Stagflation risk: Chalmers heeds budget warning
Former Treasury boss Martin Parkinson says Australia is facing a stagflation precipice caused by war in the Middle East, making meaningful budget reforms more timely.
As fears grow that the oil crisis could cause the Albanian government to refrain from making ambitious changes to taxes and spending in the May budget, Finance Minister Jim Chalmers reiterated his assurance that cost-of-living measures will not overshadow reforms.
Dr Chalmers told Sky News on Wednesday: “I have great respect for Martin. I have worked closely with him, formally and informally, for a long time and I think he makes a really important point.”
“We are not choosing resilience or reform in this budget; we are choosing resilience and reform.
“Despite the extreme global economic uncertainty that we’re seeing, that’s no reason to hit the pause button on some of the really important changes we need to make.”
Dr. Chalmers denied that he could clip the prime minister’s wings, saying Anthony Albanese and his cabinet colleagues harbored great ambition.
In his speech to the National Press Club earlier Wednesday, Dr. Parkinson warned Australia was “at risk of stagflation”; This was a scenario in which the economy was caught between the twin pressures of rapidly rising prices and rising unemployment.
This has made fixing Australia’s current poor productivity performance all the more urgent, compounding the challenges of an aging population and a declining proportion of people of working age.
“To meet these challenges, we need a broader tax base with better targeted, more efficient taxes, or we need to cut spending to ensure a more sustainable fiscal position,” he said.
“We need to stimulate innovation and investment to raise the rate limits on our growth rate, and we need either a larger working-age population or a much more productive working-age population.
“These windows of opportunity are closing quickly. And when they open, we need to hit them hard.”
Together with Violet Roumeliotis, Chief Executive Officer of Settlement Services International, Dr. Parkinson called on the government to address the underutilization of skilled migrant workers in Australia.
Ms Roumeliotis said approximately 620,000 people in Australia were not working in the professions for which they were trained, and the country was facing a skills shortage in these areas due to their qualifications not being recognised.
“There is a waiting room where talent is wasted,” he said.
“Doctors, nurses, aged care workers, tradesmen, engineers. But they don’t wait because they lack skills. They wait because of slow, expensive and unfair processes, just to get their credentials recognized.”
Dr Parkinson said short-term cost of living measures could go hand in hand with steps towards real reform of the budget.
He said it was unrealistic to expect the government to do nothing to ease consumer pressures, such as its decision to halve fuel duty, despite economists warning this would increase demand and inflation.
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