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Tomorrow the Reserve Bank will almost certainly increase interest rates yet again.
asserted
Bank → publish → rates
Finding an economist who thinks they won't is hard to do.
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they → find → economist
Yesterday, Deputy PM Richard Marles offered Australians 'light at the end of the tunnel'.
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Marles → offer → tunnel
Let's call it rhetorical hope and nothing more.
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's → let → it
What he failed to offer was a convincing explanation for why his government keeps making the journey so much harder.
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journey → fail → What
Labor wants us to focus on the Middle East, rising fuel prices and the difficult international environment at present.
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us → want → present
Things it can't control.
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it → control → ?
It's wonderfully convenient for a government determined to discuss almost anything except its own contribution to high inflation and rising interest rates.
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It → determine → inflation
Australians deserve better than a selective account of why their living standards are being squeezed.
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standards → deserve → account
The Iran war has made the inflation fight harder, that much is true.
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much → make → ?
But it didn't create the domestic pressures that were already undermining it.
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that → create → it
RBA governor Michele Bullock could hardly have been clearer in July, saying inflation 'was rising and above target even before the recent oil price rises'.
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inflation → say → rises
The RBA had already lifted rates in February.
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RBA → lift → February
The domestic inflation problem therefore preceded this year's Iran war.
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problem → precede → war
The chronology is rather inconvenient for ministers who now reach for the international explanation whenever accountability gets too close to home.
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accountability → reach → home
Reading off the distributed talking points, replete with excuses and inaccuracies, is all that Marles really did.
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Marles → read → that
Labor blames global turmoil for looming rate rise as families brace for more mortgage pain, but Canberra's spending addiction is making the crisis worse
As ministers blame events overseas, Michele Bullock's own words point to a homegrown inflation problem
Nor is the connection between government spending and inflation something that can continue to be ignored.
In March, when asked about public spending, Bullock explained that an increase in government demand adds to overall demand.
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increase → blame → demand
In other words, it stokes inflation.
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it → stoke → inflation
The RBA sets interest rates to bring demand into line with what the economy can supply.
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economy → set → what
Governments can exercise greater restraint themselves, or leave the RBA with more work to do restraining the rest of us via rate hikes.
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Governments → exercise → hikes
Labor has chosen the latter.
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Labor → choose → latter
The government's spending choices therefore have a cost beyond the budget bottom line.
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choices → have → line
When public demand keeps pressure on an economy already short of capacity, borrowers can end up paying through higher interest rates.
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borrowers → keep → rates
Ministers protect their spending priorities while households are forced to abandon theirs.
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households → protect → theirs
AMP chief economist Dr Shane Oliver put the problem bluntly earlier this month: 'This high level of public spending is using up spare capacity in the economy, depressing productivity and contributing to the inflation problem.'
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level → put → problem
Consider the government's own budget figures, which support Oliver's comments.
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which → consider → comments
This financial year it is forecast to reach 26.8 per cent, or nearly $830 billion.
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it → forecast → cent
Labor points to 'savings', including its NDIS reforms, and a forecast decline in spending to 26.2 per cent of GDP by 2029-30.
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Labor → include → 2029
But even that projected destination leaves spending well above pre-pandemic levels.
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destination → project → levels
And does anyone seriously believe forecasts before they actually happen anymore?
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they → believe → forecasts
Overpromising and underdelivering are all too common when it comes to 'savings'.
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it → overpromise → savings
Oliver argued before the budget that bringing federal spending back towards 25 per cent of GDP would help free up capacity and ease inflation.
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bringing → argue → inflation
It hasn't happened, and here we are, with rates about to go up yet again.
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rates → happen → ?
Deputy PM Richard Marles offered Australians 'light at the end of the tunnel'.
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Marles → offer → tunnel
Let's call it rhetorical hope and nothing more
None of this means every public dollar is wasted, or that spending alone explains inflation.
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spending → let → inflation
But it does mean the government can't exempt its own decisions from scrutiny while households absorb the consequences of an economy stretched beyond its capacity.
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households → mean → capacity
Then there is Marles's boast that our economy and budget are better placed than almost anywhere else in the world.
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economy → be → world
This statement was also drawn from Labor's talking points, designed to deflect criticism.
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statement → draw → criticism
Debt is still rising and is now beyond one trillion dollars.
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Debt → rise → dollars
It's also true that our debt trajectory has escalated more quickly than in many of those same nations Marles refers to.
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Marles → escalate → nations
…and 13 more, not listed.
The Aporia
