Politics with Michelle Grattan: Economist Chris Richardson on an ‘ugly’ inflation result and the coming budget

Politics with Michelle Grattan

Lukas Coch/AAP

With Jim Chalmers’s third budget on May 14, Australians will be looking for some more cost-of-living relief – beyond the tax cuts – although they have been warned extra measures will be modest.

As this week’s consumer price index showed, the battle with inflation has not yet been won. The government can’t afford to have an over-generous budget add to inflation and further delay a pre-election reduction in interest rates.

In this podcast, we’re joined by independent economist Chris Richardson to discuss the budget and Australia’s economic outlook.

Richardson say while the growth figure will be downgraded in the budget, not all is bad,

It will be downgraded, for the year just finishing, for the financial year just soon to start. It is tough times. To be fair, the Australian economy is growing. There hasn’t been a recession. There hasn’t been some of the problems that people expected.

On inflation, however, he says the new figures paint a much bleaker picture,

They are ugly. So, in the last three months, prices grew by 1%. Over the last year, they grew by a bit more than 3.5%. And yes, it’s falling. It’s not falling as fast as the Reserve Bank had predicted. There’d been hopes from some people that there might be an interest rate cut sooner rather than later.

But those numbers today, I tell you: absolutely, you are not getting a rate cut in Australia until the end of this calendar year at best.

Like many other economists, Richardson is critical of Anthony Albanese’s Future Made in Australia interventionist industry policy. He says while there’s some potential benefit, the government doesn’t seem to be focused on the right areas,

You look at something like solar panels, and throwing money at that is just spectacularly dumb. That is just a waste of money. It’s the equivalent of asking taxpayers to smoke $100 notes. And I do worry that bits of the new industry policy are a little bit more around having announcements in some key marginal seats in Queensland, for example, then they are around good policy.

Michelle Grattan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.