Australia’s July economic update will contain “confrontational” news about lower growth projections and higher inflation that will cut real wages, Jim Chalmers said.
The treasurer said the update to be delivered on Thursday, July 28 comes when the world economy is in a “difficult if not dangerous” place due to high debt and rising interest rates to fight inflation .
On Monday, Chalmers told reporters in Canberra that the Albanian government had inherited “the most complicated set of economic conditions a new government has inherited from living memory” due to a million dollars of public debt and inflation, which the Reserve Bank has warned that it is heading towards 7.%.
Chalmers attributes to Australia having achieved full employment, with unemployment at 3.5%. He said supply problems, including food and energy costs, were driving inflation, not wages.
The RBA began raising rates in May, with a series of rises that raised rates from the 0.1% emergency levels set in November 2020 to 1.35% in July, and further rises are expected throughout 2022.
With rising interest rates, Chalmers said, the cost of public debt was rising. The “really substantial” interest bill will increase from more than $ 1 billion this year to more than $ 5 billion in four years, a total of $ 13 billion in four years.
The treasurer said the updated forecasts provided on July 28 “will face many aspects: when it comes to our inflation expectations, when it comes to the impact of rising interest rates on the growth … [and] what does this increase in inflation mean for real wages ”.
There was “no credible economic forecaster in Australia who thinks wage growth will keep up with inflation, and we will review our inflation expectations, and this will worsen the real wage situation before it improves,” he said.
“Rising interest rates will have an impact on the growth of the economy.”
Chalmers said Labor had the “right plan”, including providing “responsible” support for the cost of living and making productive investments to “raise the speed limit on the growth of the Australian economy”.
But the treasurer declined to delve into possible new measures to alleviate the cost of living, explaining that existing commitments to reduce the cost of medicines and childcare would be priorities.
Australians “will be better off” after these measures are introduced, he said, with $ 5 billion invested in caring for children that encourages greater participation in the workforce.
“We will always try to do the right thing for people and where we can responsibly and affordably do the right thing for people to help them in a difficult time, of course we would take that into account.”
Chalmers said his expectation was that it would be “too expensive to continue” the six-month halving of the gas tax, which expires in late September.
The government “will find more savings in the budget,” which is scheduled for October.
“The first stop … is beginning to deal with this legacy of waste and waste, large buckets of taxpayer money distributed at ministerial discretion, there have been too many for much of the last decade.”
Workers would also make “responsible changes in the tax and fiscal compliance of multinationals,” but ruled out a tax on extraordinary profits.