When President Richard Nixon ended the gold standard in August 1971, the price of gold was $38 an ounce in Australian dollar terms.
This week the gold price hit A$3735. If you had held an Australian dollar from 1971 it would today buy 99 per cent less gold than it did.
It took the Roman Empire 200 years to achieve this level of devaluation, we achieved it in 50. Back then, they could only devalue the currency by minting coins with less and less gold in them.
Today, governments can just spend unlimited amounts of money by printing more dollars.
I suppose you could argue this is an increase in productivity.
But an increase in the efficiency with which governments spend money is the kind that just makes the rest of us poorer.
And in the two years since Anthony Albanese became Prime Minister, Australians are getting a lot poorer.
Wages data shows that Australia’s real wages (that is after accounting for inflation) have gone back to levels not seen since 2011.
So in under just two years of Labor, our standard of living has gone back more than a decade.
The data matches the lived experience of Australians.
Australians can feel how much more expensive basic items are costing every time they go grocery shopping.
The government continues to ask Australians not to believe their lying eyes but people are seeing through the Government’s spin.
For example, over Labor’s first two budgets they have been adamant to claim that they are helping the Reserve Bank control inflation.
Labor points to their budget surpluses (actually generated by a coal industry they do not support) and claim that they have cut spending growth.
Last week, the Reserve Bank destroyed Labor’s lame arguments in its Statement on Monetary Policy by concluding that the economy is running hotter than expected because of “ongoing spending and recent announcements by federal and state and territory governments.”
Again, the data backs up the RBA.
In Labor’s first two budgets their policy decisions increased government spending by over $40 billion.
There are only two times this century where governments have increased spending at levels like this.
The most recent was during COVID, where the draconian response to the pandemic necessitated unprecedented increases in government spending to keep people employed during lockdowns.
The other example was during the Global Financial Crisis when the Rudd Government “went early and went hard” to get ahead of the economic fallout.
The Rudd Government’s response proved too hasty and too costly (remember school halls and pink batts) but at least they had the excuse of responding to the threat of recession.
The Albanese Government came to office in the exact opposite environment.
The world was recovering from the pandemic.
Inflation was taking off and it was clear by mid-2022 that it was not just transitory.
Instead of taking the appropriate action and restraining government spending, the Albanese Government has done the exact opposite.
They have added fuel on top of an already raging inflation fire.
The Albanese Government’s latest slogan is a Future Made in Australia but the only thing being made in Australia right now is inflation.
Despite all of this, most of the devaluation of the Australian dollar happened before Albanese was in power.
A large part of it occurred in the aftermath of another government that was addicted to government spending led by Gough Whitlam.
It took Australia a decade of hard choices and recessions to recover from the Whitlam years.
The longer the Albanese Government takes to see the reality we can all see, the harder our recovery will be.
