Government’s Nine Ways to Decrease Your Cost of Living
A To-Do List to Control Inflation and Bring Down the Cost of Goods, Services, and Housing
The federal government is belatedly realizing that some of its economic policies are contributing to inflation that the Reserve Bank of Australia (RBA) is trying to combat by raising interest rates. Since April 2022, when rates first started to increase, it’s as though we’ve been in a car with two drivers, one with its foot on the brake, the other with its foot on the accelerator. Now, at last, the driver with his foot on the accelerator is showing signs of understanding that they’re going to damage the engine of growth if they keep pulling it in two directions. So they’ve determined to cut spending on road and rail projects after a blowout in costs on the $120 billion (US$78 billion) portfolio of current and proposed projects of $38 billion, more than 25 percent.
Cutting road and rail projects is not where I would necessarily start. Good road and rail projects actually add to the productivity of the country. Think of all the trucks that go between Brisbane and Sydney. The upgrades of the Pacific Highway have so far cut the time to travel between the two major east coast cities by 2.5 hours, or somewhere around 20 percent. That’s a huge lift in productivity, and as logistics are a significant proportion of retail prices, a huge decrease in prices. It is therefore anti-inflationary, as well as helping truckies maintain their real earnings.
Not that all transport projects are that productive. Former Victorian Premier Daniel Andrew’s Melbourne Suburban Rail Loop and Queensland Premier Annastacia Palaszczuk’s Cross River Rail are both products that provide negative benefits. They therefore increase costs and are pro-inflationary. The federal government should step away from funding projects like these.
What else should it do? Here’s a short list.
1. Reduce Immigration Immediately: Australia has apparently taken in 630,000 new immigrants this year, that’s eight regional Toowoombas. In a population of 26 million, this puts too much pressure on infrastructure and is substantially responsible for the current housing crisis. While immigration could help with various skills shortages, there is no evidence that is what the current surge in migration is actually doing. And anyway, a skill shortage is a signal that either the education and training system needs to adapt, or the economy is exhausting its ability to fulfill all wishes with current resources.
2. Produce Budget Surpluses Going Forward, Not Just This Year: The government is less efficient at spending money than the private sector, partly because large bureaucracies, whether public or private, are inefficient, and partly because when it’s not your money, you tend to be less careful. Producing surpluses, without increasing taxation, means a decrease in the size of government and an increase in productivity. Surpluses would mean they would need to control rapidly increasing costs in health, aged care, and the National Disability Insurance Scheme (NDIS). That should be relatively simple. The NDIS should have always been means-tested, and restricted in what it was available for.
3. Reform Taxation: Delivering the Stage 3 tax cuts should absolutely happen. This is part of downsizing the government and putting resources in the hands of those who will use them most efficiently.
4. Withdraw the ‘Closing the Loopholes’ Bill: This is a brutally misnamed bill that will make casual and self-employed work marginal. It strikes at the heart of ambitious Australians who want to do things for themselves and will make our workforce significantly less flexible, increasing costs all around. In fact, this bill ought to be known as the “Enabling Greater Union Power and Screwing the Small Business Sector” Bill.
5. Reform Environmental Protection Laws: The Environmental Protection and Biodiversity Conservation Act is strangling the growth of projects in Australia and urgently needs review. It gives too much power to objectors, who in many cases are environmental groups (not conservation groups) set on sabotaging wealth creation rather than protecting the environment. There is enough sovereign risk in Australia these days without amplifying it.
6. Stop Capping Prices: When prices go up the government’s first impulse appears to be to control the price. They’ve certainly done this with gas which, in the long-term, actually sends prices up. High prices are a signal to businesses of where to invest, and price caps are a signal of where not to invest.
7. Moderate the Energy Transition: The inflation in rail and road infrastructure projects is nothing compared to what is about to happen in the area of power generation. It is already diverting labor and resources from everyday necessities like housing, but there is a looming shortage of the components that make up renewable energy and power networks.
8. Reform Federal-State Relations: Not all the fault for inflation lies with the federal government, a lot of it lies with the states who have borrowed profligately. The Commonwealth either needs to reintroduce borrowing limits, as used to be the case under the Loans Council, or make it clear to lenders (and voters and governments) that they will not bail out state governments that can’t repay their borrowings. A large slab of our problem is that the RBA pushed interest rates too low—to a historically unparalleled rate. It should be clear to the RBA, and to voters, that official interest rates should never fall below, say 3.5 percent.
Source:
The Epoch Times
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