Federal Treasurer Jim Chalmers has warned homeowners there will likely be more pain ahead as interest rate rises start to weigh on the economy.
Ahead of his trip to the US to meet with Federal Reserve Chairman Jerome Powell and World Bank president David Malpass, Dr Chalmers said economies around the world are facing the headwinds of high inflation and rising interest rates.
“These global challenges we confront are intensifying, not dissipating: inflation is rampant; central banks are responding with blunt and brutal rate rises; and growth is slowing,’’ Dr Chalmers wrote in The Australian (pay wall).
“The economies of the US and Britain are in reverse; China’s has slowed markedly; and the war in Ukraine sparked an energy crisis that shows no signs of abating. This is why the International Monetary Fund won’t rule out another global recession.”
Mr Chalmers said given the low unemployment rate and strong economy, Australia should fare better than other developed economies.
“I’m optimistic and confident about the future but realistic,’’ he said.
“Like other countries we still face that now-familiar and unwelcome combination of supply-chain disruptions, high and rising inflation, and falling real wages.”
According to Mr Chalmers, many of the cost of living pressures have been imported into Australia.
“Our challenges are primarily, though not exclusively, global, but a wasted decade of missed opportunities and warped priorities has made us more vulnerable to these shocks,” he wrote.
“That means focusing on areas where our policies and sensible investments can make a meaningful and realistic difference without making life harder for the independent Reserve Bank.
“It means responsible cost-of-living relief; investing in our people, their skills and their future; and beginning the hard task of longer-term budget repair.”
Ahead of the October Federal Budget, Mr Chalmers said he is putting together a “ fairly standard bread-and-butter budget”, aimed at addressing some of the economic headwinds the country faces.
“It’s the beginning, not the end, of a big national conversation about our economic challenges, the structural position of the budget going forward, and the kinds of choices we need to make as a country in the future about what our priorities are, what’s affordable and what’s fair,” he said.
“I’m more convinced than ever that Australians are up for real talk about the state of their economy and the budget, and that there’s a hunger to work together.
“No one budget can deal with pressures that have been building for a decade, but the hard work has begun.”