While I don’t enjoy playing the critic, between a housing shake-up that’s spooked property owners and a profit reporting season that’s hammering retailers, Treasurer Jim Chalmers is racking up more black marks than gold stars this term.
According to my 2GB colleague and breakfast host, Ben Fordham, my nickname is “Positive Pete”, so it doesn’t rest easy with me to be regularly pointing out the negatives that I see with the Albanese Government, and in particular, the work of Jim Chalmers. But at the risk of annoying my friends and clients who are of a more conservative nature, after meeting him a few times I actually like Chalmers, although that doesn’t mean I’m going to praise him, sycophant-style.
On first blush, and especially after he won his PhD by specialising in studying Paul Keating, I was hoping he would’ve had the guts that his idol had, though sometimes it was misused. That said, if you put aside Mr Keathing’s mishandling of interest rates in the late 1980s, along with his RBA Governor, Bernie Fraser, most of his work was brave and enlightened for a Labor politician.
I guess Jim will look at his recent Budget work to whip away the tax benefits that property investors enjoyed as memorable, but he could at least say thank you to all the property investors who delivered rentable homes that once used to be supplied by governments.
Of course, like most entrepreneurial actions of the public sector, those housing commission properties of the past created many social disasters and lots of real estate that few people would ever want to live in. That’s why past governments eventually gave tax incentives for people to borrow to provide homes for tenants. But now Dr Jim and his PM want to portray them as beneficiaries of “landlord welfare”.
I can recall friends of mine who bought unwanted houses in Sydney’s Redfern, which they called “penny dreadfuls”, but because governments made the supply of new homes difficult and expensive, those friends of mine have become rich.
It wasn’t their fault that they got lucky rich, but maybe they deserved it as they provided homes for less well-off people in Redfern, when it wasn’t a trendy inner-city place to live. Oh no, they’re now welfare bludgers who simply followed the tax rules as laid out by our masters in Canberra.
Meanwhile, there must be a lot of taxpayers who were really happy that their homes were more valuable before the Budget but they soon could be 10% poorer. Sure, the gains over the past decade were greater than that potential 10% drop, but when someone invests in a home, paying high interest rates, they give up other activities that might have been nice, life-wise, if they weren’t doing what’s largely seen as the responsible thing of owning a home.
Leaving Jim’s reform of housing aside, which I know some Aussies will see as a good reform, let’s look at the other economic gifts from our probable PM in waiting, if ever Albo resigns.
Clearly, inflation and interest rates will never be seen as the Treasurer’s best work, and reporting season of our biggest companies isn’t indicating that the nation’s number one economic leader has created the best of circumstances for these businesses to create profits. Remember, these organisations create jobs and pay dividends to super funds, so they are important on many economic and social levels.
One week down for reporting season and AMP’s Shane Oliver pointed this out: “So far beats are running above misses, with 33% of results surprising consensus earnings expectations on the upside, but this is less than the norm of 40%, and just 25% have surprised on the downside which is less than the norm of 41%. But it’s early days.”
The smarties who speculate on and calculate company profits think that our 2025-26 earnings growth will be up 12%, but over in the US where the President might be a little crazy, his pro-business inclinations are showing up in their profit reporting.
Here’s Oliver on the Yank’s company showing: “The US earnings reporting season has now seen more than 90% of S&P 500 companies report with around 87% exceeding expectations. The consensus expectation for earnings growth has now risen to 33% year-on-year. After adjusting for one off asset revaluations at Alphabet and Amazon it’s now blown out to 50% year-on-year.”
So, US profits are up 33% or 50%, while ours is up, wait for it, 12%, if we’re lucky.
On Monday, that fantastic retailer JB Hi-Fi reported and lost 10% of its share price and is now down 37% over the past year.
The AFR looked at this result and declared: “There are two important themes tied up in JB Hi-Fi’s results: in fact, they are the two most important themes in the Australian economy.”
The first, is that the work of the RBA and the Treasurer at Budget time has KO’d housing and in turn has cooked retailers’ bottom lines.
And second, the AI boom has escalated the demand for chips and electronic stuff has become dearer, which isn’t good for consumers who are struggling with higher interest rates, petrol prices and rents.
Maybe the time for Dr Jim to play hardball on housing was when the economy was booming and interest rates were falling, not potentially rising.
When you have one of the hardest jobs in the country, such as being Treasurer, if the overall economy is sinking like a stone, you’re the guy who the buck stops with.
The one difference between Keating and Chalmers was that the former understood that while he was always mindful that business leaders and entrepreneurs were very committed to their vested interests, he also knew that they were important for job creation and economic growth, which in turn converted budget deficits into budget surpluses.
As someone who once lectured economics at UNSW, on what I’ve seen, Dr Chalmers is no more than a Pass student when it comes to the challenging subject of economics. So, my report would read: “Jim must try harder and maybe he needs a tutor!”
