Treasurer Dr Jim Chalmers has reacted to the one piece of advice worth taking from the International Monetary Fund, which said he should cut back on his government’s promise to spend $30 billion a year to take the pressure off demand and therefore inflation, which in turn means interest rates don’t have to keep on rising.
But he shouldn’t be telling just his Labor colleagues in Canberra that this needs to be done to kill inflation. Dr Chalmers needs to stick it to all the big promising state government treasurers as well. These were the ones the IMF criticised for planning to spend too much when we’re already having trouble getting inflation to fall.
Dr Chalmers and his colleagues need to be more serious about the implications of these 12-interest rate rises and what the 13th (expected tomorrow on Cup Day) might do to family budgets, spending for the economy and confidence for both consumers and business. If RBA Governor Michele Bullock makes one false move on rates, we could end up in a recession, and she will be blamed.
The Australian public and media love to stick it to public officials who fail in their job, especially when it leads to unnecessary hardship for ordinary Aussies. Thankfully, Ms Bullock is qualified to do this job. Now she has to have the courage to make the right decision.
The media are wanting to use comments by Dr Jim that suggested that inflation’s recent spike wasn’t a “material rise” in inflation, so rates don’t have to increase. This implies Ms Bullock needs the courage to oppose her Government boss — Dr Jim. The RBA Governor has told a Senate committee that a “material rise” would be a reason to raise rates, but the Treasurer and others think the recent petrol-price driven rise is more temporary.
So, do I. But I also think the mortgage cliff is still coming, which is going to be a big help for the Governor and her quest to slay the inflation dragon.
If forced to bet, I’d punt that the RBA will raise on Cup Day, but here’s why I think they should wait another month or two:
This country’s treasurers should have the courage to break promises on spending that would add to inflation and drive potentially millions of households into a home loan repayment jam that could throw us all into a recession. And Ms. Bullock also has to have the courage to stare down the media and those economists who are calling for a rate rise.
I know these economists and I’ve been reporting and interviewing the views of these people for decades. Along with past RBA governors, not all of them are good callers when it comes to rate rises and cuts.
I hope Ms. Bullock is courageous enough to say “No” to a rate rise tomorrow. I also hope our first female governor becomes the first great interest rate manipulator because I can tell you, as an economics commentator and someone who has had loans, I think her predecessors have been close to hopeless!