Jim Chalmers says spiralling energy costs the most ‘problematic aspect of our inflation problem’ through to mid-2023
Jim Chalmers says Australia will likely avoid a domestic recession despite the global economy being a “dangerous place” but has warned surging power prices continue to pose problems for inflation and household budgets.
The federal treasurer on Tuesday again said major economies are heading for a hard landing as central banks attempt to curb inflation.
Chalmers, who will hand down his first budget on 25 October, will this week meet the Federal Reserve chair, Jerome Powell, the World Bank president, David Malpass, and G20 finance ministers in Washington.
Chalmers said Australia would not be “immune” if advanced economies tipped into the third global downturn in just over a decade – but added it was “not our expectation that the Australian economy will go backward”.
The treasurer said Australia’s budget forecasts would be adjusted after his return from the US to reflect the most “contemporary understanding” of the current risks. He said rising energy costs were the most “problematic aspect of our inflation problem over the course of the next six or nine months”.
The Australian Competition and Consumer Commission chair, Gina Cass-Gottlieb, told a parliamentary committee on Tuesday household energy bills had gone up by $300 since April. Chalmers said it would be difficult to shield consumers from the price spiral in the October budget without adding to inflationary pressure.
“When it comes to support for the cost of living, we need to be extremely cautious here that any cost-of-living support that we provide isn’t counterproductive,” he told reporters in Canberra.
“We want to make sure that cost-of-living support that we provide doesn’t make the already hard job of the independent Reserve Bank even harder.”
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Chalmers said any cost-of-living relief the government provided would need to contain an economic dividend otherwise monetary and fiscal policy would be pulling in different directions.
Over the past fortnight the treasurer has attempted to make a public case that the Albanese government could revisit the stage-three tax cuts in an effort to bolster Australia’s fiscal buffers ahead of an economic slowdown. But the prime minister, Anthony Albanese, has parked that issue for October, arguing Labor cannot break an election promise.
Chalmers has continued to argue the government needs to be truthful with voters about the deteriorating global economic outlook and structural spending pressure in the federal budget. He said this month’s budget was the beginning of a substantial conversation about policy priorities.
On Tuesday, he said the October budget would “trim wasteful spending and it will do that with an eye to making some room for these persistent structural pressures on the budget”.
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“It has always been intended that the October budget would be the start of this conversation and not the end of this conversation,” he said.
“We will begin with winding back some of the waste and rorts. We will begin with multinational tax reform. We will make sure that the commitments that we make are responsible.
“That’s how we begin this conversation about making the budget more affordable, responsible, more sustainable and better targeted – and I am hopeful that the Australian people are up for a serious conversation about how we pay for the services that they need and deserve.”
Chalmers said Labor had an obligation to speak to voters like they were adults “and part of that, I think, is levelling with people about the sorts of issues that we’re grappling with in the budget and in the economy and in our society”.
The treasurer confirmed the looming budget would include the measures on multinational tax avoidance that had been flagged with voters and corporates prior to the May election. He said Treasury would provide an updated value of the revenue measure.
Labor flagged pre-election it would support the global push for multinationals, like Google and Facebook, to face a minimum 15% tax rate and also limit debt-related deductions – measures which it estimated would raise $1.89bn over the forward estimates.
