Finding savings and paying for cost-of-living policies will be a two-budget job, the treasurer says as the government works toward delivering its first budget next month amid rising inflation and interest rates.
Jim Chalmers also said he won’t take potshots at the Reserve Bank governor Philip Lowe, who is a focus of the RBA review alongside the bank’s board and executive team.
Treasurer Jim Chalmers has a “two-budget view” for funding government promises and finding savings. Credit:Alex Ellinghausen
This week the RBA lifted the official cash rate for a record fifth month in a row to its highest level in seven years as it fights inflation, taking it to 2.35 per cent. The cash rate at the start of May was just 0.1 per cent.
This week Greens treasury spokesman Nick McKim criticised Lowe’s handling of monetary policy and called for the governor to resign after Tuesday’s 0.5 percentage point rate hike, saying he misled Australians by stating as late as November last year that the bank did not expect interest rates to start increasing until 2024.
On Thursday, Chalmers said Lowe had responded “pretty honestly and pretty openly” to some of the criticism.
“For me as the country’s treasurer, it’s not for me to take potshots at Phil Lowe. My interest here is in reviewing the Reserve Bank so we can get the right institutional settings,” he said on ABC News Breakfast.
“People will rightly ask the governor questions about the recent decisions and recent language. My job is to get the system right and also to focus on the things that the government can have an influence on.”
Lowe will deliver the annual Anika Foundation address in Sydney on Thursday afternoon, where he will speak about inflation and interest rate settings. Treasury and the RBA have forecast inflation will reach 7.75 per cent by the end of the year, before it starts to fall through 2023.
Speaking on ABC Radio, the treasurer said October’s budget will be focused on the government’s election commitments including its expanded childcare subsidy, and to cut out programs identified in the Treasury and Finance audit of the previous budget to find savings. The task of budget repair will continue in the May budget, he said.
“We don’t see one budget in isolation. There’ll be another budget in May, most likely, and that’s not far away either. And so I am personally taking a bit of a two-budget view to this task,” he said.
Chalmers said there were reasons to be optimistic about the future of the economy as inflation falls, but there were tricky months ahead first as households face higher bills and mortgage repayments as the interest rate hikes bite.
But Chalmers confirmed there will be no new cost of living measures in next months’ budget, the first of two budgets the government will deliver within seven months.
“I think you’re right to assume that our priority is the cost‑of‑living relief that we’ve already announced,” he said.
“We’ve got these budget constraints. We’ve got these other pressures in the economy. And we’re not going to sort of tiptoe around them or pretend they don’t exist.”
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