Sarah-Jane Tasker: How ‘relief’ will drive up inflation

Another Budget week done and another reminder that WA’s resources sector continues to power Federal and State coffers.

The commodities boom, including our iron ore and gas exports, delivered about 20 per cent of the Federal Budget bottom line’s improvement. WA’s Budget papers showed that iron ore royalties tipped $9.3b into Treasury coffers this year.

It is this healthy boost from our booming mining and energy sectors that helped both the Federal and State treasurers not only announce a surplus, but also measures to ease cost-of-living pressures.

There is no doubt many families are doing it tough and desperately need the support provided in both Budgets, especially the energy bill credit.

But Federal Treasurer Jim Chalmers and his WA counterpart Mark McGowan are kidding themselves if they believe their cost-of-living measures won’t add to inflationary pressure.

Veteran budget expert Chris Richardson said this week a net increase in government spending adds to inflation, regardless of how the support is delivered.

“It doesn’t matter the point at which you’ve saved money. The key point is you’ve saved money, and you then spend it,” he said.

Chalmers and McGowan are smart enough to know that’s true but when their measures add to inflationary pressure and the Reserve Bank is forced to counter through higher interest rates neither Treasurer will take responsibility. They’ll simply shine the torch on number one villain Governor Philip Lowe.

Let the blame game begin.