Inflation will moderate this year, says Treasurer

Speaking to several members of the media on Tuesday (17 January 2023), Jim Chalmers has assured that the government believes that the levels of inflation should begin to moderate over the course of the year, further stating that it’s the “primary challenge in our economy right now”.

As inflation sits at a 30-year high of 7.3 per cent, Mr Chalmers attributed the problem to various geopolitical factors such as the war in Ukraine and pandemic pressures.

“We’ve got an inflation problem because the war in Ukraine is pushing up energy prices and COVID-19 is putting pressure on supply chains and a few other issues as well around labour shortages,” Mr Chalmers said.

The Treasurer emphasised the importance of wage growth during this time and implementing relief measures for those who might be feeling the pinch amid rising interest rates and ongoing cost-of-living crisis without further adding to inflation levels.

“We’re providing cost-of-living relief, whether it’s energy bill relief, cheaper early childhood education, cheaper medicines, or in other ways — you can do that in a responsible way without adding to inflation,” Mr Chalmers said.

“That’s a central part of the Budget that I handed down in October and will be a key part of what I do in May when I hand down our second Budget as well.”

The Treasurer also warned that people going off variable rate mortgages to fixed-rate mortgages will begin to feel the impact of the Reserve Bank of Australia’s (RBA) intention to continue the rate hikes over the course of the year.

“We’ve had those eight interest rate rises that began before the election and continued afterwards and that will bite when it comes to mortgages, obviously, but also when it comes to our economy,” Mr Chalmers said.

According to the Australian Bureau of Statistics (ABS), the increase in the Monthly Consumer Price Index (CPI) indicator in November was driven by the ongoing demand in the housing sector.

The data indicated the most significant contributors to the annual rise were housing (up 9.6 per cent); food and non-alcoholic beverages (up 9.4 per cent); transport (up 9 per cent); furniture, household equipment, and services (up 8.4 per cent); and recreation and culture (up 5.8 per cent).

ABS head of prices statistics, Michelle Marquardt, said: “This month’s annual movement of 7.3 per cent compares to 6.9 per cent in October and 7.3 per cent in September, indicating ongoing inflationary pressures.”

[RELATED: Housing spearheads annual November 7.3% CPI jump: ABS]