Jim Chalmers warned that the worst inflation figures since the introduction of the GST, combined with rising interest rates and global economic uncertainty, will see $30 billion wiped from the Australian economy over the next three years.
Yesterday’s figures showed the Consumer Price Index jumped 1 percentage point to 6.1 per cent in the year to June. Chalmers warns inflation will exceed the RBA’s 7 per cent estimate by year’s end. Interest rates are expected to be raised to 2.6 per cent by the end of the year.
In turn, annual growth over the next three years will grow slower than forecast, half a percentage point a year, with real GDP predicted to grow 3.75 per cent in 2021-22, compared to the previously forecast 4.25 per cent.
“Our new government has begun its work in this time of serious uncertainty and substantial challenges,” the Treasurer said.
“The growing pressures on the economy and the country don’t make our election commitments less important – they make them far more crucial.”
“Higher interest rates, combined with the global slowdown, will impact on Australia’s economic growth.
“Forecasts are never perfect, but these better reflect the economic circumstances our new government is now dealing with. Inflation will unwind again, but not in an instant.”
Wages are not expected to keep up with the inflation.
“The idea that we would be forecasting wages growth that keeps up with that, I think would not be credible in the near term – but my expectation is that there will be real wages growth, in this term of the parliament.
“My message to Australians doing it particularly tough is that we will do what we responsibly can to ease the pressure that they’re under and we will do that within the pretty serious fiscal constraints that we’ve inherited.”
