It’s a promising start to a new Labor Government when its chief ‘mean’ man, the state Treasurer, calls on his fellow state bean counters to help the RBA’s Dr Phil Lowe beat inflation by being more economically responsible!

His name is Daniel Mookhey and here’s a politician who must be watched! Luckily for him, his name is a hard one to forget. But what he is calling for from other state treasurers (and by inference from the big kahuna Treasurer Dr Jim Chalmers as well) should make him even more memorable.

If you wanted to be controversial, you could headline this story: “NSW Treasurer bags rivals and supports Dr Phil Lowe.” However, that would be a little too ‘in your face’. But it’s what Dan the real man Treasurer is saying.

The AFR tells us on a day when Mr Mookhey unveils his first State Budget, he says all levels of government must contain spending and wait for it, wages! — to support the RBA’s fight against inflation.

Some might call Dan a hard ‘so and so’. Others would say he’s the right man to get a hard job done right, when an economy is under as much pressure as ours. That pressure applies to all our economies — national, states and territories.

The AFR’s Samantha Hutchison and Michael Read put the guts of Dan’s argument into this simple explanation: “Economists have warned that persistent state budget deficits are stimulating the economy and working against efforts by the RBA to tame inflation, which is running at 7 per cent and not forecast to return to the central bank’s 2 to 3 per cent target band until mid-2025.”

This chart below shows why we need all our governments to quit over-spending and get a hold of their growth in debt.

Mr Mookhey has inherited a state debt that blew out to $80 billion, or 10% of what the state produces (or GDP) because of the pandemic and lockdowns. But now people like him need to play a strategically stingy Scrooge role and select what spending should be sustained and what must be cut. He also must work out who and what needs to be taxed more, so today’s Budget will be a test of how committed the new Treasurer is to his own call for economic responsibility.

Debt repayments are tipped to add $5 billion to the state’s budget and this is a good reason for the new NSW government to get on top of our ballooning debt.

Prominent economist Chris Richardson, who has done the numbers for federal treasurers in the past, has a rule of thumb worked out for bean counters based in Canberra. He calculates that a $6 billion increase in spending results in the RBA raising interest rates by quarter of a percent. And this would work in reverse and applies to state government spending as well.

Why is it so? Well, when governments spend, they pump up demand and this increases prices and inflation, and vice versa.

This is why Dan the new money man of the NSW government could be seen as the rescuer of those praying for no more interest rate rises!