PETER VAN ONSELEN: Nuclear steals the show but it’s still all about the economy, stupid

While Peter Dutton’s nuclear policy announced on Wednesday has understandably stolen all the political attention this week, it was what happened before then that really mattered.

Reserve Bank of Australia head Michele Bullock has dismantled Treasurer Jim Chalmers and the way he has tried to characterize the budget.

Bullock did what RBA governors rarely do: she weighed in on what she clearly sees as inappropriate and unhelpful budget positions by Chalmers and his state colleagues.

She also did not mince her words for a civil servant. Bullock said the road back to low inflation will be a “slow grind,” and that the way state and federal budgets spend money has not been helpful.

The path to solving the economic mess we find ourselves in without causing a recession was getting “narrower,” she said, adding, “We need a lot to find our way” to bringing inflation back to where she needs to be.

Not happy Jim. Treasurer Jim Chalmers (pictured) didn’t take too kindly to the RBA governor who threw a few home truths at him

It’s not very helpful that “recent budget results could also have an impact on demand,” she said. Translation: the way Australian governments continue to stimulate the economy with their spending isn’t helping.

The economic vandalism she warns about is exacerbated by government spending. So Chalmers was not selected. I would even suggest that the out-of-control spending of some government administrations makes Chalmers look like a fiscal conservative by comparison.

Bullock reserved most of her criticism for the state treasurers, not Chalmers. Not that you would know that the quick response was how he fired back when called out as part of a collective failure.

Chalmers organized a late media conference, ostensibly to respond to the criticism being leveled.

“I don’t tell the governor how to do her job and the governor doesn’t tell me how to do my job,” Chalmers spat back.

Sorry buddy, but that’s EXACTLY what she did. But only because she thinks Chalmers doesn’t get the message.

As an aside, Chalmers couldn’t even get through his media conference without contradicting his own words about not telling the RBA what to do. Shortly after delivering them, he declared that the RBA rate hikes were “already putting pressure on the economy.”

He may not have explicitly told them “what to do,” but he made it clear that the economic challenges were of their making.

Buck passed the 101 there, passing one of our senior political leaders.

This is far from the first time the RBA has warned about the way governments spend money. It’s just a little sharper than normal.

Instead of getting the message, Chalmers chose to fight, disagreeing with the damning assessment of the state of affairs and the advice given on what to do about it.

On some level I can understand why. His budget was poorly received by most economists, especially those without a partisan or left-wing ideological agenda.

As stinging as this criticism has been, if the RBA governor joins in, he risks far greater political damage. The optics of the RBA and the Treasury pivoting in different directions are far from good, not to mention dangerous for the stability of the economy.

Chalmers’ message that he is doing a good and appropriate job of bringing inflation back under control with his budget is now in tatters. This also applies to its effectiveness in reducing pressure on the cost of living.

If the RBA raises rates later this year, it could be a defining political moment ahead of the next federal election

He must have been so happy when Dutton stood up and announced a major nuclear energy policy. The distraction was political manna from heaven for the underperforming treasurer.

To avoid being eaten by the lion, all you have to do is run faster than the other guy. Chalmers came last, but after the nuclear announcement he may have overtaken Dutton.

Can anything bring the state of the economy and inflation issues to the forefront? Or has Dutton’s new policy stolen all the attention between now and the elections?

Australians still care more about their daily financial problems than whatever half-baked policy the opposition has come up with to go nuclear. But scare campaigns can be effective and Labor is only just getting started.

Add to that how difficult winning is for oppositions in the first term, not to mention selling a major policy agenda, and it’s hard to see how anything can distract from Dutton’s self-inflicted policy wound.

All that could do is worsen conditions for Australians suffering from cost-of-living pressures. An interest rate increase, for example, could achieve this. Or the outbreak of a technical recession, although we are running out of time for that before the elections.

Will the next elections be later this year or early next year? The government will decide which time suits them best.

Do they want to ‘go slow’ on Dutton by delaying it until next year so they have enough time to unravel his nuclear agenda?

Or will Labor move early, before the bad economic news gets even worse, and before a new round of criticism from Bullock suggesting Chalmers is simply not up to the role he has been given.