The inflation scourge plaguing Australia is a complex issue, and the root cause often goes unaddressed. While the blame is frequently placed on the Reserve Bank of Australia's governor, workers, and their wage demands, the real culprit lies in the widespread privatization of essential services. This article delves into the impact of privatization on inflation and explores potential solutions. Alison Pennington, chief economist at the McKell Institute, argues that the privatization of utilities, healthcare, education, and other public goods has led to rising costs and a loss of control for working people. The article highlights the irony of the government's response to inflation, which often involves advising citizens to 'shop around' for better deals, while failing to regulate monopolistic practices. The author emphasizes that privatization has created a system where profit-driven entities can easily exploit sudden price shocks, leading to higher fees and reduced transparency. The scope of privatization in Australia is vast, from the 1990s sell-offs of major companies to the recent explosion of government-funded human services contracted to for-profit providers. This has resulted in tens of thousands of businesses, from GPs to private hospitals, contributing to economy-wide price increases. The consequences are far-reaching, with workers bearing the brunt of higher prices, interest rates, and unemployment. The article calls for a multifaceted approach to address inflation. Implementing price controls, such as windfall profits taxes, can curb excessive price hikes. However, the long-term solution lies in public provision. By reinvesting in universal public education and Medicare, and expanding public coverage to include childcare, schools, and healthcare, the government can repair the 'leaks' created by privatization. This includes dissolving markets for fee-charging services and prioritizing public ownership in energy, particularly in the face of global supply shocks. Despite potential resistance from the business sector, the author predicts that these measures would be widely supported by the public. The article concludes that the current macroeconomic legacy of outsourcing and privatization is a 'sticky' domestic inflation problem. To combat this, the government must reclaim its role in regulating essential services, ensuring that the interests of citizens, not profit-driven entities, are prioritized.
