Treasurer Jim “Chicken” Chalmers did a PhD in Paul Keating and speaks to him every second day. The irony of this is palpable.
Chalmers admires Keating for his great reform push that took on and broke the vested interests and protected cartels that had all but killed Australian productivity by the 1980s.
This was a structural change that opened the Australian economy to the benefits of greater competition including lower inflation, higher real incomes and rising living standards.
Yet, today, “Chicken” Chalmers faces a similar moment on an ultra-critical timeline and is doing nothing.
I am referring to Australia’s secret energy crisis which is openly threatening a reverse structural change to the economy that will make everybody poorer.
Today the Aussie gas price is sitting at $22Gj, a price at which no manufacturing will survive, electricity prices will triple and 6% be added to CPI over two years. The RBA will be forced to overshoot tightening in response.
The underlying structure of the Australian economy – household debt – cannot survive this implied interest rate structure intact. The direct implication is that house prices will crash. Indeed, prices will fall so far that the market will clear to something representing underlying value.
If this happens, the subsequent recovery will be L-shaped. It looms not as a cyclical denouement but as a structural adjustment. A change that is so profound that it will affect every Australian for generations.
It is obvious that this will threaten the banking system and budget. What matters more is that it will deliver a multi-trillion dollar, irreversible wealth transfer from households and industry to a foreign, war-profiteering, mining cartel.
This is NOT in the national interest. The structural shift to greater energy cartel profits will retard:
- the size of the economy;
- any hope of a manufacturing rebound;
- household real income and wealth by deeply regressive trillions, and
- it will put a China-sponsored fossil-fuels cartel in charge of Australian politics on the eve of the war on climate change and Sino-illiberalism.
All of these things will hamstring Australia’s capacity to address the environment, defend itself, and sustain social equity.
Yet, when Keating-era policy doyen, Professor Ross Garnaut, recently declared at the Jobs Destruction Summit that Australia must tax the energy cartels to death, Treasurer Chicken Chalmers crawled under his bed:
A Labor source said Dr Chalmers was still “scarred” from the failed “super profits” mining tax in 2010 when he was a senior adviser to then treasurer Wayne Swan, and that he did not want to revisit the idea.
That is, Chicken Chalmers is the complete opposite of his icon: he’s a policy coward. Palpable irony indeed.
I suspect that this timidity is being made worse by Keating himself. The former PM long ago lost his bearings on the national interest in the dogmatic pursuit of his failing vision of the 1980s. I’d guess that he is telling Chicken Chalmers to persist with Asian integration and the China reset, which will not welcome inconveniences like breaking energy export contracts.
This presents Chicken Chalmers and Australia with a paradox. If the Treasurer wishes to emulate his idol, he must do what Keating did and break the cartels.
However, to do so, Chalmers will also have to break his idol.
Yet basic psychology tells us that Chalmers admires Keating – who he dubbed the “brawler statesman” – precisely because he lacks the strength to act like Keating himself.
That such enormous national interest policy decision-making has boiled down to this level of pathos is another new low in the great Australian disintegration.
