Treasurer Jim Chalmers has defended the government’s economic management following the Reserve Bank’s decision to lift the cash rate to 4.10 per cent, as pressure builds on households and political debate sharpens over spending and inflation.
Speaking after the decision, Chalmers said he accepted responsibility for the government’s role in addressing inflation, while pointing to improvements in the budget position.
“Look, I take responsibility for my part in the fight against inflation, including continuing to improve the budget,” he said.
The Reserve Bank raised rates by 25 basis points in a split 5–4 decision, a move expected to add around $2,800 a year to the average mortgage.
Chalmers said the government had already made substantial fiscal adjustments. “We’ve delivered a couple of surpluses, we’ve found $114 billion in savings, we’ve got the budget in much better nick, but there is more work to do; we’re upfront about that,” he said.
He confirmed further measures would be included in the May budget. “There will be more savings in the budget in May, and that will build on the very substantial progress that we have made in the budget to here.”
The Treasurer rejected claims that government spending was driving inflation, pointing instead to private sector demand and global developments. “Before the escalation of hostilities in the Middle East, we had an inflation challenge which was primarily towards the end of last year because the private sector recovered quicker than people were anticipating, not because of an increase in public spending,” he said.
He added that recent events had made the outlook more difficult. “In the last couple of weeks, that inflation challenge has gotten harder, particularly at the petrol bowser because of the global oil price and for other reasons.”
Chalmers acknowledged the impact of higher rates on households. “More than acknowledge the pressure that that adds to people’s household budgets, we’re acting on it as well,” he said, pointing to measures including fuel market interventions and tax cuts.
The Treasurer said the government remained focused on balancing fiscal discipline with support measures. “We’re looking for more savings,” he said, while noting that “there will always be views about whether that’s too much or too little; I understand and respect that.”
He also defended the trajectory of government spending since the pandemic. “When we came to office spending as a share of the economy was up near a third of the economy. We got it down closer to a quarter,” he said.
Chalmers pointed to broader economic conditions, including low unemployment and relative strength compared with other advanced economies. “We’ve got very low unemployment, we’ve got faster economic growth than any major advanced economy, we’ve got lower debt than the major advanced economies as well,” he said.
On recession risks, he said forecasts did not point to a downturn. “The point that the Governor made yesterday and the point that the Reserve Bank’s forecasts make is that they are not anticipating a recession, nor is the Government,” he said.
He cautioned, however, that global conditions remain uncertain. “There’s a lot of risk in the global economy right now, and we’ve got to get on top of this inflation challenge.”
Chalmers said the upcoming budget would focus on “inflation and productivity” and aim to strengthen economic resilience amid external pressures, including developments in the Middle East.
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