Labor prepares its long-promised economic outlook after the worst inflation figure in more than two decades
At least the first Question Time of the 47th parliament resolved one question: we’re not about to see a new “elevated tone” or “new era of cooperation”. At least not in this hour or so of each parliamentary sitting day.
The Opposition Leader went in hard early over the government’s long-promised plan to abolish the building industry watchdog (which has had its powers gutted before it can be scrapped altogether). There was a brief attempt by Peter Dutton to link this issue to rising construction costs, but the real motive was darker.
The Opposition Leader wanted to know if the Prime Minister had met any CFMMEU officials accused of “sexual assault, harassment or rape”.
Dutton didn’t name any of the accused individuals and had no evidence to suggest any links to the Prime Minister. He kicked up some dust but had no follow-up. The day one attack fell flat.
Still, the tone was set, and the government responded in kind. Ministers used every opening (including the Dorothy Dixers, which haven’t gone anywhere) to go after their opponents.
A refreshing new chapter of parliamentary standards it was not.
Inflation rate surprises nobody
The Coalition largely avoided the big cost of living news of the day — the 6.1 per cent inflation figure that dropped just a couple of hours earlier. The worst inflation figure in more than two decades.
A figure which mostly covers the Morrison Government’s time in office, but confirms Labor’s talk of fixing real wage growth is a way off from being realised.
The 6.1 per cent annual inflation result took no-one by surprise. Economists, markets, Treasury, and the Reserve Bank all expected a number roughly where it landed. That doesn’t make it any easier to manage.
It will lead to more interest rate rises and, we’re told, the inflation problem will get worse before it gets better.
Since stepping into the role as Treasurer, Jim Chalmers has been gradually dampening expectations of when workers can expect to see some improvement in their standard of living. He’s now conceded the obvious: there won’t be any real wage growth in the “near term”.
So, when might we see some improvement? We should have a better idea today when Chalmers provides updated forecasts as part of his long-promised economic statement to parliament.
He’ll downgrade forecast economic growth by 0.5 per cent for the last financial year, this financial year and the 2023-24 financial year, largely thanks to the global slowdown and higher interest rates taking their toll.
It’s unclear what the new forecast will be for the arrival of elusive real wage growth, but the Treasurer is cautiously predicting it will happen “in this term of parliament” (a forecast Labor will be desperately hoping proves accurate).
How far will Labor go?
While the government does what it can to encourage “sustainable” wage growth, there are limits to its influence on skyrocketing prices. Global factors are largely to blame. That doesn’t mean there’s a shortage of free advice coming Labor’s way.
Notably, most of that advice involves reining in spending, as opposed to the pre-election approach (endorsed by both major parties) of pouring fuel on the fire with “cost of living” cash splashes to somehow bring inflation under control.
With the campaigning done, most now accept that the government should at least be moving in the same direction as the Reserve Bank — withdrawing stimulus from the economy. Even the idea of extending the fuel excise cut (so popular before the election) has few friends now.
So if spending cuts are required, where should the government look? The Greens say Labor should ditch its promise to keep the Stage 3 tax cuts for high-income earners. The Coalition says Labor should ditch its promise to spend more in areas from childcare to rewiring the power grid.
It’s unlikely Labor will take up the suggestions from either its Left or Right flank and breach faith with the electorate.
Instead, it’s looking to cut “rorts and waste”. That will find some savings with presumably little political pain. But Chalmers is clear — the cuts “won’t necessarily end there”.
So how far is he prepared to go? Will the billions thrown at dams, inland rail and other regional infrastructure as part of the net-zero deal with the Nationals face the axe? Will overlapping skills and training programs be cut? Will efficiencies be found within the NDIS? Or is he hinting at only modest budget savings when he keeps using the word “trim”.
David Speers is the host of Insiders, which airs on ABC TV at 9am on Sunday or on iview, and a co-presenter of Q+A on Thursday at 8.30pm.