Australia’s economic update for July will contain “controversial” news about economic growth and a slowdown in real wages, Jim Chalmers has said.
The Treasurer said the changes to be announced on Thursday 28 July come as the global economy is in “difficult if not dangerous territory” due to high debt levels and rising interest rates to tackle inflation.
On Monday Chalmers told the press in Canberra that the Albanese government took “the economic benefits received by the new government in memory” due to public debt $ 1tn and inflation, which the Reserve Bank has warned is going to 7. %.
Chalmers said Australia gained full employment, while unemployment fell to 3.5%. He said food and energy problems are driving inflation, not wages.
The RBA began raising rates in May, raising it several times from the emergency rate of 0.1% set in November 2020 to 1.35% in July, with another hike in 2022.
As interest rates rise, Chalmers said the cost of public debt is growing. The “high” interest rate will rise from $1bn this year to more than $5bn over the next four years, a total of $13bn over four years.
The Treasury said the forecast revised on 28 July “will be met in many ways – when it comes to our inflation expectations, when it comes to the impact of interest rates on growth… [and] what does inflation mean for real wages”.
There was no “reliable economic forecaster in Australia who thinks that wage growth will be in line with inflation, and we will be revising our expectations for inflation, and that will make real wages more difficult,” he said.
“Rising interest rates will affect economic growth.”
Chalmers said Labor had the “right agenda”, including providing “appropriate” cost-effective support, and creating profitable investments to “raise the pace of Australia’s economic growth”.
But the treasurer refused to elaborate on new measures to help reduce living costs, saying existing pledges to reduce the cost of medicine and childcare should take priority.
Australians will be “better off” after the introduction of these measures, he said, with $5bn invested in childcare to boost participation in the workforce.
“We will always try to do the right thing by people and where we can do the right thing and as much as possible by people to help them in a difficult time, then we will consider that.”
Chalmers said the prospect was “too expensive to continue” the six-month reduction in petrol tax, which expires at the end of September.
The government will “find additional funds in the budget”, which is scheduled for October.
“The first stop … is to deal with waste and waste, huge buckets of taxpayers’ money that have been given at the discretion of the ministry, there has been too much of it in the last decade.”
Labor also made “reasonable changes to international taxation and tax compliance” but banned the corporate income tax.
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