EDITORIAL: Labor must resist vote buying spend-a-thon

For a government under strain and with an election looming, the temptation to spend up big is strong.

They like to call it “cost-of-living relief”. Maybe if they’re feeling particularly honest, a “pre-election sweetener”.

In reality, they’re bribes. Attempts to buy votes with promises of tax cuts, spending programs and rebates.

The thing is, they often don’t even work.

You only have to look to Queensland to know that.

Steven Miles’ Labor government promised Queenslanders the world.

Free lunches for school kids. Ultra-cheap public transport fares. Massive, inflation-fuelling electricity rebates.

Voters saw through it all and kicked them out anyway.

Treasurer Jim Chalmers says the Federal Government won’t give in to temptation, even as the polls have Labor and the Coalition neck and neck with an election just a few months away.

“If there’s a defining feature of our economic management, its responsibility,” Dr Chalmers said on Monday.

“People shouldn’t anticipate the mid-year update or the Budget to be some kind of free-for-all of public spending.”

That means there won’t be tax cuts for high income earners any time soon.

Even the Coalition, which had previously promised to return to a tax cut package in keeping with the old stage three reforms, has started to go cold on the idea.

The problem is inflation. It’s just not going away.

While other comparable economies have managed to tame inflation, Australia’s remains frustratingly high, putting households under enormous strain.

Inflation’s persistence is partly due to big spending by both State and Federal governments.

Governments keen to be seen to be doing something about the cost of living are shovelling money into the economy faster than the Reserve Bank can take it out through keeping interest rates high.

At its last meeting in November, the RBA again left the official cash rate unchanged at 4.35 per cent, and released projections showing inflation would not return to the middle of its 2 to 3 per cent target band until late 2026.

Markets now don’t expect a rate cut until May at the earliest.

The RBA is becoming more forthright about the impact of government spending on inflation.

The central bank’s governor Michele Bullock this month said Dr Chalmers was “fully aware of the inflationary implications of his own policies”, adding that she expected the Federal and State governments to “very conscious about what’s hurting people”.

Dr Chalmers’ comments that a spendathon won’t be happening are an indication that he’s taken the message from the RBA on board.

But he’ll still likely have to convince anxious ministers and backbenchers — some of whom will be fighting for their own political survival at next year’s election — of the wisdom of showing some fiscal restraint.