From our economic forum. Our Aussie Economist
As you may know, the Federal Treasurer, Dr Jim Chalmers, recently delivered his 2023-24 Budget Speech. As you may not know, he is neither a doctor of medicine nor economics. As you may suspect, he is a political ‘spin doctor’ trying to sell economic ‘snake oil’ to the Australian people.
“Australian Government general government sector (GGS) expenses are expected to increase from $644.8 billion in 2022–2023 to $771.8 billion in 2026–2027, with expenses as a percentage of GDP remaining relatively stable over the forward estimates.” – Budget Paper No. 1 - Statement 6: Expenses and Net Capital Investment
“Average annual real growth in expenses over the forward estimates is expected to be 1.5 per cent which shows the Government’s commitment to responsible and sustainable economic and fiscal management.” – Budget Paper No. 1 - Statement 6: Expenses and Net Capital Investment
A more detailed snapshot of these essential claims by Dr Chalmers is presented below in Exhibit A. It comes from BP1-S6 and shows spending growth from 2022-23 to 2026-27 in: ‘nominal’ (ie actual) dollar terms ($b); ‘real’ (ie CPI adjusted) terms (%); and ‘relative’ (ie to GDP) terms (%).
Exhibit A: Aussie Spending Plans
Source A: https://budget.gov.au/content/bp1/download/bp1_bs-6.pdf
Whether intentional or unintentional, there should have been one more row in that snapshot of ‘nominal’ dollar growth (%). If there were, it would show 19.7% growth between 2022-23 and 2026-27, at an “average annual basis” of 4.9%, starting with 6.1% growth from 2022-23 to 2023-24.
The ‘real’ (CPI adjusted) spending growth percentages in that snapshot are: not only smaller and less scary looking compared to the ‘nominal’ ones; but suggest inflation will continue at a (politically inconvenient) high rate. And the ‘relative’ (to GDP) spending growth percentages in that snapshot suggest economic growth will continue at a (politically inconvenient) low rate.
“Inflation has peaked and begun to moderate. … The Government’s measures to deliver cost-of-living relief will directly reduce the CPI in 2023–24 and are not expected to add to broader inflationary pressures in the economy. These measures are expected to reduce inflation by 3⁄4 of a percentage point in 2023–24.” – Budget Paper No. 1 - Statement 1: Budget Overview.
Source B: https://budget.gov.au/content/bp1/download/bp1_bs-1.pdf
Nominal GDP growth is expected to slow to 11⁄4 per cent in 2023–24 due to the assumed decline in commodity prices, offset by ongoing strength in domestic prices and output growth. Solid output growth is expected to support nominal GDP growth of 21⁄2 per cent in 2024–25.” – Budget Paper No. 1 - Statement 1: Budget Overview.
The Doctor seems to be spinning a better economic story in BP1-S1 above, regarding lower CPI and higher GDP, than his fiscal report suggests in BP1-S6 further above. A more detailed snapshot of CPI and GDP is presented below in Exhibit B. It comes from BP1-S1 but appears to be out-of-step with the most recent years of Australian performance, as shown further down in Exhibit C.
“Productivity in Australia decreased to 98.20 points in the fourth quarter of 2022 from 99.60 points in the third quarter of 2022.” – Trading Economics.
“Consumer Price Index (CPI) in Australia increased to 132.60 points in the first quarter of 2023 from 130.80 points in the fourth quarter of 2022.” – Trading Economics.
And, although productivity has tanked on Chalmer’s watch, it has been a problem for much longer.
"Over the decade to 2020,…productivity growth in Australia was the slowest in 60 years. … Productivity growth is the key to long-term prosperity. It is the process by which people get more from less[.]” – Advancing Prosperity: 5-Year Productivity Commission Inquiry Report
And, although inflation has skyrocketed on Chalmer’s watch, it too has been a problem for far longer.
“Inflation was, is, and always will be inflation of the money supply. The Aussie money supply starts with RBA ‘printing and lending’ and ends with big banks ‘lending and printing’.” – The RBA (reckless bank of Australia) needs a radical, not reserved, review.
The solution to low productivity and high inflation is the same: more power to the people. That means less power for the government to print, tax and spend, mainly to benefit themselves and their crony mates. The people could then productively earn and keep more of their own money: (once-again) sound money for buying (once-again) affordable necessities like food, energy and housing.