Parliamentary agenda must be balanced by budget restraint

Treasurer Jim Chalmers will respond to the growing list of economic pressures with a ministerial statement to parliament on Thursday. Chalmers claimed last week Labor had “inherited the trickiest set of economic conditions that a new government has inherited in memory” and warned many will find his economic statement “confronting”.

The task of curbing inflation is primarily the responsibility of the Reserve Bank. Its governor, Philip Lowe, says the RBA board will do “what is necessary” to ensure inflation returns to the official target rate of 2 to 3 per cent. That suggests interest rates will be considerably higher by year’s end.

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However, the federal government also has a vital role to play in bringing inflation back in check with sensible spending restraints.

A complex mix of factors, including the disruptions of COVID-19 and Russia’s invasion of Ukraine, have combined to push up inflation. Additional government spending at this point would likely put further upward pressure on prices.

But belt-tightening is always politically difficult. This was underscored this month when Labor agreed to a $780 million extension of pandemic leave payments, to be split 50-50 with the states, for those without sick leave, following a political outcry. The government previously indicated this was unaffordable.

Labor should resist the temptation to constantly blame the previous government for problems it faces. Voters want solutions not blame shifting.

Amid the challenges, there is one shining economic bright spot that does not get the attention it deserves. Last month, the national unemployment rate fell to 3.5 per cent, the best since 1974. In NSW, unemployment reached 3.3 per cent, which is the lowest since monthly records began in 1978. The public focus on rising inflation and interest rates has tended to overshadow this unambiguously good news.

Even so, COVID-19 has left the federal coffers deep in deficit and the long task of budget repair now falls to Labor.

The Albanese government will be keen to tout its legislative agenda now that parliament is resuming, but this must be balanced against the need for spending restraint.