On Thursday, ABC News Radio interviewed me about the latest monthly inflation data and the federal government’s policy failures (namely immigration and energy) that have contributed to Australia’s sticky inflation problem.
Key Highlights:
The Reserve Bank is relying on a very blunt tool—interest rates—to hammer one-third of households carrying owner-occupier mortgages to try and get the overall inflation rate under control. It’s not a great tool.
So, we have this situation whereby, if you are a homeowner with a mortgage, you are under heaps of financial pressure. The same applies to renters because rents are rising very quickly, which is actually feeding inflation.
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Then we have one-third of households that own their homes outright but aren’t really feeling the impacts. And they tend to be the ones who actually increased spending the most…
Really, what we need is for the federal government to step up because the federal government has a whole bunch of levers that it can pull to get inflation under control…
First and foremost, they need to cut immigration very hard because they are running a near record immigration policy at the same time as we can’t build enough houses for a whole variety of reasons.
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This high immigration is the reason why we have this really strong rental inflation and rents are going through the roof. And that’s actually one of the main drivers of inflation.
The other area where we really need the federal government to step up is energy. Australia has oodles of gas and coal on the East Coast of Australia. Yet, we are paying some of the world’s highest energy prices.
The primary reason is because the federal government didn’t bother to reserve our gas for domestic use when it approved a whole bunch of export terminals in Gladstone, Queensland.
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So effectively, we are left in this situation where the East Coast exports more than two-thirds of our gas internationally at the same time as we pay some of the highest gas prices in the world.
We now have an artificial domestic shortage and the gas price is feeding into electricity prices, meaning we have high energy prices in Australia. And that is feeding into inflation across everything.
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So, we really need the federal government to step up, slow immigration right down and also fix the energy market.
Because those are two key drivers of Australia’s sticky inflation problem.