Jim Chalmers is blaming Australia’s accelerating inflation on Trump – but voters aren’t buying it
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Jim Chalmers is blaming the latest shocking inflation figures on the worsening Middle East conflict, and he has a point.
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The trouble is, voters aren’t buying what the treasurer is selling.
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The Australian Bureau of Statistics said that the 9.4% jump in fuel costs in September was largely responsible for inflation accelerating from 4% to 4.3%.
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Petrol and diesel prices were on average 24% higher than a year earlier, the data shows.
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We are clearly paying an economic price for Donald Trump’s pointless and damaging war on Iran – and you can’t pin that on the government, whatever your political leanings.
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Then there’s the sudden boom in spending on datacentres, which is pouring money into an economy that is already struggling to deliver the workers and materials needed to build homes and roads.
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Again, this is driven by the global rush by tech companies to put in place the infrastructure to power their artificial intelligence revolution.
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Earlier in the day, Michele Bullock, the RBA’s governor, made the same point: overseas developments were complicating the central bank’s already tough task of bringing inflation all the way back to 2.5%, preferably by the end of next year.
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Taking the lion’s share of the blame for worsening cost of living pressures may not be completely fair, but it is the price of incumbency – as the latest Essential poll showed.
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Nearly a third of voters believe that government spending is the top cause for rising cost of living.
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Only 24% said overseas events like the global oil shock was the main reason, and 19% said it was supermarket price gouging.
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While government spending may not be the main reason that inflation has tracked higher since the middle of the year, it is part of the mix.
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Economists including Chris Richardson, the country’s top budget watcher, have argued that public spending is too high and is not helping in the battle to bring inflation down.
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Government expenditure as a share of the economy is around record highs.
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This is hard to reconcile with Chalmers’ protestations that the government has nothing to do with the latest jump in cost of living, particularly when RBA officials frequently refer to the capacity pressures that existed when the war on Iran started in late February.
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It’s also important to note that the RBA’s preferred measure of underlying inflation – removing the biggest price moves – also lifted from 3.6% to 3.7% in the year to the September quarter.
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Regardless of who or what is to blame, and to what degree, voters are likely to get angrier still next Tuesday when the Reserve Bank surely delivers the year’s fifth interest rate hike.
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In Senate estimates before the latest price statistics were released, Reserve Bank officials confirmed they were more worried about inflation becoming entrenched than they were about rising unemployment, which recently reached a five-year high.
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So it’s hard to see anything but more pain for mortgage holders come Melbourne Cup day. Another rate rise will bring the cash rate to 4.85% – the highest since the GFC.
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If you’re starting to fret about that comparison, Sarah Hunter, the RBA’s chief economist, offered the reassurance that there were no signs the economy was “in or heading into a recession in the near term”.
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Perhaps, but there is no doubt we are heading into more dangerous territory, and the future is looking darker, not brighter.
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Families are approaching Christmas with rates at their highest since 2008, sky-high petrol costs and rising unemployment.
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For many households, it will be a tough summer that will add to an increasingly entrenched pessimism about the future.
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The share of Australians saying they think the country is on the wrong track has been steadily climbing and reached 61%, according to the latest Essential poll.
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The pressure is now on Chalmers to use December’s mid-year budget to somehow change the narrative as the government approaches the third year of this parliamentary term.
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It will be a tough ask, and there are no obvious answers.
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There is, at least, one thing we can agree on. As the treasurer is fond of saying: the Middle East conflict can’t end soon enough.
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