Things look increasingly difficult for the Australian economy, with five key factors putting the nation under pressure.
When the Labor Party won the recent federal election, it marked the end of much of a decade in the political wilderness and asserted that the federal Labor Party could go to the polls, after losing an election that some claimed to be unmissable in 2019. .
Yet, just a month after their historic victory, things are already starting to look more than a little difficult for the Albanian government.
In some ways, Labor taking the keys to government for the first time in nine years is a lot like getting behind the wheel of a used car for its first drive. Everything seems OK at first, but then the car’s various problems start to become apparent and before long you might be wondering if you bought yourself a lemon.
Despite barely a month since the election, it is increasingly clear that Labor has inherited one of the toughest jobs for a newly created government in decades.
Earlier this week Reserve Bank of Australia (RBA) Governor Philip Lowe was interviewed by the ABC and shared his prediction that inflation would hit 7% in the December quarter, a significant acceleration from its current level of 5.1%.
Data from the Melbourne Institute’s Monthly Inflation Gauge pointed to an even tougher path for inflation to follow, with the latter recently recording monthly inflation at a searing 1.1%, the highest reading ever recorded in the history of the index.
Even before the election, consumer confidence was not looking good. But with inflation continuing to accelerate and the RBA raising rates by 0.5% for the first time in two decades, it has deteriorated further.
According to the ANZ Consumer Confidence Index, excluding the initial pandemic shock, consumer confidence is now at its lowest level since 1991. While confidence is quite bleak overall, the outlook for households for their finances over the next 12 months were of particular concern, with this particular sub-index standing only a few points above where it was at the height of the initial pandemic shock.
On Wednesday, the Australian Energy Market Operator (AEMO) announced that it had suspended the national spot electricity market in New South Wales, Queensland, South Australia, Tasmania and in Victoria to take over the national energy market to ensure supply to households and businesses.
It will establish administered wholesale power in these affected regions and take control of power generation at all power stations, using generator capacity to meet demand.
This comes amid soaring gas and electricity prices, which have recently seen gas prices in some markets reach around 100 times normal market prices.
While it is hoped that this AEMO intervention will ensure the lights stay on, high energy prices will continue to be a thorn in the side of households and businesses for the foreseeable future.
As inflation continues to rise, so does the expected peak in the official RBA exchange rate. Just three months ago, the market was expecting a spot rate of 1.36% for December. As of Thursday’s market close, the spot rate is now expected to reach 3.71% by the end of the year.
It’s important to keep in mind that these are market prices and are far from set in stone – it’s a snapshot of how the market sees the future unfolding. .
While it certainly doesn’t feel like it, as we’re paying near-record prices at the pumps, Australians have actually benefited from several factors putting downward pressure on fuel prices.
Internationally, lockdowns in China and the release of one million barrels of oil a day from US strategic petroleum reserves have both put downward pressure on global oil prices. It’s something we covered last weekend here on news.com.au in much more detail.
Yet despite these factors helping to keep oil prices below their March peak, fuel prices in the United States and around the world have hit record highs time and time again in recent weeks.
In Australia, we have been somewhat insulated from rising fuel prices due to the former government’s reduction of the Federal Fuel Excise Tax, which reduced fuel price tax by 22 cents per liter since the end of March.
But this measure supporting lower fuel prices will end on September 28, leaving Australians to pay significantly more for fuel if global prices continue to remain high.
lemon from work
Political commentators and politicians will no doubt spend many hours in the months and years to come blaming the mess Australia currently finds itself in, but how much it matters to the viewer.
But here and now Labor has inherited an absolute lemon of a political set of circumstances, facing both global and domestic issues that threaten to undermine its attempts to push its agenda forward in its first 100 decisive days in government.
Prime Minister Anthony Albanese certainly has his work cut out for him and hopes to avoid the pitfalls that have made US President Joe Biden a deeply unpopular leader.
Tarric Brooker is a freelance journalist and social commentator | @AvidCommentator