Jim Chalmers speaks at AFR business summit after 10th rate hike
Jim Chalmers says inflation is still unacceptably high and too stubborn, but he’s optimistic it’s slowing after the Reserve Bank hiked interest rates for the tenth consecutive time.
The treasurer has cited the cost of living as the biggest fiscal challenge facing Australia a third of what he describes as a “defining decade”, ripe for opportunities to modernize the economy through the climate and energy transition.
Speaking to business leaders about five hours after the Reserve Bank’s decision on Tuesday, Dr Chalmers said the government hoped inflation had peaked.
“That’s what the Treasury expects, that’s what the RBA expects and that’s what last week’s monthly reading indicated,” he told a summit hosted by the Australian Financial Review.
The central bank board raised the spot rate, which drives lender-set interest rates, by 25 basis points to 3.6 percent, the highest since June 2012 and in line with market expectations.
Offering a glimmer of hope to stressed mortgage holders, RBA Governor Philip Lowe said inflation — which hit 7.8 percent in the December quarter — is expected to fall this year and next.
He said the bank believed inflation could be brought back into the target range of 2 to 3 percent by mid-2025 and tempered predictions of multiple rate hikes.
As Labor tries to bolster industry support for reforms, including key manufacturing policies, Dr Chalmers told guests at the summit that he had made a “fast flight” from Canberra – where parliament sits – to Sydney, just to talk to them
“I believe we are a better government because we are taking this opportunity to work with you and learn from you,” he said.
Dr. Chalmers said inflation was his top priority, pointing to recent National Accounts figures that showed Australian households spent $20 billion on mortgage interest payments in the last quarter, nearly double the $11 billion they spent in the same period the year before. issued.
But he reiterated the government’s message that it is fiscally responsible in tackling the cost-of-living crisis.
“While the Reserve Bank does its difficult job, we do our own using the levers at our disposal – a combination of aid, repair and restraint,” he said.
Dr. Citing the government’s long-term plans, Chalmers said the climate and energy transition should be used to build a “bigger and better” industrial base, Australia should embrace data adoption and digitization and ensure that the healthcare sector can meet the growing demand.
Successfully navigating these three “major shifts” would determine Australia’s success over the next decade and require investment and input from the business community, he said.
“To get there, we need hundreds of billions of dollars in new investment by 2050 — plus thousands of new clean energy workers over the next few years alone,” he said of the energy transition.
“And now there is a race for capital in clean energy – and this means understanding our comparative advantages and remaining a trusted global partner open to trade and investment.”
Dr. Chalmers also revealed that he would release the Productivity Commission’s five-year review of Australia’s medium-term economic performance ahead of schedule.
“It’s only May, but I’m releasing it early so you can see what we have to struggle with and what we’re already working on to get us on a better productivity trajectory,” he said.
“It’s always candid, it’s always respectful, and for me at least it’s always productive. I get a lot out of it.”