Event:  David Alexander interview on Sky News

Date: Wednesday 23 October 2024

Topics: IMF forecast of Australia’s inflation rate

E&OE

Kieran Gilbert:

David Alexander. He’s the chief of policy at the Australian Chamber of Commerce and Industry. David, how concerning is that IMF report to you?

David Alexander:

Thanks, Kieran. It is of concern to the Australian business community because that’s a lift in inflation expectations for next year, and that just means more pain for longer than we had thought. And so that cost of living crisis that you see at a consumer level, that also impacts business because that’s the cost of their inputs, their supply chains are incrementally more expensive. And then of course there’s pressure on inflation, which pushes up pressure on interest rates.

Kieran Gilbert:

Is there a blame here for the RBA that they should have gone harder sooner on rate rises?

David Alexander:

I think that the RBA is dealing with what it can with a difficult set of circumstances. We’ve got a very difficult problem here of very slow growth and yet elevated inflation at the same time. Now, that doesn’t have to be the case. There are things that could have been done to obviate that. One of the problems has been blowouts in government spending and even the Reserve Bank this week has pointed to increased government spending being so big that it’s actually putting pressure on inflation. That’s a fixable problem, the slow growth problem. There are things that could be done to generate dynamism and growth in the economy. Some of the things that have been done have been working against that, like the industrial relations changes that were pretty major and they’re going to have a negative effect on productivity.

Kieran Gilbert:

These are just forecasts that could be wrong. Do you think there’s any scenario in which we might see a rate cut before the election?

David Alexander:

Difficult to say, and in all of these things, what governments have to do is think about the concrete steps that they can take, not fuss too much about what might be scenarios. They’ve got a MYEFO coming up, they’ve got a budget in March after that, and those are the opportunities for the government to take steps towards getting the budget back in shape. So that’s part of the key to fixing this slow growth, high inflation problem.

Kieran Gilbert:

Do you think it means we will have a low or lower spending election campaign from both the major parties?

David Alexander:

Difficult to say, because if you recall in September when the national accounts came out and there was very slow growth, the Treasurer was quite specific in saying that one thing that’s keeping the economy in the black, so to speak was government spending. So clearly the government thinks that that escalated government spending is doing a good thing. In our view., there’s problems that come with that sort of government spending. It’s not a great way to run your economy if government spending is the only thing propping up your growth figures. You really need the private sector to drive economic growth and that will produce tax dividends that then the government can use. But you don’t start with the spending for government side of things. That’s the consequence of getting your ducks in a row on the budget,

Kieran Gilbert:

The chief of policy and advocacy of the Australian Chamber of Commerce and Industry. David Alexander. Thanks. Appreciate it.

David Alexander:

Thanks Kieran.