Treasurer Jim Chalmers issues cost of living warning as ‘perfect storm of conditions’ triggers Australian gas crisis

The largest single interest rate hike in more than two decades is “difficult news” amid skyrocketing costs of living. And Treasurer Jim Chalmers warns things aren’t likely to improve any time soon. POLL

The largest single interest rate hike in more than two decades will be “difficult news” for Australians already dealing with skyrocketing costs of living, Treasurer Jim Chalmers has said.

It also means Australia’s $1 trillion debt will become even more expensive to service.

And Dr Chalmers warned the cost of living crisis that has “been brewing for the best part of a decade” will take more than a few weeks to turn around.

The Reserve Bank of Australia on Tuesday made the decision to push interest rates up to 0.85 per cent.

“Australians expected higher interest rates today but that doesn’t make this news any less difficult,” Dr Chalmers said.

“For an average mortgage of $330,000 remaining, it’s about $87 a month that Australian homeowners will have to find. For an average new mortgage, it’s almost twice that, at about $157 a month.

“So this will be very difficult news for all of those Australians who are already facing skyrocketing costs of living in this country.”

Treasurer, Jim Chalmers. Picture: Andrew Taylor

Dr Chalmers signalled there was light at the end of the tunnel - at some point - but the government needed to be “honest and upfront” about the magnitude of the challenge.

“We have an incredibly difficult combination of challenges; high and rising inflation, rising interest rates, falling real wages at a time when our ability to respond to these challenges is constrained by the fact that the budget is absolutely heaving with Liberal debt,” he said.

“Now it is within our grasp, it’s within our reach to strengthen our economy and have a better future but first we need to navigate together this high and rising inflation in the interest rate rises that accompany.

“We need to be honest and upfront with the Australian people about the nature, the severity, the magnitude of this inflation challenge that we confront.”

He signalled, as he has in recent days, that the upcoming budget in October will include some cost-of-living relief - mainly what has already been flagged like discounted medicines.

Dr Chalmers also reiterated Labor’s commitment that it was not putting forward any new tax plans beyond multinational tax after he was asked if companies should be made to pay more for all the profits they make by exporting Australia’s resources like gas and coal.

EARLIER

Treasurer Jim Chalmers says while the government will help families with medicines, childcare and power costs, they still need to “brace for the reality” of a “full blown cost of living crisis”.

Mr Chalmers conceded that inflation would likely “get worse before it gets better”.

He said the government had to ensure that when cost of living policies enacted by the previous government run out, they were replaced by “responsible, long-term and sustainable cost of living relief.”

Mr Chalmers flagged medicines, childcare and power costs as areas of particular concern that would be addressed in his October budget.

His comments come ahead of another expected increase to interest rates on Tuesday, after they were raised for the first time in 11 years in May.

“Just because these interest rate rises are expected won’t make them any less difficult for a lot of people who are already confronting cost of living pressures,” Mr Chalmers said.

“Interest rates will be rising according to the Reserve Bank Governor for some time yet and I think Australian families need to brace for that reality.”

Mr Chalmers made the comments as he blamed Australia’s gas crisis on a “perfect storm of conditions” that were outside the current government’s control.

Energy Minister Chris Bowen said last week that he would not rule any option “in or out” as the government seeks to deal with a “very serious” gas shortfall, which is driving up wholesale gas prices.

“The gas supply is absolutely crucial for our economy,” Mr Chalmers told Channel 7.

“We’ve had a combination of some international factors, we’ve had some flooding, we’ve got issues around supply,” he said.

Mr Chalmers said that the gas crisis was just the latest energy debacle that Australians would have to deal with after “almost a decade now of energy policy uncertainty”.

“Our energy markets aren’t as robust as we’d like them to be.”

The Treasurer reassured Australians that the government could intervene in gas markets to keep more Australian gas for domestic use, although he did say that the impacts of such a trigger, if enacted today, would not be seen until the beginning of 2023.

The government is instead relying on market regulators to keep costs affordable.

“The regulators have already taken some steps with some price caps and some guarantees, and those steps have been welcomed.”

“If there’s further steps we can take in the near term, we will take them but the most important thing is a good long term energy policy.”

“And that’s what we’ll be implementing.”

With around 25 per cent of coal powered power stations currently offline around the country, Mr Chalmers said that it will be a difficult winter for homeowners.

“It will be an expensive winter, we are in the midst of a full blown cost of living crisis,” he said.

“Electricity prices and gas prices are unfortunately part of that pain.”