Facing increasingly strident accusations that Labor has broken the Australian economy, the unpalatable truth facing Prime Minister Anthony Albanese and Treasurer Jim Chalmers is their relative powerlessness to stem criticisms because the big wheels of the economy are set internationally.
The International Monetary Fund has warned that the good luck that helped the world economy overcome the turmoil caused by the US-Israel war against Iran could soon run out.
Meanwhile, Chalmers has forecast a year of economic turmoil, pushing out Labor’s timeline to call the next election, and warned progressives not to sneer at voters feeling pain and shifting to One Nation.
A cost of living tsunami looms and Albanese and Chalmers risk being snookered at home and offshore.
The IMF predicts Australia faces the biggest increase in unemployment in the developed world next year – even as our economy remains one of the globe’s fastest-growing and inflation cools – with warnings the AI boom and soaring government debt are a growing risk to all nations.
The fund’s six-monthly updated economic outlook predicts unemployment in Australia is expected to climb by 0.3 percentage points, from 4.4 per cent this year to 4.7 per cent in 2027. The fund also predicts Australia’s economy will grow by 1.9 per cent this year and 1.6 per cent in 2027, marginally lower than earlier forecasts.
And then there is the Reserve Bank of Australia pushing official interest rates to a 15-year high of 4.6 per cent.
For Labor, this bag of mixed fortunes is being turned into a bigger political liability by the combination of higher fuel prices caused by US President Donald Trump’s lingering war on Iran and his crackpot tariffs.
It gets worse: Trump’s surprise decision to suspend sanctions on Russian diesel fuel has stunned allies and, coupled with his failure to negotiate an end to his Middle East misadventure, will prolong the oil crisis and cause the world economy to drift in stasis until the Democrats take up their seats in January following next month’s midterm elections. Then they may be able to rein in a president who uses international relations for personal gain and throws other countries to the wind.
Back home, Opposition Leader Angus Taylor and One Nation leader Pauline Hanson chant in unison that Albanese has broken the economy.
Albanese has become the face of Labor. He announces policies and chases younger voters with clumsy appearances alongside influencers on social media. The prime minister and his advisers are treating political spin as grist for the mill, with the unfortunate consequence of making Albanese vulnerable to personal criticism.
In Hanson’s heartland, her older supporters want somebody to blame and threaten to punish Albanese (and the Coalition, for that matter).
Albanese and Chalmers are facing global financial headwinds that threaten to limit growth. They also see opinion polls that suggest economic discontent has had a hand in One Nation’s rapid rise in popularity.
Without bold reforms and tough but possibly unpopular electoral decisions, the Australian economy looks stuck for now in the slow lane.
The question is will Labor have the courage and commitment to do the right thing to lift Australians out of the doldrums?
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