Facing escalating challenges at home and abroad, the Albanese government must focus on the long game
Any thoughts of a honeymoon period for the new Albanese government are already diminishing as the challenges mount both at home and abroad. The Reserve Bank of Australia has raised interest rates for the second month in a row today, marking the first back-to-back rate rise in 12 years. Wages remain flat and the cost of living will continue to rise: mortgage repayments are on the way up, and the effects of the gas and energy crisis will keep flowing through the economy for months to come. On the international stage, the new PM and his foreign minister, Penny Wong, have been quick off the blocks, but the range of challenges facing Australia in our region alone is daunting. Much has been made of Wong’s early trips to Pacific neighbours, but none of the issues she will be addressing (most related either to the territorial influence of China or to climate change) can be solved immediately. At best, as with Anthony Albanese’s visit to Indonesia this week – and, indeed, as with many of our domestic policy problems – the new government has only just begun working its way through a steaming pile of neglect left behind by the Morrison government. Its immediate task is to find responses that won’t exacerbate the existing problems.
The Reserve Bank has raised the official cash rate by a larger-than-expected 0.5 percentage points, the biggest one-month increase since early 2000, and is warning that more rate hikes are on the way. Risk and uncertainty are baked into the economy for many months yet, as is a projected rise in the inflation rate. So there is no magic remedy to rising costs for consumers, either from the Reserve Bank or the government. There are other worrying signs too: building approvals are down 32 per cent on the same time last year, hitting a construction industry already suffering from some major company collapses.
Various commentators are already trying to pin the energy crisis on a government whose ministers have been in the job for all of a week, and they have also begun delving into the distant past to find out who is responsible for the failure to introduce a policy that would have reserved some of Australia’s gas for Australian use. Spoiler: neither the previous Labor or Liberal governments introduced one. Most recently, and this is for the News Corp commentators in particular, we had a Coalition government in power – for nine years.
The one weak gas policy that the Morrison government did leave in place was a trigger that could temporarily limit exports and increase domestic supply. But it won’t work until January at the earliest. The Ukraine-related price spikes aren’t going away either. Combined with the cost incurred by our coal-fired power stations falling over, it’s going to be a tough winter for many low-income earners.
Albanese and his new ministers will be tempted to offer temporary relief (especially to low-income earners), and this will be welcome and necessary. More important will be taking a few deep breaths and adopting a long view on what’s required in terms of a steady transition to a cleaner and more equitable economy. The Labor ministers have had long enough to think about it, so presumably they’re ready to swing into action, albeit in the cautious way they’ve all repeatedly promised.
As with the re-engagement with Pacific nations, Albanese’s trip to Indonesia has offered promising signs. Our near neighbour isn’t in the top 10 of either our import or export markets. And the relationship has been a rocky one over many years, to the point that it has sometimes seemed like Australian leaders don’t understand that Indonesia is the largest South-East Asian economy, a market of 270 million people, and tipped to be one of the world’s five largest economies in the future.
Albanese, meeting President Joko Widodo yesterday, acknowledged that Australia’s economic relationship with Indonesia has “struggled to keep pace” with the country’s rise, and his visit so early in his prime ministership is a sign of an intention to change that. If Albanese can start to revive the flailing China relationship too, his government would go a long way towards ensuring Australia’s future prosperity and security in the region. It’ll be a long road though.
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GOOD OPINION
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