Yahoo Finance ‘Hit the sweet spot’: PM’s pledge on economy
The Albanese government is defending its cost of living handouts, including tax cuts for all taxpayers which come into effect on Monday, against fears they will fuel inflation and lead to higher interest rates.
Prime Minister Anthony Albanese and Treasurer Jim Chalmers on Sunday were both spruiking the stage 3 tax cuts and other measures, including the $300 energy rebate and pay rise for low income workers, denying they would overstimulate the economy.
Mr Albanese, during a visit to an Indian sweet factory in Melbourne, said the government was doing what it could to bring inflation down while helping Australians.
“That is our objective here, to make sure that we get through the short-term issues which are there for cost of living pressures on families,” he said.
“But we want to make sure, as well, that we get the economic settings right, which is why we have produced those budget surpluses, which does put downward pressure on inflation.”
He said the Sweet Magic factory was an appropriate place to talk about the government’s economic plans “because our objective is to hit the sweet spot.”
“The sweet spot in putting downward pressure on inflation while providing cost of living relief,” he said.
“Tomorrow will be a big day – 2.6 million people on award wages will get a wage increase, as well, 13.6 million Australian taxpayers will get a tax cut.”
Fears that the RBA would raise rates from 4.35 per cent, the highest its been since late 2020, rose after the CPI indicator for the month of May hit 4 per cent.
Mr Chalmers said he expected inflation would be tamed, despite the May figure and the March quarter figure of 3.6 per cent – above the RBA’s target of between 2 and 3 per cent.
The Australian Bureau of Statistics will release the important June quarter print on July 31, just days before the RBA’s next board meeting on August 6.
RBA governor Michele Bullock has said consistently the RBA would raise rates again to bring inflation under control if it had to.
The opposition went on the attack on Sunday, with senior frontbencher Michaelia Cash saying the government’s package would do nothing to help Australians.
“Back in the real world, when Australians wake up today, they will be doing it tough as a result of the policies of this government,” she told Sky News.
“It’s not inflation; it is Jimflation.”
Shadow Treasurer Angus Taylor laid the blame for inflation at the feet of the government.
“The Albanese Labor government has completely failed to address the source of Australia’s cost of living crisis – inflation,” Mr Taylor said in a statement.
“We are in an entrenched cost of living crisis, with no light at the end of the tunnel under Labor.
“The Albanese Labor government has no vision for a low inflation, strong growth economy. They have no plan for economic prosperity.”
Mr Chalmers acknowledged many households were “under the pump” because of higher cost of living pressures and interest rates, but he said he expected the government’s policies to be “helpful in the fight against inflation”.
“We’re confident but not complacent we can get on top of this inflation challenge,” Mr Chalmers said.
“We can provide this cost of living relief, and we can get the budget in better nick without smashing the economy.”
Speculation of another interest rate increase went into overdrive on Wednesday after hotter-than-expected inflation data spurred investors to increase bets of another hike as soon as the RBA’s next meeting.
“I think it’s really clear that the interest rate rises, which are already in the system, are already putting a lot of pressure on people,” Mr Chalmers said.
“We’ve seen that in a whole bunch of economic indicators. I understand that, and that’s another reason why this help tomorrow is so important.”
But he warned Australians should not expect the easing of inflation to be straightforward.
“This inflation in our economy will continue to ease. It doesn’t always ease in a perfectly straight line,”
“We’ve seen that around the world as well. And we’re seeing that here in Australia too.
“But our role is to try and make life a little bit easier for people.
“That’s why the tax cuts, the energy bill relief, the pay rises, the cheaper medicines, the paid parental leave, that’s what it’s all designed to do.”
Meanwhile, all federal politicians will get a payrise on Monday following the decision of the independent umpire, the Remuneration Tribunal.
Mr Albanese will receive a $20,543 pay rise, taking his annual salary to $607,500, while Deputy Prime Minister Richard Marles will get a $16,197 increase to $478,983.
Opposition Leader Peter Dutton will receive a pay rise of $14,617, bringing his annual salary up to $432,250.
