Yay, we’re trailing the world, but finance minister says look at the bright side
Australia may be trailing the rest of the world on tackling inflation but the finance minister says the economy is performing better on other metrics, including job creation.
Katy Gallagher is hopeful ahead of the all-important quarterly consumer price numbers next week.
“There is no doubt inflation is moderating and that is great,” she told ABC radio on Thursday.
The latest monthly consumer price index showed headline inflation rising 2.7 per cent in the 12 months to August and comforting progress on underlying inflation, which strips away volatility.
With a federal election looming and the high cost of living hurting voters, the Labor government has been under pressure to prove its economic strategy is working.
Fresh forecasts from the International Monetary Fund present Australia as a laggard in the global fight against inflation, with many other nations – the United States included – already cutting interest rates.
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The Washington-based IMF had Australia’s inflation brushing the top of the two-three per cent target band by the end of 2024 but then jumping back to 3.6 per cent by the end of next year as energy bill relief falls off.
The opposition has seized on the report, with Shadow Treasurer Angus Taylor highlighting it as evidence Australia is “at the back of the pack”.
The government is failing to curb inflation and is “out of its depth”, he says.
Senator Gallagher says there’s more to the story and Australia’s economy is performing better on other measures, including no negative quarters of growth.
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She was able to point to higher unemployment rates in comparable nations as well.
The Reserve Bank of Australia has pursued a deliberate strategy to keep the labour market healthy and Australians in jobs by not taking interest rates as high as its peers.
The trade-off, however, has been a slower march back to within-target inflation,.
Senator Gallagher added her government had been doing its bit to beat inflation, including paying down debt and delivering surpluses.
Australia’s budget balance as a share of GDP is strong compared to other G20 countries, with the government highlighting Australia’s rise to third place in 2024 on that score, from 13th in 2021.
“This is a big vote of confidence in Labor’s management of the nation’s finances,” Treasurer Jim Chalmers said of the IMF figures released on Thursday.
Australia’s purchasing managers index for October contained further welcome signals on prices.
Input cost pressures clocked their lowest index reading since the start of the pandemic inflation in 2021 and Judo Bank economist Matthew De Pasquale said final prices were also drifting lower.
“This suggests that inflation remains on track to return to the RBA’s two-three per cent target band,” he said.
