Former Treasury secretary Ken Henry has been involved in putting together more budgets than most, and while he can understand the clamour to bring down inflation, he has a different view to most commentators on what role the budget should play.
There aren't many economists willing to depart from the line that Tuesday's budget must tighten the belt on spending and be "contractionary" to prevent another hike in interest rates.The former Treasury secretary has been involved in putting together more budgets than most, for both sides of politics. He also sat on the Reserve Bank board for a decade while in that role.
Not necessarily. It's worth looking at what the governor said. Clearly the Reserve Bank is more worried about inflation than it was a few months ago. Its updated forecasts reflect that. There's no denying the shift."We believe we have rates at the right level to return inflation to the target range next year," she said on Tuesday.
Both measures featured in last year's budget, along with more money for JobSeeker and the single parent payment. Still, the budget will forecast real household incomes, which have been declining for the past two years, to finally grow by 3.5 per cent next financial year as inflation eases and tax cuts flow.While Anthony Albanese says we're in a "race for jobs" with other countries offering big government subsidies and can't afford to be "left behind", Productivity Commissioner Danielle Wood isn't sure it's a race we should even be in.
Despite the best efforts of Chalmers and Anthony Albanese to explain their thinking, however, many prominent economists remain unconvinced. And we can now add Ken Henry to that list. "The people who are going to have to pay for these subsidies are the same young workers who are going to have to, at some stage, bring the budget back into surplus," he says.Unsurprisingly, the author of the Henry Tax Review — which made recommendations 14 years ago that mostly remain on the shelf — would prefer to see a government prepared to take on serious reform, rather than the "incrementalism" that's plagued politics for the past 20 years.
Inflation Ken Henry RBA Reserve Bank Rates Treasurer Jim Chalmers Cost Of Living
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