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Let’s not repeat the perilous mistakes of the 1970s

On both occasions, expansionary fiscal policy clashed with supply shocks.

Wars created energy price spikes. In October 1973, after president Richard Nixon’s request for Congress to make available $US2.2 billion in emergency aid to Israel for the Yom Kippur War, the Organisation of Arab Petroleum Exporting Countries (OPEC) imposed an oil embargo on the US.

Commodity prices climb to multi-year highs

The price of oil quadrupled to $US11.65 a barrel from $US2.90 before the embargo. Commodity prices were already soaring and US industrial output was running at virtual full capacity.

Now, war in Ukraine has pushed the price of oil above $US100 a barrel. Commodity prices for iron ore, coal, gas, and wheat have also been trading at multi-year highs.

In 1972, a left wing Labor leader Gough Whitlam was elected to office with a big social spending agenda, just as inflation was taking off. Government spending increased by almost 40 per cent under…

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