Inflation worse under Coalition than Labor

Under Labor, Australia led the world

The World Bank helps us here with inflation records for all developed countries going back to the early 1970s.

From 1971 to 1990, Australia’s inflation rate fluctuated wildly. But that happened everywhere. Inflation reached 15.4% in 1974, which helped sink the Whitlam Labor Government. But the OECD average that year was 32%. Australia’s economy under Gough Whitlam was actually one of the world’s more successful.

Australia’s OECD ranking on inflation remained pretty much in the middle – between 13th and 21st – for most of the period 1971 to 1990.

Then came the radical restructure during the Hawke years driven by reformist Treasurer Paul Keating. The World Bank’s data validates Keating’s 1991 claim that he had “snapped the stick of inflation”. By 1991, Australia’s inflation rate had fallen to 3.2%, which ranked fifth lowest in the OECD. The next year it was just 1.01%, which was the developed world’s lowest.

The Coalition lags behind Labor badly

Examining global rankings through the last 40 years shows Coalition outcomes are consistently worse than Labor’s. A simple exercise is to observe the average ranking in the OECD throughout that period. This takes into account prevailing global conditions, which varied greatly.

Australia’s inflation rankings rose steadily through the Hawke period, which saw improvements in all economic outcomes as Keating’s reforms took effect. The best inflation outcomes by far were in the Keating years, when Australia was in the top ten countries by low inflation four times, including 1992 when it was lowest. Next best were the Rudd and Gillard Labor governments, which most independent commentators accept delivered the world’s best economic responses to the Global Financial Crisis.

Next best – or second-worst – were the Howard years, where inflation remained low worldwide, with deflation appearing in Japan and Sweden. In 1997, Australia again had the OECD’s lowest inflation rate, and in 1998 was fourth lowest, confirming the stick stayed broken for quite a while.

Things deteriorated thereafter, however, and most of Howard’s last eight years saw Australia languishing outside the OECD’s best 20.

Poorest rankings for inflation historically, by far, have been through the Coalition years since 2013, with the financial year just ended the worst on record. Ranking 31st is the lowest ever. Fortunately, inflation improved slightly in the September quarter, but not by much.

No minister, Labor or Liberal, will ever be able to trust Pezzullo again

But that is not the only limit he doesn’t appear to understand.  He doesn’t appear to understand the boundaries between the elected government and the public service: hence his remark in one encrypted message: “We need to build a meritocracy by stealth and run government through the bureaucracy, working to 4-5 powerful and capable ministers.” It wasn’t only individual ministers Pezzullo was undermining, it was the very concept of an apolitical public service answerable to the elected government.