Mike Hosking: Inflation nation - The blunt, cold and astonishingly bad economic picture confronting us

OPINION

I'm finding it increasingly difficult to work out why the "experts" keep getting things so wrong.

In the early days of Covid, everything was a mess, no one knew what was what and what was coming, which was fair.

These days, things have settled down to a degree and surely it isn't as hard to work out how being in the mess we are in, actually is.

Last week's inflation figure confirmed the previous estimates were wrong.

Inflation is higher than experts thought, it's at 7.3 per cent.

My prediction was it would be higher than they thought, based on among other things, the fact the United States and the UK have seen their inflation rates continue to rise and although we each have specific elements to our economic story, the general consensus is that if you printed too much money you are now in a world of pain and part of that pain is inflation.

Everyone printed too much money, but per head we made almost as big a hash of it as America has.

So the question is simple: why would we believe our inflation figure would peak at 7 per cent when the United States and the UK both have higher rates and those rates are rising?

Another question is, given the Australian Reserve Bank think they will see inflation up at 7 per cent and their economic story is vastly better than ours, why would we have deluded ourselves that our inflation would be no worse than theirs?

These figures slowly but surely are revealing the blunt cold and astonishingly bad economic picture that confronts us.

Australia, a week back, produced a record trade surplus for May. You will note the word surplus. Last week we produced our worst ever trade deficit.

Good economics suggests you sell more to the world than you buy. We don't do that, Australia does.

Singapore last week recorded second-quarter growth of 4.8 per cent, Singapore is a small island nation with five million people. We should be more like Singapore.

We don't have our second quarter numbers yet. That in itself is part of the malaise that burdens our country. We don't seem to produce an awful lot out of government that's current in the way other countries do.

Why do they have their stats and we don't have ours?

Anyway I can tell you this for nothing, our growth rate won't be 4.8 per cent. I doubt it will be much above zero, if it's above zero at all.

Our Covid settings mean we are not attracting enough tourists. Photo / Alex Burton

So out of Australia and Singapore, we will be easily the worst performing economy.

Why?

Because our economic settings are not producing the outcomes required in a post-Covid era.

Immigration isn't bringing the people in we need at the rate we need them, and we have made it even harder to get here.

Our Covid settings are not conducive to the confidence required for tourists to arrive anywhere near the numbers we need.

The Government has killed confidence by one, originally pumping too much money into the system and then two, failing to address the problem by pretending that all the inflation can be blamed on Russia's invasion of Ukraine.

The trick to working out our economic dilemma is not to delude ourselves that everyone faces the same issues.

The trick is to understand that although most of the Western world at the moment is broadly dealing with the same mess, it's the extent and size of the mess that counts.

And the extent and size of our specific mess is why we are where we are.

We have made it way worse than it ever needed to be.

Nurses not on as fast a pathway to residency as possible.

Gib board missing and construction firms falling over.

Banks saying no to borrowers who then cancel contracts, a Government that fiddles with ideological obsessions like Three Waters and centralising health systems, while the nuts and bolts of what needs doing get ignored.

The upside, as it is in most places, is the job market. We all have work ... apart from the 100,000 people on Jobseeker who astonishingly - in the tightest labour market of my lifetime - still can't find anything to do, but that's another story.

And as long as we all have work, we can pay at least some of the bills.

But that will change when the price rises of inflation can't be passed on any longer, the profits will fall, the rubber will hit the road, and the jobs will start getting cut.

The worst of this is yet to play out, and you don't need to be an expert to see, predict and understand that.