Treasurer Jim Chalmers has been blasted in a TV interview for suggesting the cost of living crisis could be resolved by Christmas.
His third budget is expected to include new Treasury forecasts showing inflation falling back within the Reserve Bank’s target of 2 to 3 percent by the end of 2024.
This is a year earlier than the Reserve Bank predicted in its latest monetary policy statement last week.
Nationals frontbencher Barnaby Joyce, a former deputy prime minister and accountant, said it was hard to believe the Labor Party was better at predicting inflation than the independent Reserve Bank.
“Haven’t we heard this yarn before about basically everything?” he told Sunrise host Natalie Barr on Monday morning.
Treasurer Jim Chalmers has been blasted in a TV interview for suggesting the cost of living crisis could be resolved before Christmas
“You have to make a choice: do you think the RBA got it wrong with their promotions and all their staff, the Treasury got it right and the Treasurer got it right?
‘Is the PvdA right?’
But Environment Minister Tanya Plibersek joked: “There are also a few PhDs at the Ministry of Finance, Barnaby.”
Mr Joyce replied: ‘He has a PhD in politics, not economics.’
Dr. Chalmers has a PhD, but his 2004 PhD from the Australian National University was on former Labor Prime Minister Paul Keating.
It did not cover Keating’s time as treasurer when 18 percent interest rates in 1989 led to a recession in 1991 after a serious inflation problem.
Ms Plibersek said the Treasury’s forecasts were based on budget measures to reduce inflation, suggesting Dr Chalmers would announce measures on Tuesday including electricity bill relief and childcare cuts.
“The RBA’s forecasts did not take into account what is happening in this budget,” she said.
“And the whole focus of this budget is to keep the pressure off inflation while helping families.
“We know people are struggling, we know the mission is not accomplished.”
Nationals frontbencher Barnaby Joyce (right), a former deputy prime minister and accountant, said it was hard to believe the Labor Party was better at predicting inflation than the independent Reserve Bank.
The Ministry of Finance’s 2024/2025 budget forecasts that headline inflation will fall to 2.75 percent in June 2025, but remain within the 2 to 3 percent target in December 2024.
According to the Reserve Bank’s May monetary policy statement, inflation did not fall to 2.8 percent until December 2025.
The difference in forecasts could be a problem, as Governor Michele Bullock stated last week that she would raise rates again if inflation took longer to moderate.
‘If we have to, we will. “If we really think inflation will be persistent and significantly above our expectations, we will tighten again,” she said.
Headline inflation, the consumer price index, was 3.6 percent in the March quarter, with the annual rate marking an improvement from 4.1 percent in the December quarter.
But underlying inflation measures were both above 4 percent when the Australian Bureau of Statistics removed volatile price items such as petrol and vegetables.
Overall inflation was 6.1 percent when Labor won the 2022 election, but rose to a 32-year high of 7.8 percent by the end of that year after Russia’s invasion of Ukraine led to sanctions and higher gasoline prices.
Joyce said voters should ask themselves whether they are better off under Labour.
‘Is your life better now than when the Labor Party came to power? And I think the answer is quite simple,” he said.
Since Labor returned to power, the Reserve Bank of Australia has raised interest rates 12 times to a 12-year high of 4.35 percent – marking the most aggressive pace of monetary policy tightening since 1989.
The first increase occurred in May 2022 during the election campaign and since then monthly mortgage repayments have increased by 68 percent as the variable interest rate went from starting with a ‘two’ to starting with a ‘six’.
Motorists are also now paying more than $2.30 per liter for unleaded gasoline, even as crude oil prices have fallen since April.
But prices for meat, fruit and vegetables are cheaper than a year ago, based on monthly ABS calculations for March.
Labor has been wrong with its economic predictions before, with former Treasurer Wayne Swan abandoning a promise of a budget surplus in 2012.
Dr. Chalmers was his chief of staff at the time, but he at least delivered a surplus for 2022/2023 – the first for a federal government since 2007 and the first for Labor since 1989.
Inflation has been above 3 per cent since the December quarter of 2021, when Sydney and Melbourne emerged from prolonged lockdowns, leading to supply chain restrictions.