PETER VAN ONSELEN: How things are about to get real for Albanese’s amateur finance team

While the nation’s finance team – the Treasurer Jim Chalmers, Finance Minister Katy Gallagher and Assistant Treasurer Stephen Jones – don’t hold a single economic qualification between them, let’s hope they are getting some good advice from the government bureaucracy.

Because the economic conditions in the months, and potentially years, ahead appear to be getting worse. We need the Albanese government to make the right policy moves to prepare for what is about to hit us as a nation, as well as to help minimise the longevity of the bad times ahead that will ruin lives.

This coming week the national accounts will be released, updating us on the state of the Australian economy.

The market is expecting deeply sluggish growth, perhaps even to the point where the economy contracts. That is, a negative economic quarter might be in the offing. Personally, I doubt this, but growth will be anaemic.

We are already in a per capita recession, meaning that as individuals we are becoming poorer by the day. And we have been in a per capita recession for more than a year. But the economy as a whole, so far, hasn’t gone backwards, even though citizens are suffering.

That’s because of sky-high immigration, growing the population base and thus propping up overall growth numbers. Even if as individuals we are getting poorer. 

But high immigration carries with it unintended downsides, such as the upward pressure it puts on house prices, alongside the increased difficulty it causes younger Australians trying to access an already tight rental market. 

Supply can’t keep up with demand. 

The Finance Minister, Katy Gallagher (pictured) studied sociology at university. Now she is responsible for the nation’s finances

If the national accounts confirm that the economy is weakening, we’ll see new evidence of slowing consumption, investment and construction. Which also means the Albanese governmet can say goodbye to its election promise to build 1.25million new homes, a target it is already on track to miss. 

The next step on this journey towards economic oblivion is a weakening labour market and rising unemployment.

These are all global problems in western democracies right now. The difference, however, is that like-for-like countries elsewhere have already seen their inflation numbers dramatically fall.

No us. This past week we saw just how sticky high inflation is in Australia, with the latest numbers coming in worse than the market was anticipating, despite artificial efforts by Labor using the energy rebate in the Budget to bring the headline inflation number temporarily down.

Meanwhile, the Reserve Bank has already indicated that it doesn’t expect to bring interest rates down anytime soon. This is in stark contrast to what central banks have done in countries including the US, New Zealand and Canada.

Their central banks have all brought rates down because their governments have brought inflation back under control. Our government simply hasn’t done that.

Lower inflation and lower rates make it easier to manage an economic downturn of the sort that is about to hit. If the RBA can’t drop rates to help manage a downturn because of stubbornly high inflation, the risks for the economic wellbeing and security of Australian citizens is high.

This is not the fault of the Reserve Bank.  

It’s a conundrum all of the Albanese government’s making, alongside state governments. They didn’t have to spend as much in recent budgets as they have. Nor use handouts to try and buy votes ahead of elections. And Chalmers certainly didn’t have to calibrate tax cuts in a way that is contributing to high inflation.

These were all choices our economically untrained finance team chose to make.