Chalmers’ economic update is likely to show real wages going backwards through 2022-23,which would mark a third successive year of inflation outpacing wages growth.
He said there was no credible forecast that suggests wages could keep up with inflation at present,while the RBA’s higher interest rate settings would affect broader economic growth.
The treasurer said the budget had to do more policy heavy lifting by focusing on ways to lift overall productivity,especially by improving supply chain networks across the country.
“Almost every element of our economic plan is about making our supply more resilient,making sure that we can get the workers that we need,making sure we can get the goods to market,making sure that we can lift the speed limit on the economy,” he said.
While Chalmers will update the state of the economy,it won’t be until October that the Treasurer hands down a new 2022-23 budget. That will include savings the new government says it has found since taking office.
Stiglitz,who is touring Australia and meeting with politicians including Prime Minister Anthony Albanese and Chalmers with support from the independent think tank the Australia Institute,said the US was very close to if not already in a recession,with poor employment figures and the Federal Reserve hiking interest rates at a rapid pace.
He said Australia was in a much more robust position than the US,but if the government did not focus on improving economic supply including more workers and improved local manufacturing,the country was at risk.
Australia was “not as likely” to tip into a recession,Stiglitz said,unless a combination of European Union and US policies drive recessions and growth in China remains sluggish.
“That means that the global economy will be particularly weak,and particularly weak for Australia. And that means,I think,you are in a fragile position,” he said.
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Hiking interest rates is only one “very blunt” measure to get inflation down,Stiglitz said. The government should look at measures to increase the labour force,including through immigration,and its planned changes to childcare. Policies to improve manufacturing productivity and green energy investment would also help,he said.
Stiglitz said there was only a small risk that the government cut back spending by too much. But one thing the government should look at is introducing a windfall tax to big businesses that make a huge profit from exports,including the gas and mining industries.
“When you see such redistribution caused by high energy prices,and the money going out of the country because they’re foreign-owned,disproportionately,it seems to be almost a no-brainer,” he said.
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