QED

Such a Team! What Could Possibly Go Wrong?

Up until this point I’ve reserved judgment on the Albanese government, largely out of a lack of real interest in the intellectual squalor of Australian public life but also because the Morrison government buried us under a mountain of debt that I find unpleasant to contemplate. Having caught up with the latest Treasurer’s economic statement, all my worst fears about the Albanese government have been confirmed. They have no serious economic agenda for the country and appear to have learnt nothing from their last term in office.

Labor’s economic plan is a witch’s brew of unfunded social spending, discredited industry policy and billions of dollars in subsidies for economic parasites in the renewables industry, all overlaid with a veneer of unseemly class warfare rhetoric. If implemented, Labor’s plan will damage productivity and wages growth, and the worst part of it all is they’re either too economically illiterate, too paid-off or too dishonest to care.

Treasurer Dr Jim Chalmers may have a PhD but it’s not in anything that matters and definitely not in economics. As far as I can tell, Chalmers essentially earned his doctorate by haunting the political science faculty at Australian National University and writing an extended hagiography of Paul Keating. Nice work if you can get it. The Treasurer didn’t have much to do with economics or finance in his undergraduate studies either, taking on an arts degree and not bothering to make it respectable by knocking over honours. The bottom line: Chalmers is dangerously unqualified to be Treasurer of the world’s twelfth-largest economy.

Assaying Chalmers statements and comments so far, current economic conditions were sheeted home to a shopping list of external factors. To be sure, there will always be external factors buffeting the economy, the real question is what the government plans to do to improve living standards and moderate the swings in the economic cycle. Not much on that front that was outlined that was credible.

The Treasurer noted that while inflation is high due to global factors, he maintained it has been aggravated by “domestic failures on skills, on energy and on supply chains which just aren’t resilient enough”. It would have been nice if he had bothered to cite any evidence, or quantify the impact of the alleged failures. Yeah, nah, the press will just repeat it uncritically.

While it was encouraging to see the Treasurer able to utter a basic principle of fiscal policy, “governments shouldn’t make it harder for the RBA on the demand side but, more than that, we should be working to address problems on the supply side”, this was followed by the cold, hard mendacity of Labor’s spin doctors.

Chalmers proceeded to deliver a fetid miasma of dishonest green-left talking points from rent‑seekers in the energy sector, and he actually had the audacity to claim the Morrison government had “an objective to keep wages low as a deliberate design feature of the economy” and “deliberately undermine them”. I’m no rusted-on fan of the Morrison government but the arrogance of this statement is breath-taking, presumably informed by trade union advisors. It is also one of dumbest critiques of any former government I’ve ever read.

Statements like these really should be disqualifying Chalmers, certainly from being taken seriously. Hopefully similar remarks will embolden some or other Labor comrade to challenge for the Treasury portfolio in time. Bowen comes to mind, but there is cold comfort in that prospect. Australians just can’t afford policy lightweights at the helm, especially class warriors who repeat vacuous union dogma from the 1950s as if holy writ.

As is common with incoming governments, Treasury have written down the near-term forecasts for growth. These cynical adjustments allow for convenient upward revisions to both growth and revenues when the government updates their budget down the track. Labor can then go out and claim in October that the outlook for the economy has improved and spend the newly forecast budget revenues. I’m not sure how much luck they’ll have with that parlour trick this time around given the US has now officially gone into recession.

As a nation we really need to move past this corrosive political artifice. Economic and budget forecasting should be moved out of Treasury and prepared independently by the Parliamentary Budget Office. Treasury’s massaging of budget numbers for governments has become a sick joke and has badly damaged trust in the institution.

The Treasurer was almost convincing when it came to attacking low-quality infrastructure spending. However, the Finance Minister’s Audit of Rorts and Waste looks more like an excuse to run an extended campaign against the projects commissioned by the former government. To be drip-fed strategically to the media, no doubt. Chalmers provided absolutely no assurance he wouldn’t engage in his own low-quality pork barrelling.

Where are the much-needed institutional reforms that would empower the gatekeepers of infrastructure spending to ensure priority is given to high quality projects? There was no sign of that from Labor. We all know we’re at a point with our governments that we have to take their toys away from them. Major projects shouldn’t be selected by poorly credentialed political operatives in the minister’s office trying buy votes with your dollars by building bridges to nowhere.

While Chalmers promised the government would deliver “the hard decisions” required to shore up the budget, there has been no detail on what those measures might be. There haven’t been many ‘hard decisions’ on display so far, just re-announced commitments of free money for childcare and pharmaceuticals, alongside the intent to see “a decent pay rise for the lowest paid”, most of which will be funded by small and medium-sized businesses through award wages, and wage rises for the disability and aged care sector.

Labor’s promised National Reconstruction Fund looks like a $15 billion slush fund they will hose around the economy while dragging in another $30 billion in capital from the private sector to misallocate on boondoggles and poorly conceived attempts at industry policy.

It’s not clear how any of the elements of Labor’s plan would lift productivity, or wages, but the detail doesn’t matter much these days when the fluffers of the Canberra Press Gallery don’t have basic economic qualifications, or care very much in the rare instance that they do.

In point of fact, most of what has been announced so far will undermine jobs, productivity and wages, and particular attention should be paid here to Labor’s dodgy energy policy. Shamefully, the Liberal Party at the last election ducked out on critiquing RepuTex’s questionable economic modelling of Labor’s Powering Australia plan. The Coalition’s political strategists judged it politically expedient to wave it through, even if it is terrible policy, and then got smashed by the Teal insurgency anyway.

Missing in all of this was any real attempt at fiscal discipline that might have taken upward pressure off interest rates. It’s a real missed opportunity given that the Coalition’s loose fiscal policy is one of the key factors that is leading the Reserve Bank to lift interest rates sooner, and higher, than they would have done otherwise.

So far, what we have seen confirms the Albanese Government doesn’t have a credible economic plan for government and that Chalmers probably isn’t up to the job of Treasurer. Accordingly, it will be interesting to listen for the sound of knives being sharpened and to take note of how Bowen is positioning himself over the coming twelve months. As for the business community, I know it will position itself: bent over and grabbing their ankles.

Burchell Wilson is a consulting economist with Freshwater Economics

13 comments
  • Tony Tea

    Well, there you go. Probably based on Labor barrackers’ previous boosting of Chalmers’ grasp of finance matters, I had always assumed Chalmers had a PhD in economics.

  • brandee

    Surprising to see the name of Chris Bowen as a contender to replace the arts degree treasurer. Presently Bowen speaks claptrap on decarbonising energy.

  • STD

    Tangent! Those leggings of Christopher’s- perchance, could they be Lycra ?.Love the gait!

  • BalancedObservation

    Rather than taking any fiscal action whatsoever against the looming inflation threat Jim Chalmers has decided to simply talk about it and “explain” it to us. He’s even steadfastly refused to cut a cent from Labor’s middle class welfare election handouts ( like child care and home buyer handouts to couples on incomes up to $150,00).

    His main focus seems to be to ensure Labor will not be held accountable if there’s a serious fall out from the threat through inflation getting out of control or a recession brought on by interest rates being raised too high or too fast to combat it.

    And a surprisingly weak Dutton opposition has let him get away with it. I’d expected so much more from Peter Dutton but it seems economics is his blindspot.

    What is needed is for the government to coordinate its fiscal powers with those of the Reserve Bank to lessen the impact of the inflation threat. In the absence of an effective fiscal response interest rates will need to be higher and lifted faster to curb the threat, increasing the risk of recession.

    Leaving all the Jim Chalmer’s gravitas aside what has he done about the threat? Absolutely nothing. He’s left it all to the Reserve Bank.

    He’s told us that it’s been caused by external factors and the last Coalition government’s policies and he’s distanced himself from any interest rate decisions of the Reserve Bank.

    He’s said we’ll need to tighten our belts and at the same time stressing how hard done by most wage earners have been during the Coalition government and deserve a wage increase… but not yet. He’s confirmed income tax cuts to higher income earners will go ahead and real wages for others will unfortunately continue to fall.

    The Chalmers calculated gravitas and the mixed signals will arguably fuel inflationary expectations and wage claims ( there’s evidence of that already) while he takes no fiscal action against the inflation threat.

  • BalancedObservation

    Sorry about the spacing above.. here’s a more readable post:

    Rather than taking any fiscal action whatsoever against the looming inflation threat Jim Chalmers has decided to simply talk about it and “explain” it to us.

    He’s even steadfastly refused to cut a cent from Labor’s middle class welfare election handouts ( like child care and home buyer handouts to couples on incomes up to $150,00).

    His main focus seems to be to ensure Labor will not be held accountable if there’s a serious fall out from the threat through inflation getting out of control or a recession brought on by interest rates being raised too high or too fast to combat it.

    And a surprisingly weak Dutton opposition has let him get away with it. I’d expected so much more from Peter Dutton but it seems economics is his blindspot.

    What is needed is for the government to coordinate its fiscal powers with those of the Reserve Bank to lessen the impact of the inflation threat. In the absence of an effective fiscal response interest rates will need to be higher and lifted faster to curb the threat, increasing the risk of recession.

    Leaving all the Jim Chalmer’s gravitas aside what has he done about the inflation threat?

    Absolutely nothing. He’s left it all to the Reserve Bank.

    He’s told us that it’s been caused by external factors and the last Coalition government’s policies and he’s distanced himself from any interest rate decisions of the Reserve Bank.

    He’s said we’ll need to tighten our belts and at the same time stressing how hard done by most wage earners have been during the Coalition government and deserve a wage increase… but not yet. He’s confirmed income tax cuts to higher income earners will go ahead and real wages for others will unfortunately continue to fall.

    The Chalmers gravitas – calculated to deflect any real accountability on the government to tackle the inflation threat – and the mixed signals will arguably fuel inflationary expectations and wage claims ( there’s evidence of that already) while he takes no effective fiscal action whatsoever against the inflation threat.

  • Daffy

    @BallancedObservation
    Many thanks for the technique of formatting posts!
    _
    On to the Treasurer: ‘nitwit’ springs to mind…this is looking like a re-run of the Whitlam years’ debacle.

  • Paul W

    Mathias Corman said low-wages growth was a feature of the economy and not a failure. The author here has his head in the sand. It was the Liberals who spent every day under Turnbull and Morrison ignoring the people – throwing us into debt with nothing to show for it, failing to confront mass-migration, and spending ever more money on clean energy while removing subsidies for the car industry. I have no expectation that things will change but it would be nice to have faith that the Liberals would at least try.

  • BalancedObservation

    Paul W


    When one hears the narrative – that you’re repeating in these conservative pages – that the Coalition spent big and had nothing to show for it and that they threw us all into debt – one knows Labor’s narrative to avoid accountability to manage the inflation threat has really caught on. It’s already widely accepted in the mainstream media.

    Like all misleading but successful political narratives there is of course truth in the fact that the Coalition left us indebted, just as Labor did before it. But it’s not true that the Coalition had nothing to show for its time in office.

    It’s not true to say that the Coalition were responsible for “throwing us into debt” –
    we were already heavily in debt following Labor’s turbulent time in office. It’s true that we are still far too indebted but there was the matter of the covid threat for the Coalition to manage – probably the greatest potential threat to world economies since the Great Depression.

    Just before Labor took office recently unemployment was at a 48 year low, inflation low and growth good – despite the huge economic shock of covid. So on those key economic criteria it’s hard to conclude that the Coalition had nothing to show for its time in office.

    So why has this narrative Jim Chalmer’s has been promoting caught on so well? Why has he been totally unscathed politically showing absolutely no fiscal restraint at all in the face of a serious inflation threat? Why has he been allowed to simply leave any real action to the Reserve Bank?

    Why has his simply talking about tightening our belts and grandstanding on how bad things worked so well politically for Labor? It’s even worked while Labor has arguably been encouraging wage claims at a time like this by saying workers have been badly treated and deserve increases.

    Look at the polls you’ll know how well it’s working. The Coalition primary vote is now unbelievably lower than at the election.

    Why? Because there’s absolutely no effective opposition on the economy.

    I’d thought Peter Dutton would lead a very strong opposition and hold Labor to account but it looks like he’s well out of his depth on the economic front even though he’s so strong on defence and border security. And the people see it.

    Peter Dutton is rating is at a miserable 25% while Anthony Albanese rides high at a record high approval rating for a new PM. I wouldn’t expect Peter Dutton to be overly popular personally but I’d expect him to effectively hold the opposition to account. He certainly isn’t. And I’d expect the Coalition primary vote to at least hold up to the low level at the election – not fall below it, like it has under Peter Dutton.

    On the face of the woefully poor performance of the new opposition leader so far, expect at least two terms of Labor. No matter how badly Labor performs they are likely to remain in office while Peter Dutton leads the Coalition.

  • Solo

    The fact of the matter is that no matter how bad Labor are, the Libs are really not far behind. No one in Opposition has really said anything to differentiate between Labor and Labor lite.

    Sure the thought of an extended Labor government certainly gets me down, but even if they become totally on the nose with the voting public, the alternative is only fractionally better. Libs certainly haven’t learnt their lessons from their drubbing and yes, Dutton is a disappointment.

    At this rate, bring back Tony Abbott from the wilderness!

  • Paul W

    @ Balanced Observation:
    Tony Abbott ran on a platform of paying back Labour’s debt. But Morrison threw that away. The vast majority of our debt was gained under him and if the only benefit was reducing poverty during covid then I think the standard is very low. For hundreds of billions I would expect more. Inflation was already rising under the Liberals and given that Albanese has been in government for a few months I see no particular reason to let the Liberals off the hook: they gave conservatives nothing for 6 years.

    And workers were mistreated – Mathias Corman explicitly said they were keeping wages low. They lost the election because they deserved to.

  • BalancedObservation

    Solo

    Solo, I understand what you’re saying but the trouble is we only get really good governments when they are held to account by competent oppositions.

    Mediocre or poor governments will be a lot worse with incompetent oppositions. The leader of the opposition plays a critical role in this.

    It may be only early days but we are already seeing how a mediocre small target Labor is getting away with doing absolutely nothing effective about the first serious economic threat it faces because the incompetent Dutton opposition is not holding them to account.

    Jim Chalmers is leaving it all to the Reserve Bank to address the inflation threat by exercising its interest rate powers while he is point blank refusing to use any of the government’s fiscal levers. He’s refusing point blank to cut even a cent off one of Labor’s middle class welfare electioneering promises.

    Because of the Chalmer’s refusal to use any fiscal response to help counter the inflation threat interest rates will have to be higher and lifted faster by the RBA. This significantly increases the risk of miscalculation and increases the possibility of a recession induced by an interest rate over-correction.

    On top of this the government’s messages are poorly thought through and even conflicting. They’re arguably helping to fuel inflationary expectations. Inflationary expectations can play a critical role in driving dangerous levels of inflation.

    Jim Chalmers has been grandstanding about how serious the inflation threat is and its budget implications. This may have been acceptable, if as a result, he was taking some fiscal measures to help tame the inflation threat. But he isn’t. He’s grandstanding seemingly to avoid accountability and blame the Coalition for helping to fuel the inflation threat. The government should be projecting a calm atmosphere of restraint. Even small cuts to programs would help achieve that. But there haven’t been any.

    Worse than that he’s telling wage earners they deserve an increase but can’t have one yet – even though he’s going ahead with tax cuts to higher income earners and didn’t blink in hurrying to support a 5% across-the-board increase to low wage earners. This is all likely to help fuel wage claims. It’s already starting to.

    The last thing we need now is a wages breakout. The irresponsible Chalmer’s rhetoric, a labour shortage, rising living costs and very low unemployment increase the likelihood of a wages breakout.

    Such a breakout would be devastating to everyone in an already risky inflationary environment – including wage earners who even Bill Kelty ( ex ACTU head) warned could wind up chasing their own tails if wage increases helped fuel runaway inflation. In such a situation wage increases would swiftly be more than eroded with runaway inflation.

    On top of all this a flat-footed and incompetent Coalition opposition seems to have allowed Labor to successfully convince the media and the electorate ( if the Coalition’s disastrous new polls are any guide) that the Coalition was partly responsible for the current inflation threat. Once this narrative gets permanently entrenched ( and its nearly at that stage) Labor will avoid accountability no matter how bad inflation turns out to be.

    Therefore there’s no time for a honeymoon period for Peter Dutton. He’s either up to the job or he’s not. He’s been around long enough not to need a honeymoon period if he’s up to the job. Arguably the clear evidence is he’s not.

  • BalancedObservation

    Paul W

    Paul W it looks like you’ve also swallowed the Labor rhetoric that the Coalition helped fuel this current serious inflation threat.

    You aren’t on your own. The mainstream media seems to have swallowed it and probably the electorate as well – if recent polls are any guide. Astoundingly under Peter Dutton the Coalition primary vote is now even lower than it was at the recent disastrous election for the Coalition.

    The Coalition were in office for nine years. During that time there was no serious inflation threat. The threat has come very recently, largely from external forces including the Ukraine war and covid supply chain and Labor shortages. It’s affected most countries in the world. In the US for example the inflation rate is over 9%. In the UK it is over 13%. In Australia it’s 6.1%.

    There’s no evidence the Coalition caused this new inflation threat. Only a short time before they were defeated inflation was low, unemployment was low and growth was good. Debt was and still is too high.

    But even with this serious threat of inflation the Labor government is refusing to cut back on a single cent of even its middle class welfare electioneering promises. It’s leaving all the work to the Reserve Bank. And yet at the same time it blames past Coalition government for inflation.

    This state of affairs – where people like you and arguably the media and electorate have swallowed this narrative blaming the Coalition – was allowed to develop because we currently have no effective opposition in place. This lack of an effective opposition has also meant there’s no pressure on the government to at least temporarily cut back on any of its electioneering promises. It refuses to cut a single cent from any of them.

    As long as Peter Dutton leads the Coalition there’s likely to be a Labor government.

  • Brian Boru

    I have found this article and some comments depressingly accurate.
    .
    The coalition is just not able, not capable, in getting the ball, let alone kicking it. They have painted themselves into a populist inclined corner instead of doing the hard yards of policy development.
    .
    I found unhelpful that part of the article where Burchell mentions Chalmers lack of formal qualifications. As one of a generation who were commonly forced by circumstances to self educate, I look to the evidence put forward in debate, the proponents qualifications are irrelevant in that. In fact to me, such a mention is akin to an ad hominim attack. When that comes from an economist, a discipline when there are multiple and contested strains of theory, it’s a standout.

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