Labor accuses government of “washing their hands” of cost of living crisis before Frydenberg hits back

Labor is accusing the government of ‘washing their hands’ of the cost of living issue as the war of words over the crisis heats up.

The government is trying to “wash their hands” of the challenge posed by rising interest rates, according to Labor.

But Treasurer Josh Frydenberg has hit back by comparing Australia to the rest of the world.

The Reserve Bank of Australia defied predictions by raising the cash rate to 0.35 on Monday, set to increase mortgage repayments by up to hundreds of dollars each month as the big four banks announce they will pass on the rise.

With inflation tipped to hit six per cent by the end of the year, and wage growth stagnating, cost-of-living is at the front of Australians’ minds in the lead-up to the May 21 election.

But given the unemployment rate is four per cent, Mr Frydenberg said the economy was going from “strength to strength”.

“It’s appropriate now for monetary policy to normalise as the main impacts of Covid start to subside and just as fiscal policy has started to normalise,” Mr Frydenberg told Sky News.

Prime Minister Scott Morrison and Treasurer Josh Frydenberg face new pressures in their bid to re-election after the Reserve Bank hiked rates. Picture: Jason Edwards

He hit back at claims the cash handouts and fuel excise cut announced by the government during the budget to aid with cost of living had further added to inflationary pressures, putting the blame instead on global pressures.

“The main drivers of the higher inflation are global developments. That is both the war in Ukraine and the Covid pandemic which has disrupted supply chains, and it’s affecting the whole world, not just Australia,” he said.

“The Federal Reserve in the United States has lifted the cash rate by 25 points. In the UK … 65 basis points. In Canada by 75 basis points and in New Zealand, by 125 basis points.

“We’re very conscious of the cost of living pressures that Australians are under, and that’s why we’ve made the announcements in the budget.”

Shadow Treasurer Jim Chalmers said the government was trying to wash their hands of their economic responsibility. Picture: Tim Hunter.

Shadow Treasurer Jim Chalmers said the Coalition “doesn’t understand” the pressure people were under, as he tried to sell his party as the better economic managers.

“We think the difference between Labor and the government is the government is trying to wash their hands of this challenge,” Mr Chalmers said.

“They don’t understand the pressure that people are under, under Scott Morrison’s cost of living crisis, and we do.

“Growing the economy without adding to inflation, getting real wages moving again, trying to have something to show from this Budget which is heaving with a trillion dollars in debt.”

The Reserve Bank of Australia is tipped to raise interest rates further over the coming few months. Picture: NCA NewsWire / Dylan Coker

Mr Frydenberg said the cost of living pressures were a key reason why the Coalition should be reinstated, saying the country needs “a steady hand at the helm”.

Later on Tuesday, Prime Minister Scott Morrison will pledge a two-year freeze of the pension deeming rate, which will ensure about 900,000 retirees and other welfare payment recipients won’t suffer a drop in their payments should the Coalition be re-elected.

It’s the latest measure announced by the government to aid cost-of-living, joining their budgetary measures of halving the fuel excise, $250 payments to retirees and other welfare payment recipients, and an extra $420 back at tax time to low and middle income earners.