No treasurer wants to be That Guy – the politician who rails against wage stagnation in an election campaign only to find himself at the dispatch box in the House of Representatives a couple of months later, telling voters inflation hasn’t yet peaked and real wages won’t actually increase for at least another 18 months.
But Jim Chalmers found himself in that position on Thursday when he delivered the first ministerial statement of the 47th parliament. Inflation would peak at close to 8% in the December quarter before slowly moderating. Because it would take until 2024 for inflation to return to the Reserve Bank of Australia’s target range, real wages would not start growing again until 2023-24.
High inflation and a darkening global outlook would also dampen economic growth. The revised forecasts shaved half a percentage point from growth in the last financial year, this one, and the next one.
On the plus side, that trajectory looked like a soft landing – a cyclical slowdown that avoids a recession. But the budget was tricky. Spending on necessary programs was up, and higher inflation meant government payments would probably be $30bn higher over the forward estimates. The Morrison government had also bequeathed black holes – “hidden” cost blowouts in under-resourced programs.
Given everybody already knows consumer prices and borrowing costs are going up, and the budget is coming up in October, some voters may wonder why all the political foregrounding? A few thoughts in response to that question.
We are in a rebalancing point in the political cycle. These periods are fascinating because they don’t come around all that often. The old opposition, having won the election, is either remembering, or learning, how to be a government, and the old government is learning how to be an opposition.
We are hearing a lot from Chalmers at the moment because events demand it, and because he’s learning how to be a treasurer. The fortysomething Queenslander doesn’t have the option of taking himself off-stage and practising somewhere in private. He has to learn how to do this job in front of us.
When he was last in government, Chalmers was in the backroom, advising a treasurer managing the fallout from the global financial crisis. That was invaluable experience, but offering counsel and writing lines is different to delivering them.
Like all of his predecessors in the portfolio, Chalmers brings his own personal and professional attributes to the job. His immediate predecessor, Josh Frydenberg – another staffer who transited to frontman – set great store on networked ubiquity, charm and message discipline.
Chalmers, a confident communicator with a pedagogical inclination, leans on storytelling. His style of explanatory economics is clearly influenced by Labor’s most successful postwar period in government – the Hawke-Keating project. The maxim of that era was respect voters enough to tell them what’s going on; tell them why things are hard, or why they need to change, and then they might walk with you on the twisting path to sunny uplands.
If the revised forecasts are correct, the upswing will come just as Labor prepares to fight the next election. But getting there requires navigating difficult cross currents now. This week’s Guardian Essential poll suggested people’s patience battling a protracted cost of living storm won’t be infinite.
Understanding the imperative of getting a grip on both the substance and the storytelling, Chalmers used this week’s economic statement as a dry run for the budget.
He says the trying conditions we are all battling at the moment are attributable to two things: events outside Australia’s control, and the serial hopelessness of the Morrison government.
All new governments blame their opponents for any bad news. The Coalition was still blaming Labor for things in their ninth year of office, which tells you the Liberal and National parties pursue legacy assassination with focus and vigour.
They are generally much better at it than Labor. Labor tends to have a swing, and then wander off and focus on its own program, so it will be interesting to see whether this new government has sharpened the brutal politics of blame shifting.
In any case, there’s a more important question – is Chalmers’ central charge of dereliction by the Morrison government a fair one?
The answer is both absolutely, and not entirely.
The Morrison government was the worst government I’ve covered, largely because of the hollowness of the enterprise. It wasn’t tethered by an organising philosophy or values. It had scant interest in pursuing any national reform project that might encumber weaponised partisanship. The Liberals were also araldited to the Nationals, a post-governance party riven by personality cults and vicious factionalism.
But Scott Morrison did have a good year as prime minister: 2020. Significant fiscal support was required to preserve lives and livelihoods, and minimise the risks of labour market scarring. Instead of being ideological or parsimonious on principle, as some Liberals would have been, Frydenberg and Morrison pinned their ears back, and spent the money. Not all the interventions were perfect, but lives, businesses and jobs were saved.
That’s one (certainly not all) of the reasons why we’ve got some inflation and a whopping deficit now. But Chalmers has a tendency to blur the imperfect but necessary action in a crisis with all the institutionalised “rorts and waste” – the Coalition’s hard-wired habit of shovelling buckets of money out the door to shore up its re-election prospects in marginal seats.
So the current blame-shift isn’t entirely fair. But the political objective is simple. In hard times, fortify your positions. If you can convict your opponents in the court of public opinion, you have a prospect of lengthening your own runway.
The new government is clearly taking out political insurance as it walks the narrow path of trying to subdue inflation without catapulting the economy into recession.
Separate to this, but related. The Reserve Bank is trekking alongside the government, trying to deliver the forecast soft landing. Anthony Albanese decided last week to publicly counsel the bank against “overreaching” with interest rate rises to subdue inflation. This intervention was highly unusual, given Australia’s central bank is supposed to be independent.
The overreach musing could have been a rookie error. But political strategy seems more likely on the balance of probabilities. In the event the hoped-for soft landing is harder than expected, apportioning blame will be an inevitable part of the wash-up.
There will be a serious reckoning: who stuffed up, when, and why. Albanese hanging a lantern over potential overreach by the central bank seeds the zeitgeist. The prime minister is prompting voters: if there’s a miscalculation, understand the bank is here, making decisions, as well as the government.
Chalmers’ methodology was so obvious that even Angus Taylor, the new shadow treasurer, tumbled to it. In response, Taylor said it was all very well for the new treasurer to be painting a picture and telling a story, but what the country needed was a plan.
Stirring stuff, and Taylor has a valid point. A picture is different to a plan.
But Taylor criticising anyone for lacking a plan is the stuff of standup comedy.
A good part of the reason centre-right progressive voters turned their back on the Coalition on 21 May was because Taylor, then climate and energy minister, had no coherent plan to manage the climate crisis or the transition to low emissions.
Taylor had a non-sequitur, “technology, not taxes” – a demonstrable nonsense given people’s taxes paid for the technology. No plan. No serious mechanism to drive abatement in the economy. A 2050 target that the government declined to legislate, because legislating anything would have blown up the Coalition.
So, memo to Peter Dutton.
If Taylor is your messenger, I strongly suspect the battle is already lost.
