Jim Chalmers warns inflation on track to peak around Christmas

Inflation has soared to a new 40-year high in the US, where Treasurer Jim Chalmers warned Australians face higher inflation for longer next year.

Australians face the prospect of inflation remaining higher for longer next year in what Jim Chalmers says is “public enemy number one” for the economy.

Inflation soared to a new 40-year high overnight in the United States, where the Treasurer is on a two-day visit to meet top economic leaders ahead of this month’s federal budget.

Dr Chalmers said the US data was “very troubling”, particularly as a “blunt and brutal” series of interest rate hikes had so far been unable to slow inflation.

Asked whether Australians would also be hit with extended cost of living pressures, he said inflation was still due to peak around Christmas as anticipated, but that forecasts of massive electricity price hikes next year could worsen the situation.

Treasurer Jim Chalmers has vowed to deliver “maximum bang for buck” in his first Budget. Picture: NCA NewsWire / Gary Ramage

“A bigger and bigger part of our inflation challenge is going to be electricity prices, and that’s very concerning to us, as it would be very concerning to every Australian,” Dr Chalmers said.

“There is some prospect that upward pressure on electricity prices will change the profile of inflation after that, and I’ll make that clear on budget night.”

He also warned that rising inflation in the US would lead to higher interest rates that would strengthen the US dollar, which in turn would fuel inflation in Australia.

In the Treasurer’s July budget update, he said inflation was due to hit 7.75 per cent by the end of this year, before falling to 5.5 per cent in the middle of next year and 3.5 per cent by the end of 2023.

Speaking after several high-level meetings in Washington DC, Dr Chalmers said the global economy was “treading an increasingly narrow and perilous path”.

He said the Albanese government would finalise this month’s budget in coming days, as he acknowledged it would include “a series of difficult decisions taken in difficult times”.

“The best defence against global economic uncertainty is responsible budgets,” Dr Chalmers said.

He promised to deliver “maximum bang for buck” with measures that would not worsen inflation.