There is always one friend at every racing carnival who thinks they know something that other punters don’t. Someone who is backing a horse at long odds, with no evidence of form or hope of winning. “Don’t worry, trust me - put the house on it,” they’ll tell you.
Today, Australians will be watching for a different result half an hour before the race that stops the nation; the RBA’s rate decision.
Jim Chalmers will be there on the sidelines watching with his hot tip that it’ll be nothing to worry about; “don’t worry, trust me.”
This clearly goes against the form. For 11 of the past 16 months, interest rates have increased.
They’ve increased because inflation is out of control and the RBA is doing everything it can to try to stop it. But Jim has said all along the way, he has a plan. Don’t worry, trust me.
The latest round of inflation figures were another warning by exceeding market expectations and the RBA’s forecasts.
The headline inflation rate for the last quarter was 5.4% and core inflation was 5.2%, both are well above the RBA's target range of 2-3%.
Add to this higher than expected retail spending, higher prices for housing, and a strong employment market, and you can begin to see that our economy needs all the focus of both monetary and fiscal policy to deal with the cost of living crisis.
While the RBA is focused on this, and reducing the cost of living crisis by deploying monetary policy to the fight Jim is on the sidelines. Don’t worry, trust me.
Defiant that there is no crisis, the Treasurer has said that inflation is not something that they can do anything about. But that horse won’t win, he says. It’s an international that doesn’t know the track.
After the latest CPI figures were released, the Treasurer walked out and said “the world is inflicting price pressures on Australians and we are doing the best we can to ease them.”
Is this the same Treasurer who told Australians less than two years ago that Australians “couldn’t give a stuff” what global factors had on a “cost of living crisis”?
What about weaknesses in Jim’s tip? No fear, says Jim, he also says that “the services inflation was not a big part of today’s story” and that Australians can look forward to the cost of living crisis being resolved when global factors change. “Blinkers on, tongue tie off” he tells the punters.
For example, Jim Chalmers says our stubbornly high and sticky inflation is due entirely to global factors like the international oil price.
Perhaps Jim should have phoned a friend before he made that claim.
Recently the new RBA Governor Bullock told the Senate that “the thing that we have been saying for some time and this particular CPI print reinforced that, was that services inflation, generally, is remaining fairly persistent”.
Currently, the RBA expects inflation to remain a challenge until late 2025 and it remains to be seen whether the September quarter figures will impact that forecast.
We do know that late 2025 is already a year longer than what their central forecast was in December, and months longer than what they predicted in May, immediately prior to Labor’s Budget.
But Jim and Labor have refused to help the RBA with the heavy lifting to fight inflation, and because of this, inflation will be higher for longer. Jim is hoping no one notices as the rates decisions are made - don’t worry, trust me.
As the Governor of the RBA told the Senate last week, the Government can take action; they can reduce aggregate demand by cutting spending.
However, instead of doing this, Labor is adding to the problem by spending more: $188 billion more than the Coalition spent in its last Budget. “Trust me, put the house on it,” says Jim.
It's why economists called Labor’s last Budget “unambiguously expansionary” and the RBA Governor stated that it is at best ‘neutral’.
Now is not the time to be neutral, Jim. Now is the time to read the form and come up with a plan.
Today, anxious punters waiting for the RBA decision at 2:30pm can be sure of one thing: Jim’s lack of a plan is just gambling with their money and with our economy.
Unless Jim starts doing his job in the fight to lower inflation, the RBA’s cash rate decision will continue to be the thing that stops the nation.