Ahead of next month’s mid-year economic and fiscal outlook (MYEFO), Treasurer Jim Chalmers highlighted that the Australian economy has outperformed many other nations in the face of heightened volatility over the past few years, marked by lower inflation, reduced interest rates, and low unemployment.
The Treasurer also praised the government’s efforts on the cost-of-living front, emphasising that his administration has provided significant and responsible relief while simultaneously repairing the budget, not at the expense of doing so.
“Inflation has more than halved. Underlying inflation is falling, too. Real wages are growing again. The economy is still expanding. A million new jobs have been created, the majority full time,” he said.
“Participation is near record highs; the gender pay gap at a record low. We’ve turned two huge deficits into two substantial surpluses – the first in nearly two decades.
“We’ve found almost $80 billion in savings, banked the majority of revenue upgrades and saved tens of billions of dollars in interest on debt as a result.”
Chalmers added that while the government is pleased with the “very substantial progress in the aggregate numbers”, he understands that this does not necessarily translate to how people are faring on a day-to-day basis.
“We’re not pretending it’s mission accomplished – it isn’t. We are realistic about this, but optimistic, too,” he said.
Pointing to the global challenge of inflation, the Treasurer argued that Australia has outperformed many comparable economies.
“Our inflation peaked lower and later than most developed economies. That means prices have risen less here than in countries like the US, UK and New Zealand. And our services inflation is lower than the UK and US, too,” Chalmers said.
“Interest rates also climbed higher than ours in almost every comparable country, causing worse unemployment, slower job creation, lower growth, or a combination of all three.
“And even though rates are coming down slightly in places like the US, UK and New Zealand, they are still higher than ours.”
He also revealed that Treasury’s MYEFO growth forecasts will show that the slow growth of the Australian economy is set to continue in the near-term, however, “any growth at all in these circumstances is welcome given many other countries have gone backwards”.
“Treasury is expecting a gradual recovery in the economy driven by rising real incomes thanks to our cost-of-living relief, jobs growth and progress bringing inflation down,” Chalmers said.
“We’ve already seen a modest recovery in consumer confidence, with the ANZ Roy Morgan measure at near two-year highs and showing households are now feeling more confident about the next 12 months.”
According to the Treasurer, the government is “confident not complacent” that the economy has seen off the worst of the inflation challenge, adding there is “still more to do and plenty to lose if we don’t do more”.
“The Albanese Labor government is proud of the record I’ve set out today, but prouder of the Australian people to whom the credit really belongs,” he said.
Taylor not so bullish
While the Treasurer presented an upbeat assessment of the Australian economy, his opposition counterpart claimed that Labor has made a bad situation worse.
In his response, shadow treasurer Angus Taylor said the government’s three “expansionary budgets” have resulted in inflation staying higher for longer
“The reality is prices are still rising, and Australians have now experienced almost three years of above band inflation,” Taylor said.
“The price level is what Australians are feeling and that is why inflation needed to be attacked aggressively, and early. Australians are paying the price at the checkout.
“Cost pressures are eating away at Australian small businesses margins. There is nothing soft about the pain Australians are feeling. If this is it going to plan, Australians should be deeply concerned.”
Indeed, Taylor argued that Australians have been left poorer thanks to the most incompetent government since Whitlam, noting that Australia has seen the largest fall in real disposable income in the advanced world at 8.7 per cent under Labor.
“Labor has had three budgets and almost three years to get this right. At every hurdle they have stumbled. Making the wrong calls for the time. Like adding $315 billion of spending, adding to inflation. That is $30,000 per household of extra spending,” he said.
“Government spending is now at its highest level on record, outside of the pandemic, according to the Final Budget Outcome from last year, and the structural deficit is only heading in one direction. The OECD and IMF have been consistent in their calls for stronger fiscal safeguards. The RBA has said extra government spending is making their job harder.”
The MYEFO, the shadow treasurer said, is a chance for Chalmers to “finally get it right”, calling for a budget update that helps improve the standard of living and tames inflation, while restoring budget discipline.
“Right now we have an opportunity. It’s about choosing a different future – a future where fairness, opportunity, enterprise and prosperity are within reach for all Australians. A future where we get Australia back on track,” Taylor said.
“In order to do that, we need an agenda focused on getting the basics right. That’s why a Dutton-led Coalition will get Australia back on track by delivering a back to basic economic agenda. That is how we will restore our standard of living and ensure future prosperity.”
