Sharri Markson:
Back and joining me now is the Institute of Public Affairs Chief Economist Adam Creighton. And good to have you in Sydney and studio Adam.
Adam Creighton:
Indeed. Yeah.
Sharri Markson:
Now Trump’s State of the Union address today, what did you think were his strongest remarks?
Adam Creighton:
Well, I think on the economy, I think you’d have to say that the first 12 months have been pretty good in that regard. I mean, he has many detractors, as you know. He mentioned the Nobel Prize winning economist that he said got it totally wrong. And indeed they kind of did, especially on the inflation rates, the growth rates. I mean, the US economy is still the standout economy in the OECD.
Okay. It grew at 2% last year, but that’s still much better than the European Union, much better than Australia, much better than New Zealand and all the rest. So it’s a difficult time for the West, but the US is still a standout. If you look at where all the smartest people in the world want to migrate to, it’s still the United States. For all the stuff about Trump, that’s where they want to go.
Sharri Markson:
True. Although, of course, there’s different economies within the US and a lot of people are leaving New York because of the tax situation there. I just want to ask you about tariffs and then inflation. So starting with tariffs. So, Trump, this week increased or announced global tariffs would be a flat 15% after the US Supreme Court said that his pre-existing tariffs were unlawful. The detractors, the argument has been that the US tariffs would drive the US economy into recession. What do you think the impact’s been?
Adam Creighton:
Well, that’s why the economists have been so wrong because they clearly haven’t. It’s one of the fastest growing economists in the OECD, and somewhat comically, they all said these economists, there’d be a big spike in inflation in the US because of the tariffs. It’s just simply not happened. Their inflation rate’s 2.4%, I think over the 12 months of last year. Australia’s is 3.8, much, much higher.
So tariffs clearly have not been a disaster. I think as you said this week in one of your editorials, they need the money. I mean, the US has a massive budget deficit, 2 trillion a year or something. The debt’s 38 trillion. The White House only has one way to raise money without Congress, and that is tariffs. So I think Trump doesn’t often put it that way, that we need to raise money, although I think he actually did in the speech for the first time, but it raises three or 400 billion a year. That’s a massive amount of money. It’s not really hurt American consumers so far that much.
Sharri Markson:
So he’s actually trying to tackle the debt here.
Adam Creighton:
Exactly, exactly, and they have to, because otherwise there’ll be a huge global financial crisis. I mean $38 trillion, right? It’s 110% of GDP or something, that’s much higher than Australia’s debt, relatively. The US of course, because it’s so big and powerful, it can go on for much longer than other countries, but at some point it’s not sustainable.
Sharri Markson:
You just mentioned inflation in the US compared to Australia. So 2.4% in the US and news today that inflation is now sitting in the past 12 months at 3.8% in Australia. Why do you as an economist think that it is so much higher? Is this because of the Albanese government?
Adam Creighton:
Well, it certainly is partly, I mean, there are budget deficits as far as the eye can see. Certainly government demand plays a big role. We’ve had the fastest growth in government spending since the Whitlam years except for the pandemic, 27% of GDP. Now I believe the federal government is, which is extraordinary. That’s obviously boosting demand and it’s partly their responsibility. Our inflation rate, I think is more or less the highest in the OECD.
Sharri Markson:
You worried about it?
Adam Creighton:
Yes, of course. It hits every single Australian’s wage. I mean, who’s getting a 4% pay rise every year? Certainly not me. Maybe you are, Sharri, but I’m not. That’s a 4% cut in your living standards every single year. So it’s a very serious problem, and the government just kind of hand waves it away as if it’s not important, but I think they’re going to pay for it at the ballot box.
Sharri Markson:
Now, I was watching Chris Kenny’s programme earlier this evening and he had Pauline Hanson on, and she said… because Chris was quizzing her on one of her new policies of income splitting, and she said, “Well, that bloke Creighton,” she couldn’t remember your first name, but she said, “That economist, Crichton, endorses this policy.” So what do you think of income splitting as an economic policy?
Adam Creighton:
Well, she must’ve been referring to my tweet about the fact that the One Nation has more policies on their website than the Liberal Party, which is true, but the policy of income splitting is reasonable. The US does it. You either file as a single or you file as a married couple, and that has tax consequences.
Sharri Markson:
So if you file as a married couple, that means the tax rate is lower.
Adam Creighton:
Yeah. So basically if there’s only one income earner, you basically divide the income across the two people and because of the progressive rate, that means you get two tax-free thresholds instead of one. So it makes a big difference to the average tax rate. That’s something we could do in Australia. I think it’s probably a good idea.
It does cost a lot of money though, in terms of lost revenue. So you have to make cuts. The other good thing about One Nation is they at least have the courage to point out on their website the things they would cut, 20, $30 billion a year of climate change nonsense, they would cut. That’s what needs to be said, I think by the Liberal Party for them to have similar policies.
Sharri Markson:
All right. Adam Creighton, thanks so much for your time.
Adam Creighton:
Thanks, Sharri.
This transcript with Adam Creighton talking on Sharri Sky News Australia from 25 February 2026 has been edited for clarity.
