Topics: Monthly CPI, Cost of living, Stage 3 tax cuts, GST

E&OE  

PATRICIA KARVELAS:

While it may not seem like groceries and fuel are getting any cheaper, last month's inflation data revealed yesterday shows that inflation is easing falling from 5.6% in September to 4.9% in October. It's welcome news for households, businesses, the government and the Reserve Bank. The OECD'S global economic outlook released overnight is even more positive, forecasting that the lost interest rate rise this month was the peak and Australia could see rates fall in the second half of next year. Angus Taylor is the Shadow Treasurer. He joins us now from our Parliament House Studio. Angus Taylor, welcome.

ANGUS TAYLOR:

Good to be with you, PK.

PATRICIA KARVELAS:

Inflation is clearly slowing. The OECD's outlook predicts a rate cut next year. The fight against inflation is essentially working, isn't it?

ANGUS TAYLOR:

Well, I don't think so PK. And let's go to the facts. Economists tend to look at core inflation - trim mean inflation in this index - which barely moved in the numbers that came out yesterday, went from 5.4 to 5.3. The government wants to be congratulated for that. But the truth is that Australians have seen enormous price rises, price of fuel's gone up 8.6%, food and drink 5.3, electricity over 10%, gas 13%. So Australians are seeing enormous price rises. And we know that Australia has the stickiest, most persistent inflation of any advanced country, The Economist has told us that in the last couple of weeks. We have amongst the highest levels of inflation of any advanced country. And indeed, we've seen the sharpest drop in household disposable income. That's the standard of living of Australian families, of any advanced country in the world. So we are at the back of the pack in dealing with this issue. We've got a long way to go - a long way to go. And as for the OECD forecasts, well Australians have become sceptical of interest rate forecasters PK. Because they've been consistently wrong, it's been worse than expected. I'm not going to get into forecasting, but I still think there's a long way to go in this journey. And the price rises have been sharp, and the pain is very, very real out there.

PATRICIA KARVELAS:

No doubt that statement, that pain is real out there is absolutely accurate. There is no doubt about that. But we're talking about economic trends now. And what we're seeing here, inflation is slowing. I mean, that's a fact, isn't it?

ANGUS TAYLOR:

Well, our inflation is still double of the target we want to get down to.

PATRICIA KARVELAS:

I'm talking about the trend, I'm not saying that we're there...

ANGUS TAYLOR:

Well, 5.4 to 5.3 is hardly a major victory when your target is 2 to 3%. So we've got a long way to go. And we're struggling versus other countries, you see many other countries who have done much, much better at dealing with this. And we think that is a result of wrong priorities and bad decisions. We do think government policy has an enormously important role to play in fighting inflation and beating inflation. And we know that PK from past bouts of inflation we've seen in Australia and elsewhere in the world. A government policy makes a very big difference. And any economist will recognise that it's not just monetary policy that has to do the work - that's interest rates - that's a very painful way to deal with a problem. You need every policy lever.  Industrial relations, competition policy, fiscal policy - all of these things contribute to making the right decisions and having the right priorities. And we don't think that's what we're seeing around.

PATRICIA KARVELAS:

Okay, so you do you believe that inflation is currently, based on the latest figures we have, out of control?

ANGUS TAYLOR:

Well, it was too high.

PATRICIA KARVELAS:

Is it out of control?

ANGUS TAYLOR:

Well, it's not where it needs to be. And that's the point.

PATRICIA KARVELAS:

But you won't use the language out of control, even though I keep putting it to you. So you do think...

ANGUS TAYLOR:

Well, I'll put it to you this way, PK, this government hasn't got it under control, that's for sure. Because we're at the back of the pack with dealing with it.

PATRICIA KARVELAS:

Inflation was higher in the last quarter the coalition was in government, 2.1%...

ANGUS TAYLOR:

The peak of inflation we've seen has been under Labor, let's be clear about that. And we've seen price rises surging under this government. You deal with the hand you've got and the trouble with this government is they haven't dealt with the hand they've got. Look, you've had a Prime Minister who doesn't like talking about economics. It's not been his focus as a leader. Now, that's his choice. But we think it's been the wrong priority for this country.

PATRICIA KARVELAS:

So what would you do if you're in power right now?

ANGUS TAYLOR:

As I've said many times on this program, you've got to pull every lever available to you. You've got to make sure your industrial relations is right. Don't put union officials in charge of the relationship between workers and employers. You've got to make sure that they can work out between themselves what is good for them. You've got to make sure that fiscal policy's completely aligned.

PATRICIA KARVELAS:

I mean, they're broad areas, I mean, what policy response could you introduce now to help people with cost of living?

ANGUS TAYLOR:

Well, I've just been going through them, and I'll keep going through them. I mean, don't make a bad situation worse by pursuing industrial relations legislation which is gonna make our workplaces less flexible, and put workers in a position where the flexibility that's been valuable to them is lost. Don't pursue policies where you're making competition worse, like we've seen in the airline's industry. Don't add $188 billion dollars of spending since they came into government $7,000 For every Australian of additional spending that Labor has pursued. I mean, I can keep going down the list. But it's...

PATRICIA KARVELAS:
No, no lists overall, you know that! I just want to talk about whether you think the stage three tax cuts coming in next year would be inflationary. They're going to put money in people's pockets at a time where, as you've identified, inflation is an issue. Is that a good idea? Should they be delayed?

ANGUS TAYLOR:

We know from past bouts of inflation, the best way to deal with this is to control the growth in government spending. The problem with using taxation as the lever to try to control inflation is it slows the economy, it slows the supply side of the economy, and you need a strong supply side of the economy to take pressure off inflation. We've got productivity in this country, which has gone backwards sharply. Labour productivity, we've never seen this before, the level of collapse in labour productivity. Putting extra taxes on income, personal income, is not the way to deal with that problem. And can I add to it by saying this, PK. We've seen a 15% increase in taxes paid by Australians on average over the last 12 months. This is an enormous increase in the amount they're paying in tax. A big part of that is because of the impact of bracket creep, where people's incomes push up into more of their income pushes up into higher tax brackets. And this is a big part of the pain that's being felt. So we don't think taxes are the right lever to pull here. We need lower taxes in this country to have a more productive economy...

PATRICIA KARVELAS:

I understand that's your broader view, but do you think that the timing is bad and that it could be inflationary?

ANGUS TAYLOR:

No. I mean, if Labor gets their act together, and deals with the source of the inflation problem here and not just deal with the symptoms, then this is perfect timing. The reality is Labor's not dealing with those issues. And I think the broader question here is how they get on with the job and sort this out because it's not happening right now.

PATRICIA KARVELAS:

Very quick one because we're about to hit the news. But I have to ask - the GST, the AFR reports State Premiers are pushing the government to extend the No Worse Off Guarantee. It would cost $5 billion a year. Should it be extended?

ANGUS TAYLOR:

Well, throwing more money around right now is not the answer. Whether Anthony Albanese has the strength to be able to deal with that, you know, there's no State Premier who doesn't want more money, of course.

PATRICIA KARVELAS:

Do you think the Federal Government should say no?

ANGUS TAYLOR:

It's a real test for him. We haven't seen a specific proposal, so it's hard for me to comment without seeing any specifics, PK. But what I will say is throwing money around is not the answer right now, which is what I've just been saying.

PATRICIA KARVELAS:

Angus Taylor, thanks for joining us.

ANGUS TAYLOR:

Thanks PK.

ENDS.