Next government will need to tighten its belt says economist

NSW Farmers Economist Brendan O’Keeffe says another interest rate rise and ongoing inflation means funding new roads and hospitals will be even harder for the next state government.
The pre-election budget update from NSW Treasury found the economic outlook had deteriorated even more over the past few weeks, Mr O’Keeffe said, and families, businesses and the government would need to tighten their belts.
“Things aren’t looking good based on the level of inflation and the latest interest rate rise,” Mr O’Keeffe said.
“These figures from Treasury show inflation will hang around for longer than previously thought, and assume more rate rises in the future.
“This means households and businesses will have less money to spend, so that means less revenue for government, which will in turn constrain spending on infrastructure and services.”
The latest rate rise from the Reserve Bank of Australia has put increased pressure on young farmers trying to enter agriculture, Mr O’Keeffe said, which was cause for concern in terms of future food security.
“Agriculture has pretty tight margins at the best of times, but as an industry that produces food for Australia, it’s a pretty essential one,” he said.
“Young farmers are telling us they’re really feeling the pressure of interest rate rises, especially since the cost of key inputs like fuel, electricity and fertiliser have also soared.
“We’re going to need some clever policies from future governments to make sure we continue to have domestic food production.” 
While government spending would be constrained, Mr O’Keeffe said investing in agriculture would be a wise use of limited funds.
“We know that every dollar invested in boosting farm productivity delivers a dividend of $12 for the economy,” Mr O’Keeffe said.
“There are direct investments – such as expanding the Farm Innovation Fund and rebate programs to increase productivity – but there are also structural and regulatory changes that could make a big difference.
“Expanding strategies to help new farmers enter agriculture will secure the future of food while also delivering gains for the state economy.”

Date: Friday, March 10, 2023
Media Contact: Steve Mudd  | 0429 011 690 | [email protected]