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The Treasurer said “forecasts are never perfect, but these better reflect the economic circumstances our new government is now dealing with – compared with what was set out before the election”.
“Inflation will unwind again, but not in an instant,’’ he said.
“Just as the domestic forces contributing to some of the supply side pressures have been building for the best part of a decade, it will take some time for them to dissipate – but they will.
“In the meantime, higher interest rates, combined with the global slowdown I’ve described, will impact on Australia’s economic growth.”
The Treasurer will confirm this has cut half a percentage point from growth for the last financial year, for this financial year, and for next financial year.
“It’s expected that real GDP grew by 3.75 per cent in 2021-22, instead of 4.25 per cent as was estimated pre-election,’’ he says.
“The pre-election forecast for GDP growth in 2022-23 was 3.5 per cent. This has now been revised down to 3 per cent growth.
“And growth is expected to slow further in 2023-24, at 2 per cent – down from the 2.5 per cent previously predicted.”
But rather than seeing the challenges as a cause or dumping election promises, he said the growing pressures on the economy and the country “don’t make our election commitments less important – they make them far more crucial”.
“Australians are paying a hefty price for a wasted decade,’’ he said.
“They know their new government didn’t make this mess, but we take responsibility for cleaning it up.”
Australia’s inflation rate hit 6.1 per cent on Wednesday – slightly less than forecast – but still a big hit to the cost of living.
The figure makes it less likely that the Reserve Bank (RBA) will raise the official cash rate by 75 basis points in August. But it’s still expected to increase by 50 basis points.
Data released by the Bureau of Statistics (ABS) on Wednesday morning revealed the consumer price index (CPI) rose by 1.8 per cent in the June quarter, with the annual inflation rate increasing to 6.1 per cent.
It’s the highest inflation rate since December 1990, when Bob Hawke was still prime minister.
The CPI previously rose by 2.1 per cent between the December 2021 and March 2022 quarter.
The current figure is substantially higher than the RBA’s inflation target of 2-3 per cent, increasing the pressure to hike rates again.
The most significant contributors to the June quarter’s CPI spike were new dwellings (up by 5.6 per cent) and petrol prices (4.2 per cent).
The price of goods (2.6 per cent) continued to rise faster than that of services (0.6 per cent).
There was a particularly large increase to food prices, driven by supply chain disruptions due to floods, labour shortages, and rising freight costs. Fruit and vegetable prices went up by a 7.3 per cent.
Meat and seafood and bread were up 6.3 per cent year-on-year.
But in some good news for workers, the Treasurer still predicts real wage growth in coming years.
“We expect [inflation] to get higher,” he said. “And the idea that we would be forecasting wages growth that keeps up with that, I think would not be credible in the near term,’’ he said.
