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<\/p>\nTreasurer Jim Chalmers has rejected claims that government spending has fuelled inflation, saying such criticism was \u201cmotivated by politics\u201d.<\/p>\n
It comes after several of the nation\u2019s leading economists questioned the Albanese government\u2019s fiscal settings ahead of the central bank\u2019s rate decision on Tuesday.<\/p>\n
Government spending as a percentage of GDP has sat at an average of 22 per cent since the 1960s.<\/p>\n
But this has ballooned out to about 28 per cent since the high levels of government spending during the pandemic, which did not abate following lockdowns.<\/p>\n
Mr Chalmers told Sky News he would take responsibility for his economic record but denied suggestions that public spending was driving inflation.<\/p>\n
\u201cI see that commentary. Often that commentary is more motivated by politics than it is founded in facts,\u201d he said.<\/p>\n
\u201cWe will continue to play our part in managing the budget and the economy as responsibly as we can, recognising these inflationary pressures have been hanging around.\u201d<\/p>\n
It comes after AMP chief economist Shane Oliver said \u201cthe best thing\u201d for the government to do to bring down inflation would be to \u201ccut government spending\u201d.<\/p>\n
Mr Oliver told Sky News he was not motivated by politics, like Mr Chalmers said, and pointed to high public spending as a percentage of GDP.<\/p>\n
“I’m not motivated by politics, I am not favouring one side or the other here, I’m just analysing the situation as it is,” he said.<\/p>\n
“I’m not saying that government spending has boomed in the last six months. It’s really the fact that it’s boomed over the last six or seven years.<\/p>\n
“You’ve got to go back to World War II to see public spending as a share of the economy around these levels.”<\/p>\n
<\/p>\n
Mr Chalmers blamed private spending – not public spending – as the big driver in the uptick of inflation.<\/p>\n
Inflation lifted 3.8 per cent<\/a>\u00a0in the 12 months to December and the\u00a0unemployment rate sits near historic lows<\/a>.<\/p>\n Markets have priced about a 73 per cent chance of a rate rise on Tuesday following a period of already-high interest rates.<\/p>\n Australians saw rates increase 12 times under the Albanese government and only fall three times.<\/p>\n IFM Investors chief economist Alex Joiner warned that \u201cthe fiscal guard rails have come off\u201d the government\u2019s budget.<\/p>\n EQ Economics managing director Warren Hogan said that the government needed to \u201ctighten up fiscal policy just a little bit\u201d.<\/p>\n Meanwhile, shadow employment minister Tim Wilson told Sky News that Mr Chalmers was not in control of his portfolio.<\/p>\n \u201cThere are a number of drivers of inflation and they’re all backed up by excessive government spending because he can’t manage his budget,\u201d he said.<\/p>\n \u201cHe’s borrowing from the future to pay for today. What that’s doing is driving inflation\u2026 to try and cover for their overall economic mismanagement.<\/p>\n \u201cYou just need to look at the employment data. Eight out of 10 jobs are created directly or indirectly by government expenditure. And that is what is driving inflation.\u201d<\/p>\n