Tom 🇦🇺

I just don't get Greg Jericho's economics. Jericho’s central exhibit is that Australia taxes and spends little by OECD standards. True, and irrelevant. Inflation responds to the change in demand relative to capacity, not to where spending sits in a league table. A low-spending country that adds to demand when the economy is at capacity still adds to inflation. France’s spending ratio tells you nothing about Australian non-tradables. Worse, his own numbers undercut him. The $141bn revenue gap is an argument for funding spending with tax. That would make the spending non-inflationary. But he never says that. He uses the tax gap to wave away the spending question, when it actually concedes it: unfunded spending at full capacity is demand, and demand is the problem. The NDIS point proves the opposite “Take away the NDIS and spending looks normal” is a strange defence. You can’t take it away. Its growth is the fiscal impulse. Saying spending is fine apart from the part that is growing fast is saying spending is growing fast. The unemployment rate is at full employment Unemployment rose from 4.1% to 4.7%. Jericho calls this recession-like and accuses Bullock of ignoring her mandate. But the Statement defines full employment as the NAIRU, and credible estimates put it around 4.7%. Unemployment has risen to full employment, not away from it. Inflation is still above target, and with productivity near zero, wages around 3.25% are too fast for 2.5% inflation. Getting inflation down from here requires unemployment a bit above the NAIRU. Bullock said exactly that. That’s the mandate working, not a betrayal of it. Inflation is the real class war If anyone is waging class war, it’s whoever lets inflation fester. Inflation hits renters, wage earners and welfare recipients hardest, because their incomes are indexed late or not at all. The 1970s and 80s lesson is that half-hearted inflation fighting doesn’t save jobs. It raises the NAIRU and ends with higher unemployment anyway. Jericho’s preferred path delivers more of what he claims to oppose. The data centre complaint asks the wrong institution His best point is that data centre construction competes for scarce labour and capacity. Fine. But the RBA has one instrument and can’t pick sectors. If the government wants to slow data centres, it has planning, energy connection and tax levers. Demanding the central bank target an industry is asking it to leave its lane, which is the very thing he’d condemn if it suited the other side. Where he has a point To the extent the RBA “insinuated” fiscal policy is the problem, that’s fair game. The bank shouldn’t grade a government’s budget. But that’s a complaint about RBA communication, not a refutation of the inflation arithmetic. deepcutnews.com?utm_source=n…