Labor must keep its focus on the inflation task

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OPINION: The real question is whether the Albanese government’s economic agenda is up to the job of preventing above-target inflation from becoming entrenched.

Starting a new parliamentary year, Anthony Albanese says that Labor’s prosecution of the case for enshrining an Indigenous Voice in the Constitutionfrom tackling other priorities, especially the cost-of-living crisis.

Fiscal policy needs to be in concert, not in conflict, with the Reserve Bank’s low-inflation monetary policy.With the Reserve Bank poised on Tuesday to raise its official cash rate for the ninth consecutive board meeting, Jim Chalmers’ declaration that the May budget will haveis welcome, along with Anthony Albanese’s decree that new spending proposals must be offset by savings elsewhere.

This would, in turn, increase the chances of a hard landing and a significant uptick in unemployment. Fiscal policy needs to be in concert, not in conflict, with the Reserve Bank’s low-inflation monetary policy.The upside of the energy crisis for Australia is booming prices for our iron ore, coal and gas exports. The short-term tax and royalty windfall will likely produce a sharp improvement in the budget deficit this financial year, even if officials downplay the chances of a temporary surplus.

Dr Chalmers has flagged the budget’s long-term structural challenges – due mainly to Labor’s spending monuments in health, aged care, childcare, disability and education – and talked of conducting a “conversation” about how to pay for social services. But that sounds like code for further ratcheting up the size of government and paying for it with inflationary tax rises – which would break Mr Albanese’s election promise of no new taxes.

 

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