After spending a year warning of the coming completely underestimated by markets Australian crisis, it has finally arrived.
Yesterday, I said the economic crisis of ‘recession risk’ was already on our doorstep. Today, I would say it has arrived.
Suddenly the Federal Treasurer is warning of significant economic challenges in contrast to the previous government’s mantra of everything is great.
The private sector is screaming from the rooftops over energy costs destroying profit margins. Domestic gas prices have surged and yet Australia is one of the world’s biggest exporters.
This is just one example of how I have warned that it did not matter that we are an agriculturally and mineral-rich nation. That global pricing pressure would see Australia heavily negatively impacted in the domestic economy by booming export prices.
Such is the modern world. Global capitalism has magnificently reduced global absolute poverty and levelled the playing field for everyone. No, it is not a perfect world, but it is a far better world for globalisation.
That said, there is a price to pay. It is called global pricing in the domestic market.
Not only has the whole world experienced supply disruption and profit fattening induced extreme inflation, but also the impact of both war and sanctions have driven intense actual availability of supply shortages. So, more together than we have ever been, economically and socially in history, we will all now experience these challenges.
Australia has been late in seeing these global challenges hitting our shores. Despite all the warnings provided here.
At last, though, the new Treasurer seems instantly aware and this is a very good thing.
We cannot stop the upward challenges of rising prices for the most staple of necessities, food and energy, but we can moderate the impact on hard-working Australian families through thoughtful policy.
On interest rate settings, the RBA has been nothing short of a catastrophe to the nation, our economy and our people.
The RBA is the primary generator of inflated property prices and housing affordability issues. The RBA is the primary cause of initial runaway inflation.
The RBA is the primary cause of the correction to the economy, property prices and the skyrocketing mortgage distress that is already beginning to be seen and will increase dramatically in the coming months.
The RBA is incompetent at its core. It does not need assessment and correction.
The RBA must be massively overhauled and the Governor and Board sacked publicly in disgrace.
Once we get to appropriate intelligence and action on interest rates, then we can look to further policy resets to save the nation.
These begin with but are not limited to, immediate and permanent removal of the fuel excise tax. It is the most oppressive of working families, unfair and disproportionate regressive tax ever inflicted on the Australian people.
It must go or working families will fall further behind and have to resort to less healthy food and activities just to survive. We in our ivory towers do not fully appreciate just how hard it is for many Australians right now, to just simply look after their families. This tax hurts the poor and barely registers with the rich.
And one would think a Labor government would immediately recognise this to be the case. The survivability and fairness of the Australian economy are far more important than the excel spreadsheet revenue and budget.
Adjustments to our energy policies, particularly gas, so that the Australian people and businesses can more directly participate in the natural wealth of our nation are also badly urgently required.
If you know Treasurer Jim Chalmers, please pass this article on to him.
Making such seismic shifts in the RBA, fuel excise and gas supply prices are the basic first steps for our economic sustainability through the fast arriving global slow-down and price shocks.
Market insights and analysis from Clifford Bennett, Chief Economist at ACY Securities
