Expert challenges Coalition's inflation comparison with Labor
A senior lecturer says the Coalition's Treasury spokesperson used inconsistent inflation metrics to criticize Treasurer Jim Chalmers, while other analysts note Australia’s higher headline CPI and labour market strength.
The Coalition’s assistant treasury spokesperson, Kevin Hogan, released a statement after the Reserve Bank of Australia’s recent rate rise, questioning why Australia’s inflation is higher than that of comparable advanced economies. Hogan cited core inflation of 3.6% in September, claiming it was the highest among major economies such as Canada, Germany, the United States and the United Kingdom.
Sydney University senior lecturer in econometrics Luke Hartigan said Hogan’s comparison was misleading because each country uses different definitions for core inflation. He explained that the United States relies on the Private Consumption Expenditure deflator, which excludes food and energy, whereas Australia’s measure removes a broader set of volatile items. Hartigan suggested that headline CPI provides a more comparable gauge, showing Australia at 4.3% versus 3.7% in the United States, 3.1% in Canada, 2.8% in Germany, 4.0% in the European Union and 3.6% in the United Kingdom.
Hartigan attributed part of Australia’s higher inflation to the Reserve Bank’s relatively gradual rate hikes after the COVID-19 pandemic, describing the approach as a “narrow path” aimed at preserving labour-market gains. He also noted a productivity constraint, with the economy’s growth rate near a 2% annual “speed limit.”
Jonathan Kearns, chief economist at Challenger Investment Management, acknowledged Australia’s inflation challenges but highlighted the country’s comparatively strong labour market, noting lower unemployment than New Zealand, Canada and Europe. He referenced the “misery index,” which combines inflation and unemployment, placing Australia in the middle of the range at 9%, between the Euro zone (10.3%) and the United Kingdom (8.3%).