Chalmers has made a big, bold gamble on inflation which risks the living standards of millions, while Dutton’s rhetoric is bigger than the reality on immigration.
Already a subscriber?Treasurer Jim Chalmers’ third federal budget this week demonstrates what a slippery slope it is for a government to have no real fiscal rules.
The Albanese government envisages a bigger role for government in the net-zero energy transition and manufacturing, via subsidies for solar panels, green hydrogen and critical minerals such as lithium, nickel and cobalt that are used to make electric vehicles and wind turbines. “The direct effect is to soften inflation via the associated subsidies and lower indexation of some other prices the following year,” she said.“But there’s an indirect effect; the relief provided to households may spill over into extra spending that could see inflation take longer to moderate.”
The underlying budget deficit over five years is forecast to be a cumulative $113 billion, while the all encompassing but under-discussed headline deficit that includes “below the line” investment spending will tally up to $193 billion by 2027-28. Economist Saul Eslake says: “I’m not sure that inflation will come down as quickly as the government is forecasting, but I don’t think what’s in the budget is enough to make inflation go up – which is what I think would be needed to prompt the RBA to raise rates.”Before the May 2022 election, treasurer Frydenberg was convinced there was no chance of an interest rate rise, only months later to be later caught out by a surprise jump in inflation and an unavoidable pre-election rate rise.
But Dutton’s migration pitch is largely “smoke and mirrors”, former senior immigration official Abul Rizvi says.Most of the post-pandemic catchup surge of almost one million net migrants who arrived in Australia in the past two years came via the “temporary” stream, which is very difficult to cap. Dutton’s focus is on the reducing the “permanent” migration from 185,000 a year to 140,000, before gradually raising it.
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