The persistent and painful inflation Australia is facing has a root cause that often goes unnoticed: privatisation. Despite public opposition, privatisation has been a contentious issue in politics since the 1980s, and its impact on inflation is a crucial aspect that needs to be addressed.
When we examine the fastest-rising costs in the CPI basket, we see a pattern. Utilities, electricity, medical services, insurance, education, and housing are all areas where privatisation has taken root, and these are the very sectors that are eating away at household budgets. The Chinese manufacturing boom has made electronics and clothing more affordable, but it's the essential services that are driving inflation.
Global energy price shocks are a significant contributor to inflation, but the problem is exacerbated by Australia's reliance on for-profit entities for essential services. When an energy shock occurs, these firms prioritize profit margins, leading to fee increases. With limited competition and transparency, it's a perfect storm for inflation.
The sell-offs of the 1990s and the subsequent explosion of government-funded human services contracted to for-profit providers have created a fragmented landscape. Tens of thousands of businesses, from GPs to private hospitals, are engaged in profit-seeking activities that collectively drive up prices across the economy. While these moves may have improved government balance sheets in the short term, the long-term consequences are dire.
Workers bear the brunt of this. They face higher fees, interest rates due to inflation, and potential unemployment as the RBA's efforts to control inflation through rate hikes contract the economy. The irony is that over $20 billion in public money goes to private schools, yet there's no control over their fee schedules. We're essentially funding systems that work against our own financial well-being.
The government's advice to "shop around" for the best electricity plan is a prime example of the issue. Shouldn't it be the government's responsibility to protect its citizens from the profiteering of essential services? The sense of losing control over incomes and living standards is a driving force behind the rise of parties like One Nation.
The solution, in my opinion, lies in a combination of short-term measures and long-term structural changes. Price controls, as seen in the past, can be an effective tool to cap the prices of essential goods and services. A windfall profits tax could discourage excessive price hikes, and wealth taxes can reduce inflation by limiting the demand for resources like housing. However, the ultimate solution is public provision.
We need to strengthen and expand our universal public education and Medicare systems. Childcare should be integrated into public education, and markets for fee-charging schools and healthcare providers should be dissolved through expanded public coverage. This would involve weaning privatized systems off public funding. Public ownership and control in the energy sector, where global supply shocks are most felt, is crucial. Establishing a Commonwealth entity to provide cheap renewable energy is a step in the right direction.
While there may be resistance from the business sector, I believe these measures would be widely supported by the public. The RBA's struggle to control domestic inflation is a direct result of the failed neoliberal project of outsourcing and privatisation. With geopolitical risks on the horizon, the government must step up and reclaim its role in providing essential services. It's time to address the root cause of our inflation scourge and build a more resilient economy.
