Inflation the Price to Pay for Big Government: Shadow Treasurer
SYDNEY, Australia—Shadow Treasurer Angus Taylor said Australians were currently suffering the consequences of big government.
“Inflation is the price that everybody pays for excessive government. It is a thief in the night,” he said in a speech at the Friedman Conference in Sydney on July 8.
Championing the late American economist Milton Friedman’s words that inflation was “always and everywhere a monetary phenomenon,” Mr. Taylor emphasised that big government inevitably drives inflation.
This idea was taken up by leaders such as Margaret Thatcher, Ronald Reagan, and John Howard to bring economic freedom to economies that were suffering from interventionist governments at their times, Mr. Taylor said.
Australians were paying for inflation not only through out-of-pocket payments for higher prices but also because of higher taxes due to bracket creep.
“So it’s no wonder the government has rivers of gold coming in—big government by stealth,” Mr. Taylor said.
Australia has experienced two significant inflation surges in the last century, the first right after World War II and the second after the 1970s oil price shock.
“Both of these surges, by the way, were precipitated to some extent by energy crisis,” Mr. Taylor said.
The shadow treasurer said the current situation was an “enormous opportunity” to oppose excessive government and the high levels of inflation and red tape it brings for middle Australians.
Similar to when Liberal party founder Sir Robert Menzies answered the public’s desire for economic freedom and aspirations, Mr. Taylor said the Liberal party needed to “own the issue” of the debate and lay out an alternative.
New Classical Agenda
“I think it is a time to rebuild what I call a new classical agenda,” he said. “To reestablish those foundations that were so strong back in that time,” he said.
To beat inflation, Mr. Taylor said unnecessary government spending needed to stop, noting that the current Albanese Labor government “has added $185 billion (US$123 billion) of spending since it came into office,” which is around $7,000 per Australian.
“[The Coalition has] opposed $45 billion of spending in recent months in the federal parliament,” he said. “We’ll keep doing it.”
When commenting on the previous Morrison government’s big spending during COVID-19, Mr. Taylor said a little-known fact was that from the end of 2021, the federal budget had been “in balance.”
“It was a truly remarkable outcome, and that’s because the spending was temporary,” he said.
“The not-so-temporary spending was at the state level. Huge debt at the state level combined is three times what it was. And I think we have a problem now where that is actually going to cause a lot of inflationary pressures.
“I think it is right and proper that this is where liberal oppositions—because that’s what we’ve got across the mainland right now—have to fight back.”
Four Areas of Focus
One economic agenda the Coalition would need to focus on was social welfare by reestablishing incentives to work and eliminating the disincentives.
Mr. Taylor said nothing improved a person’s life more than being able to work.
“We’ve lost track of the importance of that kind of economic freedom and that kind of economic focus,” he said.
“Friedman always pointed out that the worst possible outcome for the economy would be when you have a welfare system that discourages people to stay out of work.”
Another area was ensuring the energy security of Australia, with Mr. Taylor declaring it was time to have a sensible debate about nuclear energy.
But he added that the nuclear debate needed to include short-term energy solutions.
“Nuclear won’t provide that,” he said.
“And that’s why there is a big fight now over gas in particular, and we’ve got to have that fight, too. So we’ve got to have the broad range.”
A third area of policy for economic freedom was education, with Mr. Taylor saying freedom of choice for schools and parental rights was critical.
“That freedom of choice, that parental control is absolutely essential if we’re going to get our standards back to where they need to be in our education system,” he said.
“We need to take our education back to basics, to delivering to our children and grandchildren the education they deserve.”
Finally, Mr. Taylor highlighted that high levels of regulation and industrial relations had caused Australia’s productivity levels to collapse in recent months.
“[We’ve seen a] 4.6 percent reduction in labour productivity in this country in [the last] four months,” he said. “This is an economic disaster in the making.”
He criticised Labor’s proposed “same job, same pay” legislation, which, if passed, would require employers to pay labour-hire contractors the same amount as their direct employees who do the same job.
This includes incentives and bonuses, overtime pay, and other benefits.
“[Same job, same pay] is all wrong, for economic freedom, all wrong for productivity, and all wrong for creating the prosperity that middle Australia wants and deserves,” Mr. Taylor said.
When asked about the role of the Reserve Bank of Australia in the fight against inflation, Mr. Taylor said the monetary policy had a significantly smaller part to play compared to fiscal policy.
“I think this has been this is the thing that has been lost in this debate—what the government does is far more important for fighting inflation than what any central bank does,” he said.
