No one really knows what will be made by the Future Made in Australia policy except for the inflation it is guaranteeing.

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Another month, another round of RBA inflation data showing Australia’s inflation hopes aren’t being met by reality.

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This should surprise no one beyond union organisers at the Fair Work Commission, and share market and property spruikers.

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The past thirty years have been an aberration. It is what BlackRock’s chief investment strategist, Wei Li, described as the end of the “Goldilocks era”. We are returning to a bumpy norm that comes with government-directed crony capitalism.

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Australia has experienced inflation for years, but global economic integration, efficiency from supply chains, and reduced national security premiums have acted as deflationary offsets.

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Supply chains have been particularly critical. Global economic integration has put downward pressure on goods, which has meant that arbitrage has only really been achieved through shipping costs.

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It is what hid most of the monetary and fiscal expansion resulting from the global financial crisis. That inflation was absorbed in assets, particularly housing and the share market.

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Since COVID, Ukraine, and Israel, the influence of security and environmental hawks has been on the ascendancy.

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Supply chains are slowly unravelling, and governments are now spruiking regionalisation over globalisation through the renationalisation of economies. Currently, this is focused on energy and manufacturing, but their arguments are so elastic it will eventually include any comrade looking for a taxpayer-funded road to unearned wealth.

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It is a programme designed by vampire squids for vampire squids, both sucking and squeezing the productive life out of our collective enterprise, leaving only an enriched few, while an impoverished many suffer real wage declines at the hands of this self-induced inflation.

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The judgement of economists seems to be infected based on what households can bear and the flip-flopping of Nobel Prize-winning doyens who can’t make up their minds.

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When monetarists warned that running printing presses at full speed would create inflation, Paul Krugman compared them to flat earthers, often mocking them by asking, "Where was all this inflation?" When it arrived, he said it was transitory because of supply chain disruptions, then later Ukraine; then late last year, he declared he had been right all along and inflation was now over as supply chains returned to normal.

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Remember when Alan Kohler and Dan Zepher pushed Modern Monetary Theory as the latest and greatest thinking in economic theory? Look Mum, Keynes was right all along.

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It was pushed by so many who should have known better that running currency presses at full capacity was letting the inflation genie out of the bottle.

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But too few seem capable of understanding that noticing the bottle is empty isn’t the same as stuffing the genie back in.

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Now it is clear that inflation is home-grown, and the most likely direction of interest rates is up, it might also be time to admit the clearest driver is Federal and State government spending.

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One of Milton Friedman’s favoured sayings was, “inflation is caused by too much money chasing after too few goods”.

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That’s true. While central banks are reining in money supply, governments are shoving the stuff out the door and re-regulating the economy for good measure, unwinding the productive capacity of our nation.

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It is hard to point to a single policy measure between State and Federal governments that is deflationary.

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All this means the RBA will have to keep interest rates higher for longer.

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Fiscal expansion and deficit spending are only putting upward pressure on interest rates.

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The Commonwealth has done little to fix the problem. COVID spending was obviously a contributor but was at least temporary. Structural spending remains largely unabated.

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Not that it is just the Commonwealth. States have been reckless in expanding their spending, deficits, and debts to the point that there will be serious debates about the investment integrity of their bonds. It took the Labor Party in NSW less than a year to lose the AAA credit rating, such has been the recklessness of Daniel Mookhey and Chris Minns.

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State and Federal governments are setting the next generation up for significant economic pain and inflation unless they pull the belt in.

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What’s extraordinary is the lopsided unwillingness of the public sector to help. State governments are backing increased flexibility for public servants and contractors.

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While the RBA has always dismissed the risk of a wage-price spiral, that won’t last long after State Labor governments bow to the demands of their union paymasters in public sector unions.

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And that’s to say nothing of the unfolding consequences of Federal Labor’s multi-employer bargaining legislation and further industrial relations changes yet to come into force. None will support higher real wages or productivity.

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The States and Commonwealth have a lot to answer for when it comes to the cost of energy. Despite their press releases of announcables for ‘cheap’ renewables, their planning laws make it impossible to get a project approved. AEMO seems unwilling to authorise connections of renewables to the grid, so State governments quietly funnel billions of taxpayer dollars to coal generators to keep the lights on.

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The left, in all its red, green, and teal incarnations, voted for $2 billion in fossil fuel subsidies for coal producers to put downward pressure on prices. Are you ready for your lecture on integrity now?

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Even then, the speed of renewable adoption, the cost of duplication of intermittent renewable generation, firming costs, and network costs is only sending energy prices in one direction and making domestic industry less competitive.

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Australia should have the cheapest energy and houses in the world. Due to deliberate public policy failure, we have some of the most expensive.

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Australia’s manufacturing base is entirely dependent on an affordable and reliable energy supply chain, whether it is creating tanks or turbines, submarines, or solar panels.

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Until we have an honest conversation about energy that recognises whole-of-system and levelised costs, energy prices will continue to rise.

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Against this backdrop, you’d think a Canberra wanting to lower interest rates might actually press pause. Instead, they’ve announced their Future Made in Australia agenda, which will be focused on turning the clock back to protectionism and a high-cost, unproductive economy with low real wages.

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It’s not even innovative. They are using the same arguments the protectionists used in the 1890s alongside the White Australia policy and centralised wage fixing.

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Future Australia might make for a good bumper sticker, but it will only increase the cost to business and households and reallocate capital away from productive capacity.

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Not that Canberra will listen. As he called Voice referendum critics “Chicken Little”, the Prime Minister is calling critics of Future Australia “flat earthers”.

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In the fairytale, Goldilocks was the naïve child looking for a warm meal and a comfortable resting place.

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That isn’t Australia’s inflation story. To give false comfort, the Albanese and State governments are feeding hot inflation before a hard landing on a firm bed.

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Join Australians for Prosperity today and help us fight against these bad policies that are costing us all.