This week’s inflation figures were at odds with the Reserve Bank’s own forecasts and those contained in last month’s budget, which had inflation climbing by 4.25 per cent through 2021-22.
Prime Minister Scott Morrison, who on Wednesday incorrectly claimed twice that the government’s cut in fuel excise would reduce inflation by 0.5 per cent over the next six months (it’s expected to reduce it by 0.25 per cent), said the Coalition understood the real price pressures facing the country.
“We are not out of the woods yet, and we understand that,” he said.
Morrison denied there was any similarity between 2007 – when the Howard government lost office just 18 days after the RBA lifted interest rates – and today, noting the cash rate is just 0.1 per cent compared to 6.75 per cent in 2007.
“We are in the middle of a global pandemic, with a war in Europe. Those situations were not in place in 2007. I think everyone would understand that,” he said.
But shadow treasurer Jim Chalmers, who refused to commit to extending the Coalition’s reduction in fuel excise if Labor wins the May 21 election, said the government had to take responsibility for the pressures facing the economy.
“These interest rate rises will hurt, and Scott Morrison – who takes credit when the economy is going well – won’t take responsibility for the fact that a decade now of attacks on real wages in this country make it harder for people to meet what will be the rising costs of their mortgage,” he said.
Chalmers did signal that Labor would use a budget later in this year to “take into consideration” existing economic conditions.
Whichever party wins the election will face ongoing inflation pressures.
A survey of businesses by the ABS released on Wednesday found 57 per cent experienced an increase in their costs over the three months to April, with 21 per cent saying they had gone up a “great extent”.
Fifty-two per cent of businesses said they had not increased their prices and of those that had, about 42 per cent said they had only partially passed on those costs to consumers.
Separate bureau figures confirmed how much inflation is coming into the country. Prices on imported products rose by 5.1 per cent in the March quarter to be 19.3 per cent up over the year.
Petroleum products (20.4 per cent), fertilisers (19 per cent), coffee and tea (20.1 per cent) and clothing (4.7 per cent) all jumped through the quarter.
Prices for Australian exports are also soaring. They jumped by 18 per cent in the quarter to be 46.7 per cent up over the year with the biggest increases in coal (32 per cent), iron ore (25.5 per cent), natural gas (13 per cent) and non-monetary gold (4.8 per cent).
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