Australia’s cost of living crisis is set to deepen, with Treasurer Jim Chalmers warning inflation will be significantly higher than expected, hitting 7 per cent by the end of the year.
Chalmers says there will be cost of living relief in his October budget, as pressure mounts on the government to extend the cut to the petrol excise.
The Treasurer will deliver his first budget on October 25 and is promising some relief from rising prices.
But economists warn that more government spending will feed a spiral that pushes up prices and interest rates.
“Inflation will be significantly higher than what was expected in the last government’s most recent budget,” Chalmers said.
“The Reserve Bank said something around 7 per cent, that doesn’t seem to me to be wildly off the mark.
“There will be a cost of living package (in the budget).”
Economist Chris Richardson said the package may not be a good move.
“That means it costs the budget, which tips money back into the economy, which simply adds to inflation and makes the Reserve Bank go harder,” he said.
The Treasurer will be under intense pressure to extend the previous government’s temporary halving of the petrol excise because if he doesn’t, there will be a rude shock for drivers.
Prices will jump at the pump 24 cents a litre come late September.
Richardson said it could go up to $2.50 a litre.
All this makes it hard to deliver on Labor’s aim to push wages up faster than living costs.
And with employers struggling to find staff, the opposition wants pensioners and veterans to be able to double the hours they can work before their benefits are cut.
“Those who want to be able to work an extra day or two, for them to be able to work and have it not affect their pension,” opposition leader Peter Dutton said.
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The government isn’t opposed to the idea but it would come at a cost to the budget, Chalmers said.