Ex-PM ScoMo might have made a few mistakes over the pressure period of fires, floods and pandemics but one thing he and the unfairly banished ex-Treasurer Josh Frydenberg can be proud of is that they haven’t set us up for 18% inflation, which the Poms are predicted to endure!

I’m currently in London and this is an unusual time for our UK cousins, with the country in drought, the average household is looking at power bills of £4,266 (or $7,200) and Citi’s economics team are predicting inflation will hit 18% by early next year!

This is a lot higher than the forecast of the Bank of England, which expects consumer price inflation to top out at 13.3% in October, and it follows the July inflation reading of 10.1%, which was a 40-year high.

This takes us back to the 1980s when home loan interest rates in Australia topped out at about 17% that sowed the seeds of the recession of 1990-91. Inflation was a global problem as it is today, and it’s why central banks like our RBA are trying desperately to kill it by being aggressive with interest rates.

The problem with that though, is a whole chunk of the world’s inflation is caused by the Ukraine war, the China lockdowns and the pandemic generally, which played havoc with supply chains. It’s given us higher petrol costs, power bills, car prices and a whole lot more, such as airline tickets!

A lack of workers has also pushed up wage costs, and while those costs are starting to fall, supply bottlenecks are still with us, putting pressure on inflation. “Industry experts are projecting that the global microchip shortage – which has been hampering supply chains in several industries –will not improve before 2023,” the TechRepublic website explains. “Last year, experts projected that there would be some relief in the second half of 2022.”

Of course, the war in Ukraine is hurting energy and food costs, which feed heavily into inflation. These price rises are really hitting the Poms and the country wasn’t helped by the impact of Brexit. “Research published by the UK in a Changing Europe think tank in April found that the extra costs of trade to businesses had led to a 6% rise in food prices (above the expected level) between December 2019 and September 2021,” the New Statesman has reported. And they have sheeted the blame back to the impact of Brexit.

Meanwhile, The Guardian came up with this scary calculation: “In April, Adam Posen, an American economist and former member of the Bank of England's monetary policy committee, said that 80% of the explanation for Britain's higher inflation was bound up with Brexit and its endless complexity. It amounted, he said, to ‘a trade war the UK declared on itself’.”

Economists have explained that by adding new tariffs and non-tariff trade barriers, the British government has slashed purchasing power and available imports, and it has created inflation during the staggered implementation of the Brexit deal.

Those who voted for Brexit probably didn’t factor in the inflation effects of their decision. I guess most countries’ populations fail to comprehend the hidden implications of their votes and the policies that their politicians come up with over time.

So far, our inflation rate, which has to be from the work of ScoMo and Josh, is 6.1%, which is a long way from the UK’s current 10.1% and the predicted rates of 13.3% and 18%!

Our rate is expected to top out at about 7% in October and it could force our cash rate up from the current 1.85% to 2.6% or so. It means there could be another 0.75% worth of rate rises ahead but we will be miles better off than mortgage holders in the UK. “Benjamin Nabarro, the chief UK economist at Citi, said its forecasts had been updated after a 25% and 7% rise in UK gas and electricity prices respectively last week,” The Guardian reported. “Conditions in the gas market worsened on Monday in response to Russian state-owned operator Gazprom announcing unscheduled maintenance on the Nord Stream 1 gas pipeline into Europe.”

But wait, there’s more and it’s scary reading.

The BBC looked at the interest rate implications of this runaway inflation problem over here. “The Bank of England has been raising interest rates since December and earlier this month implemented its largest increase - 0.5% - in 27 years to take borrowing costs to 1.75%,” Jennifer Meierhans & Michael Race reported. “But Citi said it expects the Bank to increase interest rates even higher, to as much as 7%, to control inflation.”

I haven’t made a mistake, Citi is actually predicting rates might have to rise by 7%. If that happens, the Poms will spiral into a heavy recession.

It’s why we should be grateful that, like him or not, ScoMo hasn’t left behind such an inflation mess that we could be worrying about a cash rate higher than 7%.

The worst-case prediction for our cash rate might be as high as 3.5% but few economists think that’s likely.

One final thing needs to be pointed out about the current high global inflation: It can be blamed on a virus emanating out of China that caused the world to go into lockdown and threatened a rerun of the Great Recession until politicians like ScoMo, Josh, Boris Johnson, Donald Trump, Joe Biden, Emmanuel Macron and all other global leaders, including Xi Jinping, used big budget spending and record low interest rates to save businesses and peoples’ jobs.

A majority of people (though not all) largely kept their jobs, saw their house prices rise and now they’re even getting higher wages and demanding to work from home.

They’re also ditching the politicians who were landed with one of the most unenviable jobs imaginable. Leaders like Boris and ScoMo made mistakes but at least in the latter’s case, the economic mess left behind from the pandemic rescue program should be manageable for Albo and Dr Jim Chalmers.

On the other hand, I wouldn’t want to face the job the UK’s next PM (which is likely to be Liz Truss) has to deal with — 18% inflation and rate hikes as high as 7%!

We often think the other person’s grass is greener, well, in the UK, the drought has actually made theirs yellower and no Aussie would want to cut the inflation/interest rate grass the Poms will have to walk on.