On Wednesday 9 November 2022, I made a speech in Federal Parliament about inflation and real cost of living relief. You can watch the speech here or read the full transcript below.
E WATSON-BROWN: I know a lot of everyday people really hate it when they hear politicians talk about the cost of living. There's so much empty rhetoric, so much pantomime politicking, so many crocodile tears, so many words, so little action, so many excuses and so little responsibility taken. People know the government could do something, and people know they won't. Meanwhile, the cost-of-living crisis goes from bad to worse.
Here are some facts. A recent ANU study found that one in four Australians are finding it hard or very hard to make ends meet at the moment. It's sobering. The number of people using buy-now pay-later schemes is now at 5.9 million. One in seven of these—over 840,000 people—are now using this on practically a fortnightly basis. That's 20 or more short-term loans a year. More and more people are getting trapped in a debt spiral.
A few weeks ago, NAB's consumer sentiment survey found that the average Australian expects to be paying an extra $2,000 before Christmas because of the rising cost of everything. That's fine if you're well-off, but what sacrifices will that mean if you're on a middle or low income? What presents can you now not buy for your kids? What holiday outing are you now going to have to cancel? And, at the lower end of income, what meals are you going to start skipping?
Inflation is starting to bite, but it's not inevitable that people have the suffer through this. The Labor government and the RBA are pursuing a strategy here with the intentional effect of making more people's lives harder. That's how they intend to solve inflation—hold back on social spending and push up interest rates. Everyday people will struggle to buy as much, leading to a drop-off in economic activity. Businesses will contract and lay off workers, who will then be forced to accept worse wages because there's a growing pool of unemployed to compete for their jobs. This is then supposed to lead to a drop in inflation. This punishes everyday people for the sin of living their lives and makes them bear the cost of fixing a problem they did not create. Labor say they want to get wages moving, but the broader policies being pursued by both the RBA and the Labor government in fact suggest they want to get them moving downward.
And yet, despite what some commentators say, inflation is in no way being caused by wages. Earlier this year, the Australia Institute found that a full 60 per cent of inflation was driven by corporate profits, which in a number of sectors are at record levels. UK economist James Meadway says the other real drivers are: the war in Ukraine, which driving up energy and other basic commodities prices; floods and other weather events ruining crops; and supply chain issues from ongoing COVID disruptions, particularly in China. So what is pushing up interest rates and holding back on government support supposed to do other than make people's lives harder?
Another great economist—in fact, a constituent of mine in Ryan—John Quiggin has pointed out that if Labor wants to use the excuse of inflation for not giving everyday people the relief they need then why does this not apply to the stage 3 tax cuts? Surely, $9,000 tax cuts for the rich is precisely the kind of cash splash that the Prime Minister has said he wants to avoid. I think there's a big double standard here. When it's money for the rich, or for fossil fuel corporations, there's plenty of money to be splashed. But when it comes to cost-of-living relief the government counts its pennies and blames inflation.
What's the alternative? The government could scrap the stage 3 tax cuts and put that one-quarter-of-a-trillion-dollar cash splash for the rich into things that will actually help people deal with the cost of living—like putting dental and mental health into Medicare, universal free child care, raising the pension, and income support. The RBA could freeze interest rates and the government could cap rents and build the public homes we actually need. Also, an urgent windfall tax on the giant gas corporations could be used to cap energy prices, which the Treasury yesterday agreed with.