Chalmers: More spending ‘counterproductive’

Jim Chalmers is warning against cost of living relief that might push up prices ahead of the budget. Photo: AAP
Treasurer Jim Chalmers has indicated there won’t be any further cost of living relief measures in the federal budget, warning more spending could be “counterproductive”.
It comes as Reserve Bank of Australia governor Philip Lowe is due to speak about where the economy is headed and the role of monetary policy on Thursday.
Dr Chalmers warned Australians to brace for tougher times ahead and said the government was balancing relief against rising inflation and rates.
“The last thing we want to do is to provide that cost of living relief in a way that’s counterproductive and just costs people more in the end,” he told ABC radio.
“You’re right to assume that our priority is the cost of living relief that we’ve already announced.
“It’s difficult enough, frankly, to make room in a budget with a trillion dollars of debt for those commitments.”
Dr Lowe’s speech follows another rate hike this week, the fifth in a row, in an effort to tame soaring inflation.
He has made it clear there will be more rate hikes in coming months, although noted the bank was “not on a pre-set path”.
Dr Chalmers said it wasn’t up to him to “take pot shots at Phil Lowe”.
“People will rightly ask the governor questions about the recent decisions and recent language,” he told the ABC.
“My job is to get the system right and also to focus on the things that the government can have an influence on.”
Opposition treasury spokesman Angus Taylor said Labor needed a “timely” plan to “to strengthen the economy and reduce inflationary pressures”.
Commonwealth Bank economists expect the 50 basis point rise on Tuesday to be the last supersized hike in this tightening cycle, and expect a 25 basis point increase in October to take the cash rate to 2.60 per cent.
“This is around the RBA’s estimate of the neutral level – a cash rate level not considered too stimulatory or restrictive for the economy – given the recent softening in economic data and deteriorating sentiment,” CommSec economist Ryan Felsman said.
But economists believe there’s a chance the cash rate will reach 2.85 per cent by the end of the year.
The RBA’s latest decision has also prompted calls for Dr Lowe’s resignation.
Both the Greens and Nationals senator Matt Canavan have called for the central bank boss to resign because he promised rates would not start rising until 2024.
The Labor government has dismissed the suggestion, with Dr Chalmers arguing it is not for him to “second guess the decisions taken by the independent Reserve Bank”.
While rate hikes did little to dampen growth figures in June — with GDP lifting by 0.9 per cent in the June quarter — economists expect the impacts of policy tightening to show up in the following quarter.
– AAP