.
I am cynical enough to believe that Labour governments facing re-election simply don’t care.
They know that short-term inflationary spending goes into people’s pockets before they vote (hopefully buying their support), while the consequences occur afterward.
These consequences are dire and dangerous: they will lead to high inflation for all of us, possibly forcing interest rates up for mortgage holders, and they will also risk a recession and therefore job losses for working people.
But so what?, these selfish politicians probably think… because there is nothing they care about more than keeping power.
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