Audio Excerpt - Kasy Chambers:

“I think ‘the cost of living crisis’ is a phrase on everyone's lips. But it doesn't tell the whole story. I think there's a context of growing inequity and inequality in Australia.”

ASHLYNNE:

We’re constantly hearing that Australia is in a cost of living crisis. And we know that, because the prices typical Australians pay for everyday things have been going up, much faster than our wages.

Audio Excerpt - Kasy Chambers:

“The cost of living is useful in that it affects everybody. Everyone can see that their groceries are going up. But I think it's also worth remembering that they’re going up more for people who are already poor.”

ASHLYNNE:

This is Kasy Chambers. She is the executive director of Anglicare Australia.

Anglicare works with the poorest and most vulnerable Australians and that’s who Kasy is used to seeing; families, young people and children who are homeless or in crisis.

But Kasy says more and more people have been seeking help every day, and they aren’t the types of people she would typically see.

Audio Excerpt - Kasy Chambers:

“I hesitate to use the word middle class, new people that, you know, a demographic we wouldn't have seen before. And we're seeing them more often. We're actually seeing them in every fortnight, every pay cycle.

And it's very common for us to be talking to people who are skipping meals, not insuring the family car, not filling their, their scripts, you know, at the pharmacist. People talking to us about the anxiety of every single day, not knowing whether they're going to be able to afford the rent or just praying that another bill won't come in just yet.

And we'll start to see those people in our emergency housing services who are, who are coming to those services saying, you know, I can only keep juggling the rent for another month or, I've just heard from the landlord that my rents being put up $60 a week. What are my options? Unfortunately, the end part of that cascade is homelessness.

We do know, you know, of many, many families around the country where kids are going to school from cars. We really should be able to find people places to be.”

[Theme Music Starts]

ASHLYNNE:

From Schwartz Media and 7am, I’m Ashlynne McGhee, this is The Cost: Inside the living crisis.

This week, as we approach a federal budget that could define this government and the conditions so many of us are living with, we’re bringing you The Cost: Inside the living crisis.

We’re going to explore the impact this crisis is having on our country, why it just isn’t ending, and whether our leaders are doing enough to protect our standard of living.

Today, Executive Director of the Australia Institute, Richard Denniss, on when prices will finally stop going up, and the kind of country we risk turning into once it’s finally over.

It’s Monday, May 13.

[Theme Music Ends]

ASHLYNNE:

All right, Richard, I want to start with a question I think all of us are hoping there's an answer to which is when does this cost of living crisis end?

RICHARD:

Well, it ends when the people who sell us stuff stop jacking up the prices so fast. And the problem is the people who sell this stuff have had a great couple of years. So our cost of living crisis is their profit surge. And, you know, we talk about, like, we're all in this together or something.

Well no, when we talk about the cost of living, the cost of living, we make it this singular thing, the cost of living. But of course, there's 25 million people out there that have all got entirely different costs of living. So, the fact is, young people in Australia are doing particularly tough because they're already on the lowest incomes. They're spending every cent they earn, if not actually going into debt.

For a young person who moved out of home a year ago, who's in a low paying job, who's repaying their HECS debt, I'm telling you now, they are hurting bad. And by historic standards, yeah, have really endured a reduction in their disposable income and their quality of life, you know, that's unprecedented in modern Australian history.

So unfortunately no one knows when the cost of living crisis will end, because it's not caused, it’s not like rain, it's not like a storm, it's not like we're waiting for nature to pass. What we're waiting for is for the people who sell us things to stop jacking up the prices so much, and get back to wages rising faster than prices.

At the moment we've got prices rising faster than wages. Again, that's good for the people who sell stuff as bad for the people who work for a living and buy stuff.

ASHLYNNE:

And so, is this different from the kind of inflation crises that we’ve seen in the past?

RICHARD:

Yeah, no, it's really quite different. So. no one knows when it will end. We don't know exactly what the Reserve Bank will do. We don't know what will happen with, you know, Russia's invasion of Ukraine and the oil price and, you know, there's all sorts of things. That's why we don't know. What we do know is that this really started after the COVID crisis ended.

Audio Excerpt - News Reporter 1:

“If you thought you'd been paying more for meat, veggies and petrol over the past few months, you were right. Australia's annual inflation rate leapt to 3.8% in the June quarter, the highest jump in more than a decade.”

RICHARD:

All of a sudden, people had been locked away unable to spend money. You know, stuck at home, working from home, no holidays, no going out to the movies, no going to see a band. All of a sudden when people could actually go out and spend money again they did, and they flooded out. And a whole bunch of people who sell things to those people thought, I can't even fit you all on my plane, so I'll double the price of getting on my plane.

Audio Excerpt - News Reporter 1:

“Well, travel agents say they've never seen anything like it. With no such thing as cheap seats this summer and airlines struggling to meet demand.”

RICHARD:

Or I can't fit you all in my restaurant, so I'll double the price of my restaurant meal. So another big part of it is, both in Australia and around the world, we get what we call supply chain bottlenecks. The big factories in China that made a lot of this stuff were severely disrupted by COVID.

Audio Excerpt - News Reporter 2:

“What we're seeing now is that there's a lot of goods that are just stuck in China, they can't get out. I mean, if you want to get your goods, to export them safe from the port near Shanghai, you can't get them out because you can't even get the drivers to come and bring your goods to the port...”

RICHARD:

And then you've got the profit gouging, the price gouging. What you saw was a whole bunch of companies who were thinking, oh, well it's been a while since I've put up my price, and everyone else seems to be putting up their price at the moment, now would be a good time for me to put up my price.

Audio Excerpt - News Reporter 3:

“More than two thirds of our nation's inflation problem is made up of increased corporate profits. Wages barely moving the dial. From pre-COVID…”

RICHARD:

So all of those things have combined, and we've seen record inflation. I'm seeing real wages fall, which is pretty rare in Australia, and now, you know, things are coming back. You know, wages are starting to grow a bit, inflation is coming down a bit. But yeah, we're certainly not out of the woods and, well we might get out of the woods, but we're gonna wind up in a paddock that wasn't as nice as the paddock we were in beforehand.

ASHLYNNE:

And Richard, you know, do you accept that consumer spending has been a big part of this or do you disagree with that?

RICHARD:

Look, it's a part of it, but let's be clear - consumers - isn't a thing. You're a consumer. I'm a consumer. What I do and what you do isn't the same. So some people are really hurting right now, and let's be clear, other people are having a great time, right? You know, CEO pay is doing fine, high income earners wages are rising faster than low income earners. Are consumers out there still spending? Yes they are. But again, this is the problem when we treat - the economy - as this big singular thing and when we talk about - the cost of living - and when we talk about - consumers - as one big, cohesive, homogenous group, we really miss what's happening.

ASHLYNNE:

Richard, this cost of living crisis, this inflation. was kind of forecast to be over by now. So can you talk to me about who’s been forecasting that? And, you know, perhaps if it’s mystified some people in your profession, and economists, and why hasn't it ended yet?

RICHARD:

My profession are mystified all the time but, you know, we're just really good at pretending that we know more than everyone else about what's going to happen. Look, no one has a crystal ball. And, you know, basically the Reserve Bank of Australia, the RBA, has jacked up interest rates really fast and really high. And that's, to be clear, designed to put a lot of pressure on people with mortgages. The idea, this is not an unintended consequence, this is the plan, this is the lever. When you increase interest rates a lot, and people's mortgage repayments go up a lot, the people whose mortgage repayments went up a lot spend a lot less at the movies. They spend a lot less at the supermarket. They spend a lot less on a whole bunch of things.

Well, inflation is trending down but why hasn't it happened fast enough? Look, how long's a piece of string? But inflation is coming down, it is going in the right direction. I think it's wrong to get too obsessed with the inflation rate. It's dangerous and we might end up accidentally having a recession and causing a lot of unemployment and a lot of pain because some people are so worried about inflation being, you know, 4% instead of 3%.

ASHLYNNE:

After the break, can the government ease the pain without first inflicting more of it?

[Advertisement]

Audio Excerpt - Jim Chalmers:

“So the budget will balance. The near-term pressures that people are under, under, and the longer term goals and opportunities in our economy. It will fight inflation without smashing the economy. It won't be a smash and grab budget because people are hurting and the economy is slowing, but there will be a premium on responsibility and restraint. There will be savings in the budget. There will be spending restraint in the budget…”

ASHLYNNE:

So, Richard, as we head into a week where we're going to see this really important federal budget, I want to ask a bit more about that approach you just spoke about. What is it that we could change or what could we be doing differently as a country to combat it?

RICHARD:

Well, what is it about that approach? Look, just to be clear, a lot of people like that approach, right? A lot of people at the Reserve Bank like that approach. A lot of people in Treasury like that approach. A lot of people in Parliament like that approach. And a lot of economists like loading up pain on people to control inflation. I'm an economist, but I don't like that approach. I think interest rates have a role to play in managing the economy. I think inflation is something that you want to take seriously, but I think there's a lot broader range of policy tools available for governments. If they're worried about inflation than simply loading up pain on young people with mortgages.

So, for example, during COVID we made childcare free. Guess what? When you make childcare free, you lower the cost of living. Because childcare counts in our consumer price index. This is not terribly complicated stuff. And if we want to impose some pain on people, if we want to take some consumer demand out of the economy, here's a crazy thought, what if instead of tax cuts for high income earners, we had tax increases for high income earners? What if we increased taxes on high income earners who are spending the interest they’ve got on their deposits, on their new telly and their overseas holiday, we can take demand out of the economy that way.

But we live in a country where it's kind of heresy to talk about that and it's big and important to say that consumers have to take their pain for the national good. Well, high income earners aren't taking their pain. They're about to get a full $4,000 tax cut. That could cause inflation, I don't hear many people complaining about that.

ASHLYNNE:

And so what appetite do you think there is in government now to take on those kind of big, sort of sacred cows really, and make big structural changes? And also, demonstrate confidently that those things are going to work?

RICHARD:

Well, we know they work because we've done them before and they’ve worked. There's nothing hypothetical about this. In last year's budget, Jim Chalmers took a leaf out of the book that I just described and designed a sort of an energy price supplement that was designed to improve people's cost of living and lower inflation. You asked about the appetite, I think they're starving for this. But, they also know that a change this big, a change in the way to admit the economy works and a change in the role of government in controlling inflation. They know that's a big task and I suspect they’re just kind of chipping away at the edges rather than saying, look, you know, this is a new problem. We need a new approach, as luck would have it, we've got one. Here we go.

ASHLYNNE:

So Richard, you talked about the treasurer, Jim Chalmers, taking at least one page out of your book last year. So, as we're speaking a day out from the budget, what is the most urgent thing you'd like to see the treasurer address on Tuesday night? And, you know, maybe take another page out of your book?

RICHARD:

Look, I don't mean to reject the premise of your question, there are so many urgent problems in Australia. Support for women fleeing domestic violence is urgent. Indigenous health in regional areas is urgent. The need to tackle climate change is urgent. There are lots of things we need to do.

So for me, what's urgent is for the government to say out loud that Australia is one of the richest countries in the world, that we live at the richest point in world history. And if we want to solve these problems, we can, but if we want to solve lots of problems, then we're going to have to do some big things differently and Australia is one of the lowest tax countries in the world. That's a fact. The OECD website makes it clear that pinko lefties at the International Monetary Fund make it clear. Australia is the third largest fossil fuel exporter in the world but we collect more revenue from kids that are paying their HECS debt than we do from the gas industry paying petroleum resource rent tax. We spend $12 billion a year subsidising the fossil fuel industry. We should not be subsidising fossil fuel expansion in 2024. We should be subsidising better health care, better education, better child care, the rollout of renewable energy.

So we’ve, we've got a kind of 1970s budget, even though we've got the problems of 2024 and until we change that we'll get kind of stuck with well-meaning people asking is it more important to invest in health or education? I don't know, what about both? My favourite observation is in Norway, they tax their oil industry and give university degrees to kids for free. In Australia, we subsidise our fossil fuel industry and charge our kids a fortune to go to uni. That's why budgets matter. Budgets are about choices and we need to urgently make big, better choices.

ASHLYNNE:

So Richard, I know it’s not great to simplify the cost of living crisis, but I want to ask you about the legacy this is going to have on our country. So when we do finally exit this, is there a risk that if we don't get this right, some people are going to live with the consequences longer than others?

RICHARD:

Oh, absolutely and that's already happening. We're already seeing this and this is not just brutally unfair to people who were unlucky enough to, you know, just finish uni at this point in history. It's brutally unfair to people who've become homeless or had to flee their home from domestic violence at this point in history.

This is the real pain of neoliberalism. This is the real danger of decades of trading everybody as, you know, well if you're poor it's because you made bad choices. Australia used to be the land of the sort of fair go. Well, now we're the land of suck it up.

It's been decades of talk and we still haven't even increased unemployment benefits. Child poverty in Australia is going up. But, you know, for those earning over 200 grand, strap in, lucky you, you're about to get a $4,000 a year tax cut. That's proof that Australia is not making the big structural decisions that I think we need to make, comma, if we want to solve these kinds of problems.

And to be clear maybe we don't, like maybe I'm shag on a rock here. Maybe most Australians are happy watching income inequality get worse, greenhouse gas emissions go up and social cohesion decline. Not the kind of country I'd like to live in, but it is a democracy, and we do elect people to Parliament to make these decisions for us.

And that's why we have to be careful not to think that there's this thing like a cost of living crisis that's like a cyclone that's buffeting your country. It's entirely imaginary for people that own lots of houses and own lots of shares, and earn lots of money. It's never been a better time to be really rich.

ASHLYNNE:

Richard, thanks so much for your time.

RICHARD:

Thank you, any time.

ASHLYNNE:

And when Richard says he thinks the government is starting to make those bigger changes when it comes to where our tax dollars go, and what we choose to subsidise, Kasy Chambers from Anglicare thinks that too. And she’s also a little more optimistic that they might actually go through with it.

Audio Excerpt - Kasy Chambers:

“We'd like to see the government start to, and not just the government, but the government as leaders of our society, start to talk about the level of inequality we're willing to have. And I don't think most Australians are willing to have the level that we have, so we need to really work on it.

We think that the government does have an interest in social cohesion and equality. The fact that they went back and remodelled the tax cuts, which were going to be grossly unfair, is a really good sign.

And it gives us hope and optimism that, you know, this government does have the spine to do it and that the community has a desire to see that.”

ASHLYNNE:

Of course, we’ll have to wait and see.

[Advertisement]

[Theme Music Starts]

ASHLYNNE:

Also in the news today...

Australia has voted ‘Yes’ at the UN general assembly, along with 142 other nations, on a resolution that Palestine is qualified to join the UN as a full member. That would give the Palestinian delegation more "rights and privileges".

At the moment, Palestinians have an ambassador at the UN with observer status as a non-recognised state and any official change to that would have to be granted by the 15-member security council, where the US holds veto powers.

And,

The education ministers of five states have joined together to call on the Albanese government to do more to help them fund public schools in Tuesday night’s budget.

Under the current funding arrangements, the ACT is the only place where public schools are fully funded to the baseline school resourcing standard.

I’m Ashlynne McGhee, this is 7am. Thanks for listening. We'll see you again tomorrow.

[Theme Music Ends]