Treasurer Jim Chalmers defends government record after prices surge in December
Finance Minister Jim Chalmers has failed to reassure Australians that real wage growth will continue and living standards will not regress following a jump in inflation; But he assured that interest rates will rise next week.
Chalmers defended his government’s record on inflation, a key boast since it comes to power in 2022, on the ABC 7:30 Wednesday night after the December inflation figures were announced Prices rose a full percentage point last monthincreased the annual rate to 3.8 percent.
The Treasurer said it was not yet clear whether real wage growth would continue as predicted in last year’s budget, following higher-than-expected inflation figures.
“We’ll see how and what kind of results we get on wages,” Chalmers said. “Of course, the fact that inflation is higher than we want is reflected in real wages. However, we have been experiencing continuous real wage increases for two years.”
“Obviously it’s under pressure as we get this inflation data that is higher than anyone would want.”
Labor broke a record for wages during last year’s election campaign, outpacing inflation since December 2023 after two years in which prices climbed faster than Australians’ pay packets. The wage price index for the three months to the end of September increased by 3.4 percent compared to inflation, which increased by 3.2 percent over the previous 12 months.
“Under Labor, more Australians are working, earning more and keeping more of what they earn,” Chalmers said in May. “Australians voted for higher wages in the election and that [inflation numbers at the time] to show.”
In its latest economic outlook, the Central Bank forecasts that annual real wage growth will be negative this year due to the expected rise in inflation and the slowdown in wages, then recover in 2027.
Chalmers rejected suggestions that the government was willing to take credit for lower inflation but avoided responsibility for the increase by claiming government spending was not to blame.
“I’ve said many times that I take responsibility for all aspects of my job, but more than taking responsibility, we’re taking action, lowering taxes, lowering the cost of living, making the budget better,” he said. 7.30.
The Minister of Finance addressed the claim that government spending does not increase inflation; AMP chief economist Shane Oliver contradicted that claim, saying private demand has been constrained for years and government spending is driving many factors that have contributed to rising inflation.
“The increase in inflation [announced on Wednesday] it was actually due to less government spending (removal of energy rebates), holidays and housing. I don’t think any of this can be objectively attributed to government spending or budget position,” Chalmers said.
When asked whether the budget includes bold reforms, he answered: “I do not write the budget in January.”
“There is a lot to think about, a lot of decisions to be made. This will be a matter for the cabinet. We make these decisions collectively in our government, and the budget will focus on the economy, not politics.”
Shadow treasurer Ted O’Brien said the latest inflation figures will mean next year will be tougher for many people.
“For working Australians and mums and dads across the country, the decline in real wages means a lower standard of living,” he said.
“This latest inflation figure suggests that prices will remain high for longer. Interest rates will likely rise, taxes will rise and real wages will likely fall.”
O’Brien said the government should cut spending and introduce measurable fiscal rules to control spending.
“When the government continues to pour more money into the economy, it competes with households and businesses for goods and services. This raises prices for everyone and crowds out the private sector,” O’Brien said.
“The Liberal Party has been calling out the government for wasteful spending for some time; now some of Australia’s leading economists are openly doing the same. Everyone from AMP to HSBC chief economists say the government needs to rein in its spending.”
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Brittany Busch is the federal politics correspondent for The Age and the Sydney Morning Herald.Connect via email.
