Is Labor the better economic manager?

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Speaker 2 For the first time in history, Labor has claimed the crown of better economic managers from the coalition, according to a key election study.

Speaker 2 It comes as Susan Lee accused the Albanese government of either lying or mismanaging their budget. After it was confirmed, they were asking the public service to find savings.

Speaker 2 They're going to tell you they're not cuts, but we'll get into that in a moment.

Speaker 2 The Treasurer has defended the move as a run-of-the-mill reprioritisation to avoid budget blowouts and has denied it amounts to public service cuts.

Speaker 2 And just to make things more complicated, inflation figures are out. It has jumped to 3.8%,

Speaker 2 which would be worrying the government. Welcome to Politics Now.

Speaker 2 Hi, I'm Patricia Carvellis.

Speaker 1 And I'm David Spears.

Speaker 2 And David, I wanted to kick off with the public service story, but we are recording on a Wednesday the news has broken of the new inflation figure and it's higher than predicted.

Speaker 1 Ouch, PK. It is higher than predicted.
This is for data nerds out there, the ABS, the Bureau of Statistics, has shifted from quarterly to the full, complete monthly read on inflation.

Speaker 1 What's it told us? Headline inflation has come in at 3.8%, up from 3.6%,

Speaker 1 and underlying inflation has come in at 3.3%. These are annual figures.
What's the Reserve Bank's target range, PK? 2 to 3%.

Speaker 1 We are now well outside, well above that inflation.

Speaker 2 We're heading to the fall territory, my friends.

Speaker 1 Which is not a good territory.

Speaker 2 You don't want to be there.

Speaker 1 Now, what's driving this? Largest contributors were housing, up 5.9%, food and non-alcoholic beverages, up 3.2%, and so on. But let me read directly from the ABS on electricity.

Speaker 1 Electricity costs rose 37.1% in the 12 months to October 2025. The annual rise primarily related to state government rebates being used up by households, and they are coming off.

Speaker 1 The big question now, PK, what does the federal government do about its rebate, which is due to end at the end of this year?

Speaker 1 It made the case all along, certainly leading up to the election earlier this year, that these rebates were needed because of what was happening with inflation.

Speaker 1 If that problem's still there, in fact, inflation, I think, is now higher than it was at the time of the election. That's the argument for extending these rebates, for keeping them going.

Speaker 1 Because if you take them off, those power prices for households will jump up again. But that costs money, a lot of money.

Speaker 1 And that brings us to the other part of today's conversation about how the government is paying for everything. Yeah, that's right.

Speaker 2 But it's interesting. I've spoken to a couple of different Labor people about their thinking on this.

Speaker 2 And the Prime Minister's instinct, I think, you could tell from in terms of the energy rebates, was to keep it on the table, extending it, because he's very alert to this. But I'll put this to you.

Speaker 2 I've spoken to like a senior labor source who says actually it kind of puts pressure on us

Speaker 2 not to extend the energy rebate. And I'll explain because it's counterintuitive, but it's about government spending.

Speaker 2 You know, this person was saying to me, government spending is becoming a problem for the optics of this government and the real and the reality too, not just the look of it.

Speaker 2 But that's going to put a lot of pressure. And now, you you know, you mentioned the public service cuts because they are cuts.

Speaker 2 They will say to you, they're not cuts, but sorry, a cut's a cut, like, you know, and equal treatment. I mean, when the coalition does this sort of thing, we call them cuts because they're cuts.

Speaker 2 They are very alert to government spending and how it might be impacting inflation.

Speaker 1 Absolutely. And this was the debate.
in the last term of parliament, wasn't it? It was what role is the government contributing to this inflation problem.

Speaker 1 Now, yes, the government was right to point to all sorts of other factors, global inflation, post-COVID spike, supply chains, the war in Ukraine, all of that driving up

Speaker 1 gas prices and inflation more broadly. But there was always this argument around, well, what about government spending? Is it too high?

Speaker 1 Should it be pulled off to put some downward pressure on inflation? Or do you need that government spending to help people through this difficult period of high prices?

Speaker 1 So this brings that conundrum back onto the table for the government. particularly with this energy rebate.
Does it keep that spending going to help people with these high prices?

Speaker 1 You've got to turn this tap off eventually ken henry's made this point as well when it comes to this energy rebate the longer you keep it the harder it is to turn it off and can you turn it off later in the term when you're getting closer to the next election okay

Speaker 2 you know politically it might be easier to do it now but it's still going to be painful if inflation's running where it's now running it's always going to be painful and the problem they run into by extending it is the accusation that they're just going to keep this forever, the Ken Henry line.

Speaker 2 You know, they say it's not forever, but like,

Speaker 2 kind of looks like a forever thing, doesn't it, if you keep doing it? So it is a conundrum. And back to the government spending issue,

Speaker 2 talking about it in more substance. So the Treasurer has been doing the media rounds defending.

Speaker 1 the move. Well, he just a bit.
But re-spitting. He did the rounds this morning before this inflation figure dropped.
Very important. We'll see.
You know, there'll be question time this afternoon.

Speaker 1 So we'll hear, no doubt, something from the Treasurer on the inflation number.

Speaker 1 But this morning, his whole effort, wherever he was talking, was to play down the story that the Financial Review has been running about spending cuts of up to 5% across the public service.

Speaker 1 And his line all morning has been, well, nothing to see here. This is what we do before every budget.

Speaker 1 We ask departments, ministers and agencies to identify low priority areas of spending so that we can take that money and reprioritise it. Of course, he's not ruling out using that for savings as well.

Speaker 1 It sounds like this is still...

Speaker 1 a fluid situation leading up to the MIEFO, which is the mid-year budget update, which we'll get before Christmas, Christmas, and of course leading up to the budget in May as to how hard they're going to go in terms of taking the scalpel to government spending.

Speaker 1 The problem when it comes to the public service is, yeah, that wages bill has been growing since Labor came to office.

Speaker 1 The higher headcount, the higher wage growth, all of this is putting a strain on the budget.

Speaker 2 It is, but it's important to mention, I think it is a fair part of the story that they did pull back on the consultants. significantly rather than...

Speaker 1 I don't think that's been enough to make up for the increase that we've seen in the headcount.

Speaker 2 Yeah, I think that is absolutely correct. But it is like an important part of the story, I think, that we had, that they're right, that there was an over-reliance.

Speaker 2 And also, you know, the other part of that story, which is not a money story, but is the kind of intellectual rigor of a public service that's strong, that can actually come up with ideas.

Speaker 2 That's a different pod, but you know what I mean.

Speaker 1 Look, the other difficult, the other point to make here is this increases the difficulty for the government.

Speaker 1 If it's trying to find savings where it can, it's trying to maybe put some downward pressure on inflation by reining in government spending where it can. This makes it more difficult to embark on any

Speaker 1 serious productivity reform in this coming May budget and really in a lot of ways this May budget next year. I know we're months away from it.

Speaker 1 But this is the time in this electoral cycle, in this parliamentary term, when Labor should be able to do

Speaker 1 whatever reform it wants to do this term. Sure, it might take something else to the next election.

Speaker 1 But it's got this extraordinary moment of political capital, big majority, opposition demoralised and divided.

Speaker 1 The May budget 2026 is the point at which you really should be doing the reform and then betting it in, selling it at the next election. You've got the time to do it, right?

Speaker 2 It has to happen. Yeah.
It has to happen.

Speaker 1 It becomes harder if you're also trying to, you know.

Speaker 1 scrooge where you can and squirrel away money to to deal with this problem uh of inflation but also the ballooning uh public service so it just becomes more difficult what's the answer to all of this productivity getting productivity going growing the pie growing revenues for everyone lifting everyone's living standards.

Speaker 1 Well, easier said than done. The Treasurer has been asked this morning on Radio National about

Speaker 1 the economic reform slash productivity roundtable.

Speaker 1 100 days ago, he's defended all the things that are happening and a mountain of work going on behind the scenes, he says, that we'll see the fruit of that in the May budget. So, yeah, we'll see.

Speaker 2 We will see. Just back on the public service in terms of the political dimensions.
Susan Lee, I thought, had a pretty good hit out on this to give us some credit.

Speaker 2 She's been under so much pressure, but I thought that she did land the argument that the government was full of well either lying or incompetence right and and she is right to point out that they went in very hard labor against the coalition for the public service cuts for for and you can see why the politics was delicious for labor but then to kind of plan cuts after the election after sort of suggesting you wouldn't well it's a fair point to make it's a very fair point the fairest of all points i mean you know obviously there's a big question mark over what the coalition would do in relation to public service cuts.

Speaker 1 They've dropped the policy they took to the election, which was vague itself, but where would they go?

Speaker 1 You know, Ted O'Brien, no doubt, will get questions about what they'll do and all sorts of things. He's due up at the press club, the shadow treasurer,

Speaker 1 very soon as we record this. He's not yet spoken.
But the inflation number dropping just before he speaks at the press club, what a gift.

Speaker 2 Oh, absolute gift. Look, the coalition has had many bad days since the election.

Speaker 2 This helps them today. And you would think that this would be if their brains are functioning and there's days where I don't see them functioning.
I'm sorry, but I've seen it.

Speaker 2 I'm thinking, I'm hoping for their sakes that today they realize that the inflation angle is their main angle in question time as well.

Speaker 2 Look, you mentioned Ted O'Brien about to give this major speech at the press club.

Speaker 2 He's focusing interestingly on what he's described as the broken intergenerational compact, a real pitch to young voters. We know bits of what he has to say, David.

Speaker 2 What's What's the vibe?

Speaker 1 Look, I think these are sort of the principles that he's laying out.

Speaker 1 Don't expect the detail anytime soon, but the principle being that we've got a problem with debt and deficit, and it's younger generations who will carry the can for this.

Speaker 1 I think it's important really for both sides of politics to start making the case to younger Australians

Speaker 1 to get on board for the need for some spending restraint. Many ways, a lot of them would be thinking, why should we carry the burden of this?

Speaker 1 You know, it's the older generations that have racked up this debt and deficit and pushed us out of the housing market and all sorts of things. But at the end of the day,

Speaker 1 reducing that debt problem is going to be of benefit mostly to younger generations who are going to inherit all of this. So it's about making that case to them.

Speaker 1 I was looking at some research on this today, some polling from JWS research, which

Speaker 1 shows there is an appetite there to deal with deficit and to rein in spending. It's actually interesting, amongst the younger demographics, the appetite is a little weaker.

Speaker 1 It's still there, but it's much stronger amongst the older demographics. And I just think that tells us

Speaker 1 both sides do need to make the case to younger Australians as to why reining in the deficit is in their interests.

Speaker 2 I think younger Australians have lived in a very different era. And I think politics have shifted a lot.

Speaker 2 And if one point that actually Tony Barry often makes, he won't mind me mentioning, is based on the, you know, he's a Redbridge director based on their research is that increasingly, you know, you used to be able to sort of say say, this is how much deficit we have.

Speaker 2 And there was broadly an understanding in the community about what that meant, whereas that's kind of eroded now.

Speaker 2 You don't get that.

Speaker 1 And Susan Lee's made this point herself, to be honest, not long ago, and she gave a speech where she talked about this and dealing with this post-COVID government dependency that's built up.

Speaker 1 And that's kind of talking to how do you turn that sentiment around. Maybe, you know, next year, gross debt is set to tip over the $1 trillion mark.

Speaker 1 So maybe that will sharpen everyone's focus on these things. But yeah, as I say, I think you can see why, obviously, the Liberal Party wants to get people focused on deficit.

Speaker 1 This is a weakness for the government. But ultimately, they'll have to have an alternative.

Speaker 1 And let's not forget, as Jim Chalmers will tell you every five seconds, if given the opportunity, the Libs went to the election, actually promising bigger deficits for the first two years at least and higher taxes.

Speaker 1 So that's the record the Libs have got to shake somehow.

Speaker 2 They really do have to shake it.

Speaker 1 Which probably brings us to this.

Speaker 2 It does. And I just want to mention we're recording this before the treasurer stands up.
He's actually going to stand up.

Speaker 2 And I commend that because I was sort of, there was a view, and I'm going to say it. I had your doubts.

Speaker 2 Yeah, no, there was a view that, and the coalition's been arguing, you know, that the treasurer is happy when there's good news to stand up, but not when there's bad news.

Speaker 1 Yeah, no, look, to be fair, Jim Chalmers, even, you know, carrying the can on the super back down that they had to do, he does stand, he fronts up.

Speaker 2 Yeah, so he's fronting up, he's about to front up, and I imagine he will talk about the different measure of inflation because it's broadened, it's changed, and he'll talk about

Speaker 2 how it's definitely

Speaker 2 lower than when the coalition was in charge and all of those talking points. And it'll be interesting to hear how he answers the inevitable question on government spending

Speaker 1 and its impact. And this rebate.
Oh, this rebate.

Speaker 1 I suspect today it's still we haven't made a decision on that.

Speaker 2 Yeah, because they haven't.

Speaker 2 They haven't.

Speaker 2 So that's right. Look, David, you mentioned where this takes us.
Yes, there's a very, very interesting study out. The Australian election study is a kind of shorthand snapshot of these kind of issues.

Speaker 2 It's a part of the federal election sort of study of what's happened. It's found Peter Dutton was the least popular leader on record in the survey's 38-year history.

Speaker 1 Gosh, for an opposition leader. Worse than Latham.

Speaker 2 38-year history. So

Speaker 2 that's what they're saying. There you go.

Speaker 1 Well, that's not great.

Speaker 2 that's just what immediately came to mind yeah but what does it tell us about um i did see one headline out of this i must admit i haven't read the whole study but um who is the better economic manager because labor coalition has lost its perceived advantage on economic management now you alluded to this in terms of uh the last election where it absolutely and there's other reasons too the bankrolling of those nuclear plants yeah i think that eroded it too the idea that big government goes in and does that like we have been weaning the public off the idea that government goes in and builds these things for a long time, I think.

Speaker 2 And all of a sudden, here we have the right-leaning party telling you they're going to do that.

Speaker 1 I suspect there's a few factors here. One, absolutely, the idea of taxpayer-funded nuclear power plants was a problem.
They dropped that pretty quick post-election.

Speaker 1 Two, and Nikki Sava has written about this in quite a lot of detail in her book, Earthquake, the decision to oppose those tax cuts. Peter Dutton captain's call in the budget lockup.

Speaker 1 His colleagues aghast, but they did it. The higher deficits for at least the first two years, I mean, these sort of things just trashed their economic credentials.

Speaker 1 That flip to see Labor as the preferred manager is significant. Whether they hold that, we'll see.
But I think for all those faults on the Dutton side,

Speaker 1 you've also got to look at Labor and their management of that inflation problem during the last term. There was a lot of criticism for the three years they were trying to manage that.

Speaker 1 Interest rates did remain high for a long time.

Speaker 1 People were watching what was happening overseas and saying, when are they going to cut here?

Speaker 1 But managing that without the big spike in unemployment that we saw elsewhere, I think, you know, Labor got a tick for that. And that might be part of the reason why we're seeing those results.

Speaker 1 Doesn't mean it gets easy from here for them, though, if inflation is now tracking back up again.

Speaker 2 Yeah, and it's not a small thing to change that perception because Labor really has carried a lot of baggage from history on the perceptions around economic management.

Speaker 2 And in fact, you know, talking about the Treasurer that's about to stand up, who's probably feeling pretty uncomfortable around the inflation stuff, he's been very much, I mean, I remember, you know, having conversations with him, he really was very, very committed to sort of really altering this idea, like being the, and that, and that goes to the Prime Minister's idea, too, of Labor being the natural party of government, that we do run things well, we're not these kind of big spending,

Speaker 2 we're not unrealistic about these things. So it's not a small thing to shift that perception.
You're right, it's a wicked problem. If they can actually entrench it as a view, that's harder.

Speaker 1 I thought it was interesting that they had their caucus meeting this week and being the last week of parliament for the year. This was the final caucus meeting for the year.

Speaker 1 And in some ways, you would think that Labor MPs, they've had a wildly successful year politically.

Speaker 1 Big election win, massive majority, coalition at sea, you know, that they would be almost dancing on the tables in their final caucus meeting of the year, sending each other off to a nice Christmas break.

Speaker 1 But look, there was a deliberate effort, I think, to keep celebrations in check. And the message from the Prime Minister in this final caucus meeting of a big year

Speaker 1 was that point about, look, he actually noted the Whitlam dismissal anniversary, Crash All Crash Through, Labor legend.

Speaker 1 But he made the point that while there are always people who don't think Labor governments are legitimate, his answer to overcoming that was to be stable, was to be clear and to be consistent.

Speaker 1 as a government. And obviously in contrast to an opposition in disarray.
These are the virtues for Anthony Albanese, to be stable, to be clear, not to be overly ambitious and reformist.

Speaker 1 Some in that room, that Labor caucus room, might like to see that.

Speaker 1 But I do think Anthony Albanese, I mean, he would argue that he's reforming, but he very much wants to be the natural party of government through maintaining stable, calm, clear.

Speaker 1 government, not getting too carried away. I thought that message to his Labor MPs at the end of this year was significant.

Speaker 2 Yeah, I couldn't agree more. And that sort of the framing to just sort of set them off on their way.
There was another comment he made about,

Speaker 2 which I thought implied, you help me out here,

Speaker 2 don't take too big a break.

Speaker 2 Wasn't that interesting?

Speaker 1 Almost, this is in verbatim, but keep your phones handy, keep talking up what we're doing, whether it's any bushfires that are happening, whether it's dealing with road trauma, these sort of summer issues, that make sure you're out there talking about our cost of living measures as well.

Speaker 1 Talk about what government's doing. Yeah,

Speaker 1 it was quite quite a contrast. I looked back at actually what he said to the room at the end of last year.
So they were in a more difficult political position.

Speaker 1 We were heading into, you know, months before an election, a lot of fevered speculation about when he'd call it. And again, it was, you know,

Speaker 1 don't take a break here.

Speaker 1 Throw everything at it. We're going to work right through the summer.
And he did and it worked and he got the big win. And this time, yeah, he's ended the year with this message of

Speaker 1 don't just put your feet up.

Speaker 2 Yeah, and why that that's significant in my view is 94 seat majority.

Speaker 2 You'd think if there's any time to put your feet up, I mean I've had people tell me they're not doing it, but like, God, it's tempting. Like we are in a pretty good position.

Speaker 2 It's his way and also he knows it gets reported out. I want to be clear about that.
Yeah. So it's not just to them, it's also so we know.
The message is this. We are not going to be complacent.

Speaker 2 He does not like the reporting and image of his government as being arrogant or complacent.

Speaker 1 So it's also about that.

Speaker 1 Very much, very much.

Speaker 1 And look, you know,

Speaker 1 on the other side, I think the message from Susan Lee or Ted O'Brien in the coalition party room meeting was try and stay out of the headlines. We've had enough headlines.

Speaker 1 And I get the point they're making. They sure have the wrong reasons for months and months.

Speaker 1 But I'd be surprised if Susan Lee puts her feet up this summer. She's made it through this week.
There was a lot of talk about getting, you know, cut down in this final week, this killing season week.

Speaker 1 That hasn't happened. She has the opportunity now.
to prove why she deserves to stay in that role. She's out there fighting for it with that glossy brochure glued to her hand in every interview.

Speaker 1 You're rolling your eyes.

Speaker 2 Sorry, the brochure was made in like 10 minutes with some very vague ideas.

Speaker 2 You need to bag things that are silly. It's a silly brochure.

Speaker 1 But she's out there trying.

Speaker 2 I agree with that, but that's different. The brochure is just like this cobbled together policy that can't explain what

Speaker 2 we can do this, we can't tell you how. That's what I'm mocking, not her work effort.
I can see that her effort is...

Speaker 1 That's the point I'm making. The work effort is there.
I suspect just over the summer, we won't see Susan Lee disappear.

Speaker 1 I think she's going to be out there all the time trying to hold her job and take opportunities where she can.

Speaker 1 And I'm sure today on inflation will be one of them to try and put some heat back on the other side.

Speaker 2 That's it for politics now today. Thanks for joining me, David.
Thanks, PK. Tomorrow, of course, it's the party room.
Fran and I are back together, the band back together.

Speaker 2 Next week is our live show in Canberra, actually. So

Speaker 2 a lot of time together. You can send questions to the party room at abc.net.au and we'll endeavour to answer them.
See ya.