I know that excessive government spending is playing a role in driving up inflation.
I commit to real savings in the Budget update in December. Net savings.
That is what Anthony Albanese could have said on Tuesday when the cash rate went up again.
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Mr Albanese was in the Caribbean for the Commonwealth Heads of Government meeting where he hung out with the King and mining billionaire Andrew Forrest on a “low-carbon ship” aimed at promoting a global environmental initiative.
Back here in the real world the rest of us are again counting the cost of the miserable failures of efforts to drag back inflation into the Reserve Bank of Australia’s target zone.
We had gathered helpless rather than hopeful around screens to read the news on rates from the RBA.
At 2.30pm AEDT the RBA statement lobbed: “At its meeting today, the Board decided to increase the cash rate target by 25 basis points to 4.85 per cent”.
The RBA went on. “The inflation outlook has . . . been revised materially higher.”
“This partly reflects higher fuel and other commodity prices affected by the conflict in the Middle East. But domestic capacity pressures are also judged to have been a little tighter than earlier thought.”
Oh. And in case you were feeling unsure about how things were looking. “Housing prices have fallen significantly and the unemployment rate has risen”.
So millions of Australians are facing higher home loan repayments on assets that are plummeting in value.
Some face the prospect of falling into negative equity, where the value of their home is less than the amount they owe the bank. Wham. Wham. Wham.
They will be quite within their rights to ask how is it that the RBA is smashing people for a problem generated by factors outside their control?
And why is it that the burden of tackling inflation is falling on just those with a home loan. And some small businesses?
How is that fair and equitable?
Treasurer Jim Chalmers was ready with his usual disclaimer that “our Budgets are not what’s putting upward pressure on inflation”.
“The war in the Middle East is pushing up inflation and interest rates around the world,” he said.
In other words, don’t blame me. Blame Donald Trump.
RBA governor Michel Bullock was equally adamant.
The fifth cash rate rise of the year was not a response to the direct inflation effect of rising oil prices from the war in the Middle East, but “to address domestic capacity pressures”.
“These were evident before the rise in oil prices, which is why the board started to increase the cash rate in February this year prior to the start of the conflict in the Middle East,” she said.
The RBA is pulling one way. The Albanese Government is pulling the other way.
It continues to pump money into the capacity-constrained low-productivity economy.
This is more than economic theory. Real people are in the firing line.
There will be a savage reckoning from voters. No side of the usual political structure will be spared.
