Prime Minister Anthony Albanese said that his government has launched several measures to tackle cost of living, but an expert warns that government spending can only help if directed at projects that can generate a positive return.
Graham Young, executive director of the Australian Institute for Progress and pollster, has pulled the government up for overspending as reflected in the latest GDP numbers released by Australian Bureau of Statistics.
“Unfortunately, the current government’s record shows that even when it spends money on assets, it is most likely to direct increased expenditure into activities that destroy wealth rather than creating it, like the Capacity Investment Scheme where the government undertakes to subsidise renewable generation because it is unprofitable without a subsidy,” he told The Epoch Times.
“Figures show that the personal savings we were spending during the last few years are almost exhausted. We need a pause while the economy realigns.”
It comes after Albanese defended the Reserve Bank of Australia’s (RBA) monetary policy strategy from criticism, saying they both had the same objective of lowering inflation.
“We respect the work that they do. They’re in charge of monetary policy. We’re in charge of fiscal policy,” Albanese told reporters on Sept. 6.
“We’ve got a responsibility to our constituents and to the people around Australia ... to understand that people who are under cost-of-living pressure need support,” he said.
Some examples of government support schemes includes tax cuts for middle to low income households, energy bill rebates, cheaper childcare fees, and free TAFE.
“But the other thing that the Commonwealth has done, of course, is to produce two budget surpluses. That makes a difference,” he said.
Persistent Inflation Met With Sustained Interest Rate
RBA Governor Michele Bullock on Sept. 5 said that she does not anticipate reducing interest rates soon due to persistent inflation concerns.The RBA has kept the cash rate at 4.35 percent since December 2023, while other economies have started to cut interest rates after successfully lowering inflation rates.
Labor Treasurer Wayne Swan compared its monetary strategy to “punching itself in the face” and said the bank was prioritising economic dogma over rational decision-making.
“I think the Reserve Bank is putting economic dogma over rational economic decision-making. Hammering households, hammering mums and dads with higher rates, causing a collapse in spending, and driving the economy backwards doesn’t necessarily deal with the principal pushes when it comes to higher inflation,” he told Nine.
Last week, Treasurer Jim Chalmers also said the RBA was “smashing the economy” with high interest rates.
Meanwhile, research from the Centre for Independent Studies (CIS) found that government spending is fuelling inflation and private sector growth has stagnated, signalling a potential structural shift in Australia’s economy.
In a research paper titled “Government Spending and Inflation,” CIS senior fellow Robert Carling argued that current high levels of public demand, even if future growth is constrained, will cause ongoing detrimental economic effects.
