Treasurer Jim Chalmers tight-lipped as more energy bill relief on the cards

Labor is considering another round of energy rebates, but it’s still not likely to result in interest rates being cut as families become thousands of dollars worse off.

Treasurer Jim Chalmers would not say if Australia was in the grips of a “people’s recession” with households thousands of dollars worse off than three years ago, as Labor considers promising another round of energy bill relief.

Economists have warned further subsidies to artificially lower power prices will not entice the Reserve Bank of Australia to cut interest rates given its focus on underlying inflation as the federal government considers the option as a cost of living election policy.

Opposition leader Peter Dutton said families were “going backwards” under the Albanese Government, blaming the persistently higher inflation on Labor’s spending.

Both major parties are preparing cost of living offering ahead of the next election, with Mr Dutton expected to frame his long-awaited nuclear policy costings as key to lowering energy prices for Australians.

Despite previously opposing Labor’s energy subsidies, Mr Dutton left the door open on Thursday, saying “let’s have a look at what the government’s proposing”.

Jim Chalmers was tight-lipped when asked about whether Australia was in the midst of a people’s recession. Picture: NewsWire / Nikki Short

Mr Chalmers warned the Mid Year Economic and Fiscal Outlook (MYEFO) due later this month would not be “some kind of mini-budget with a lot of new initiatives,” however it is understood Labor is considering taking a pledge to extend its direct energy bill subsidies for a third time to the next election.

“We are always looking for responsible ways to help people where we can, we have got pretty substantial budget constraints,” he said.

“And we want to make sure that we are part of the solution, not the problem in relation to inflation.”

Mr Chalmers said he acknowledged the economy was “weak and people are under very substantial pressure,” but avoided answering whether Australia was in a “people’s recession” due to 21-months of negative GDP growth per capita.

Aussie families are thousands of dollars worse off than they were three years ago after the Covid-19 pandemic. Picture: NewsWire / Gaye Gerard

AMP chief economist Shane Oliver said if the government was considering the energy subsidies to boost their re-election chances it “may help,” but if they thought it would encourage the RBA to cut rates then it was “not going to have any impact”.

“The RBA will still look at underlying issues and ignore (the energy subsidy),” he said.

Mr Oliver said the “trouble” with subsidies was that once introduced, they were politically difficult to remove.

“The bounce back in electricity prices might not worry some voters, who will see through it as a one-off, but other voters will be annoyed,” he said.

“Particularly low and middle income earners are likely to feel a big rise in power costs.”

Mr Oliver said ultimately Labor would have been “far better off” curtailing government spending right back at their first budget in October 2022.

“That probably would have meant we’d have interest cuts by now,” he said.

“NDIS, energy rebates, defence spending, aged care, health spending generally, of course they’re nice to have, but the problem is they’re adding to the demand in the economy and that’s what the RBA is trying to slow down.”