And on Thursday, he said, “There’s no point in pretending these rate hikes don’t hurt, they do and they will.”
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Outlining the latest economic projections (revised from the Treasury’s pre-election figures), Chalmers said Australia’s growth forecast for this financial year had been cut from 3.5 per cent to 3 per cent. For 2023-24, the forecast drops from 2.5% to 2%.
Inflation is now expected to peak at 7.75% in the year to December. It will still be at 5.5 percent by the middle of next year, according to new estimates.
Real wages are forecast to “start growing again in 2023-24”.
Had the Morrison government been re-elected, it would have faced the same difficult prospect. The main drivers of bad economic news are coming from abroad, especially the war in Ukraine and the COVID-19 lockdowns in China. But there are also some domestic factors, such as the pent-up demand for spending after the lockdown.
Faced with a bleak outlook, the government’s messaging strategy is threefold.
First, Chalmers makes a lot of it about wanting to be level with the audience about how tough things are. He talks about trusting the Australian people and uses the word “cope” a lot when describing the economic situation.
Second, to the extent that local factors contribute to the bad news, Labor is placing most of the blame on the former government. He condemns their lack of action on everything from climate change to the proper qualification of the workforce.
Thirdly, the Treasurer maintains the perspective that things will get better in the end, helped by Labour’s electoral policies.
The new government is still on its honeymoon and can therefore ask for goodwill from the community.Credit:Alex Ellinghausen
In political terms, the Albanian government, at least in the short term, is rather better placed to deal with the situation than Scott Morrison would have been.
The new government is still on its honeymoon and can therefore ask for goodwill from the community.
But this can only be temporary. Exploiting the rising cost of living helped Labor win power, but voters are already becoming a little skeptical. This week’s Essential poll reported that four in ten people thought the government was doing a poor job of managing cost of living pressures.
Chalmers’ statement was a warm-up for the October budget. On this, one of his messages was that people should not get carried away when, in the coming weeks, the budget result for 2021-22 reveals a “drastically better” (smaller) deficit than initially expected .
The various factors producing that bit of brilliance wouldn’t last long, he warned. There were other frictions in the budget, including the increased cost (due to higher interest rates) of servicing the debt left by the Coalition.
We’ll be hearing a lot more about all this as the government attacks the former government’s “waste and mistakes” in the budget. The big question will be: how far will the cuts go?
Chalmers has more than one reason to talk about budget pressures. Like treasurers before him, he will be anxious to avoid lawsuits.
Thus, he continues to say that the cut in excise duty on petrol will not be extended. Calls for the relief to last for a few more months will be strong ahead of the September expiry date.
Chalmers’ budget talk is directed at his own colleagues as well as the public. As the budget approaches, the temptation to throw away money will be great. It has already had to bring hundreds of millions to extend the payment of pandemic leave.
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The harsh economic picture that Chalmers paints only underscores the need for urgent action on immigration and training.
The economy desperately needs migrants and this requires improved visa processing and probably active recruitment. Specific skills training is crucial.
These issues will be discussed at the job summit in September. But much of what needs to be done is already clear: it’s about acting as quickly as possible.
For Chalmers, he must feel an element of deja vu. He was a senior member of the then treasurer Wayne Swan during the global financial crisis.
Despite problems with some programs, the Rudd government did well in handling the GFC, during which Australia avoided the recession that hit many countries.
Chalmers was a senior member of the then treasurer Wayne Swan during the global financial crisis.Credit:Fairfax
The economic challenges of the long tail of this pandemic are very different from those of the GFC, and so are the policy prescriptions. At the time, large-scale spending was vital. Now, it’s a matter of recovering the expense.
Being involved in the GFC has provided Chalmers with experience that he can bring to bear on the current situation. He will also remember a healthy political lesson. Even if Australia comes out of next year’s 18 months in good shape, the government can’t expect the community to necessarily be grateful. It wasn’t after the GFC.
Chalmers might then hope that he could sell the message of success better than Labor did all those years ago.
Michelle Grattan is a lecturer at the University of Canberra. This column was first published on The Conversation.
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