Inflation Not Coming From the Kremlin, but From Canberra: Shadow Treasurer

New money at the Royal Australian Mint in Canberra, Australia on April 22, 2005 Mark Nolan/Getty Images

Shadow Treasurer Angus Taylor says the federal government needs to stop making excuses for Australia’s inflation crisis and get on with the job of stopping it.

In his Budget Reply speech, Taylor said the Albanese government’s budget would worsen the current economic situation.

“This is the crisis government has to deal with now,” Taylor said at the National Press Club on May 17.

“Hardworking families are climbing a mountain day in and day out to pay the bills and to support their children. A typical family paying off their home is $25,000 a year worse off than they were a year ago. Hit hard by higher mortgage costs, taxes, energy bills, and other rising costs.”

Currently, Australia’s inflation rate is one of the highest among major developed economies at 6.6 percent—higher than the United Kingdom (5.7 percent), Canada (4.4 percent), and the United States (4.93 percent). It is lower than the Euro Zone, however, which sits at seven percent.

Opposition Treasurer Angus Taylor delivers his budget reply speech at The National Press Club in Canberra, Australia, on Nov. 2, 2022. Martin Ollman/Getty Images

Taylor accused the government of undermining the Reserve Bank—which has tried to control inflation through interest rate rises—by bolstering spending with an extra $185 billion worth of new commitments.

“Inflation now is coming from Canberra, not the Kremlin, and it’s Canberra’s problem to solve,” he said referring to Labor’s argument that rising fuel costs from the Ukrainian conflict are driving inflation.

Federal Treasurer Jim Chalmers has argued that the cost-of-living measures rolled out in the budget were targeted and affordable, taking pressure off household budgets with limited impact on inflation.

“Inflation is still unacceptably high, and it will stay higher than we want it to for longer than we want it to,” Chalmers said.

“But there is growing evidence that inflation is now around its peak and will begin to moderate in 2023. Plenty of the factors influencing inflation and interest rates are outside the government’s control—like the war in Ukraine, the volatility in global supply chains, and the independent decisions of the central bank.”

Economists Sceptical About Labor’s Inflation Claims

Financial experts are also debating the inflationary impact of the budget, with some arguing that the government’s claims are wrong.

Chris Richardson from Rich Insights said in a Twitter thread that the federal government had taken a popular approach to the budget which did nothing but rearrange where inflationary pressures hit.

Meanwhile, Market Economics Managing Director Stephen Koukoulas said on the Fear and Greed podcast that the budget would not fight inflation.

“There was an increase of about $20 billion in what we might term cost-of-living pressures. You’ve got to remember that the Australian economy expansion is going to be about $2.7 trillion,” he said.

“OK, $20 billion is still a lot of money that’s been put into the economy that year, but it isn’t enough to have a material change on the inflation pressures.”

Commonwealth Bank chief economist Stephen Halmarick told AAP that while the budget surplus in 2022/23 represents a fiscal contraction that is helpful in moderating the inflation running through the economy, the move back to a deficit in the following year does not continue the trend.

“On balance, we have not changed our inflation forecasts and continue to see a return to inflation within the two to three percent target by mid‑2024,” he said reported AAP.

Taylor said that in his own electorate of Goulburn, residents had told him they believed the budget proved the government was not listening to the average Australian.

“This budget divides Australia into the worthy few and they’ve got that forgotten, including small business, middle-income families, mortgage holders, farmers, truckies regional communities, and many others,” he said.

“Less inflation is good for all Australians. For every single one of us. Rather than dividing the country, lower inflation brings the country together.”