JACKSON HEWETT: Treasurer Jim Chalmers is running out of road. And help isn’t coming anytime soon

Labor’s path to electoral victory just narrowed.

As much as Treasurer Jim Chalmers tried to put a positive spin on things in his ministerial statement on the economy, the trend doesn’t look good.

Budget deficits are back, the labour market is “softening around the edges” and China weakness is hitting critically important resource company tax receipts.

With revenue improvements likely to be “a sliver” of the past four years, the economy desperately needs a shot in the arm.

But unless China unleashes the mother of all stimulus, help isn’t coming.

The RBA has made it clear that inflation is still too high and any improvement in the economy will be seen as a reason to keep rates steady at 4.35 per cent.

In response to RBA minutes out yesterday, most economists have pushed out any chance of a rate cut to beyond the election. Some economists believe they won’t happen at all next year.

So while mortgage holders won’t see any relief anytime soon, they are getting hit with inflation that is still too high. They don’t have enough confidence in the economy to spend either.

The banks revealed that consumers haven’t been going out and spending their tax cuts or their energy rebates, they’ve been hanging on to them.

Business insolvencies are on the rise. In another sign of bad timing for the government, the $35 billion tax lifeline of deferred small business debt to the ATO has now fallen due and it’s time to cough up. It’s helped push the average failure rate for Australian businesses to 5.04 per cent, almost as high as the height of COVID, according to CreditorWatch. The failure rate is nearer to 10 per cent for the hospitality and consumer sector.

In his speech on Wednesday, Chalmers pointed out that Australia is not unique in the world in its economic malaise. The UK, Canada, New Zealand and Europe are all in the doldrums too.

But voters don’t compare themselves to global competitors, they compare the change in weekly prices and whether the bank balance has gone up or down.

Labor inherited large deficits and high inflation as a result of COVID and the invasion of Ukraine, and now heads into an election with the spectre of trade wars and geopolitical conflict.

They have done a good job under the circumstances. As Chalmers rightly points out, Labor has delivered Budget surpluses, shaving the national debt by $150 billion and helping to save around $80 billion in interest payments over the decade to 2032-33.

Real wages have gone from negative to slightly positive. But cost-of-living anger is hard to shake. Ask Joe Biden or Rishi Sunak.

Labor is desperately trying to communicate that it has a plan for reducing prices by improving productivity, building more houses and flooding the country with renewable energy but that is years in the making and billions in the budgeting. In the eyes of the economically stretched it will come far too late.

Kos Samaras, the polling guru behind Victoria’s Labor success and now at the independent Redbridge Group, says Labor is in danger of losing the outer suburban and regional seats - “ground zero for what Parliament is going to look like” - unless they can fix that cost of living message.

Competition inquiries into supermarket pricing have not had cut-through.

“It’s not public enough. It looks administrative,” he says. “The millions of Australians living in the outer suburbs and the regions are baying for blood when it comes to political leaders holding corporates to account for taking them and their households to the cleaners.”

Angus Taylor, in his parliamentary response, wants to appeal to those voters. “We will stand up for hard-working Australians by delivering stronger penalties for anticompetitive behaviour in the supermarket sector,” he railed. Whether the LNP wants to find a smoking gun in power is another question, but that’s tomorrow’s problem.

The Coalition is going to attack Labor on the old trope of poor economic management, something that Labor has always been alive to, according Stephen Koukoulas, economic adviser to then-Prime Minister Julia Gillard.

The question for Labor is whether they’ll take the bait of showing financial restraint or look to “put a compassionate tilt” on policies to reduce the impact on those under financial stress, he says.

Labor is not just caught in a trap of political perception, it is also hamstrung by an RBA that is very alive to the inflationary impact of government spending. Open the taps for more cost-of-living relief and the RBA may keep rates higher for longer.

Samaras thinks it is too late for a rate cut to have an impact in any case.

“I think any any rate cut that may have occurred from now until the election will have the same effect as the rate cut that occurred in the US in September,” he says, with polling showing that a net 31 per cent of voters expect to be worse off in the next five years compared to pre-COVID. In the outer suburbs that outlook worsens to 37 per cent.

Labor needs a solid plan to talk up the economy. Telling voters things aren’t that bad compared to the rest of the world is not going to cut it.

“If you’re feeling you’re worse off from 2022 you know you’re going to be least likely to be listening to the Labor Party narrative when it comes to their plan,” he says.