Interest rates: Jim Chalmers expects economy to “slow considerably” this year

Federal Treasurer Jim Chalmers has made a grim prediction about the economy, saying Aussies are going through a “very difficult time”.

Federal Treasurer Jim Chalmers has made a grim forecast about Australia’s economy after conceding the current cost of living crisis had created a “very difficult time for Australians”.

Speaking on ABC’s Insiders on Sunday morning, the Treasurer said the cost of living crisis was being felt “around the kitchen tables” in the country, but called short of openly criticising Reserve Bank of Australia governor Philip Lowe following Tuesday’s ninth consecutive rake hike.

In its first board meeting of the year last week, the RBA raised the official cash rate to 3.35 per cent in attempt to combat soaring inflation, which sits at a 32-year high of 7.8 per cent.

“We expect our economy to slow considerably this year,” Mr Chalmers said on Sunday.

Federal Treasurer Jim Chalmers said on Sunday that he expected the Australian economy to slow this year. Picture: NCA NewsWire/Tertius Pickard

“Both the Reserve Bank and the Treasury expect that to be the case, because of that combination of consequences flowing through from higher interest rates and some tricky global conditions.”

But Mr Chalmers was cagey when he was asked about the blistering criticism Mr Lowe received from the Treasure’s parliamentary colleagues.

“He’s got a hard job to do,” he said.

“He’s got to balance getting on top of this inflation challenge without crunching the economy.”

Reserve Bank governor Philip Lowe has come under intense criticism recently, after last week’s ninth straight interest rate hike . Picture: NCA NewsWire / Christian Gilles

“I’m not going to second-guess the Reserve Bank governor... I genuinely respect his independence as I’ve said probably hundreds of times.”

Mr Chalmers said the government would “consider” Mr Lowe’s appointment towards the middle of the year.

Prior to Tuesday’s rate increase, Mr Chalmers colleague, NDIS minister and former Labor leader Bill Shorten told Sky News the RBA’s recent string of rate increases would be “incredibly painful for millions of Australians who are trying to pay their mortgages off.”

Mr Chalmers said inflation remained the “biggest problem” in the Australian economy, but would not say on when he expected energy prices to fall.

“It depends on the trajectory of the energy market from now,” he said.

Treasurer Jim Chalmers said RBA governor Philip Lowe’s tenure would be considered towards the middle of the year. Picture: NCA NewsWire / Christian Gilles