SYDNEY (BLOOMBERG) - Australian consumer prices have accelerated from the 5.1 per cent recorded in the first three months, Treasurer Jim Chalmers said, intensifying pressure on households and suggesting further interest-rate increases ahead.
"It's now really clear that the inflation challenge that Australians are facing is worse," Chalmers told News in an interview Sunday (June 5), saying he'll likely raise the forecast in next month's economic statement to parliament. "People should anticipate that it will be higher than it is now. Significantly higher."
Australia is in the grips of the soaring power prices that swept Europe and the US following Russia's invasion of Ukraine and exacerbated inflationary pressures. The Reserve Bank (RBA) meets Tuesday and is expected to execute back-to-back rate hikes for the first time in 12 years as it tries to cool prices.
The RBA in early May predicted inflation will hit 6 per cent by year's end, before easing to 3 per cent by mid-2024 in response to rising rates and as higher energy costs wash through the data. It aims to keep inflation between 2-3 per cent over time.
Chalmers, who took office about 2 weeks ago after a Labor party election victory that ended 9 years of centre-right rule, had campaigned hard on rising living costs. First-quarter inflation was more than double the 2.4 per cent pace of pay gains, producing the biggest fall in real wages in about 20 years.
"This is the defining challenge in the economy," he said in the interview. "Not easily fixed, not easily addressed. But a challenge, which is even more substantial than my predecessors fessed up to."
Australia's economy is growing solidly and unemployment is at the lowest level in 48 years. Yet the budget is deep in the red and government debt at record levels following heavy fiscal spending to support the economy through the pandemic.
Chalmers will deliver an economic statement to Parliament when it reconvenes in late July setting out the outlook. He plans to deliver a budget in the second half of October, despite the former government handing one down just over 2 months ago, ahead of the May 21 election.
Chalmers said in the interview Sunday that the budget would "implement our commitments and our economic plan to try to get the economy growing faster, without adding to these inflationary pressures".