By Shane Wright
Treasurer Jim Chalmers has warned the government’s increasingly worried backbench the pre-election budget will not be a spendathon to woo voters scarred by cost-of-living pressures as evidence grows that inflationary pressures are easing.
Ahead of this week’s critical September-quarter inflation figures, which many experts believe will show consumer prices growing at their slowest rate since the early stages of the pandemic, Chalmers said the government would not add to prices with irresponsible spending in either his mid-year budget update or the 2025-26 budget.
Treasurer Jim Chalmers has warned backbench MPs he will not use the coming budget to engage in a cost-of-living spendathon.Credit: Alex Ellinghausen
Labor MPs have called for Chalmers to use his two fiscal set pieces to expand programs to help voters dealing with high inflation and mortgage interest rates. There is also growing concern about the hit being borne by small businesses as consumers cut discretionary spending.
Saturday’s Queensland state election, at which the Labor government lost power after a 7.4 per cent swing against it, was dominated by cost-of-living issues.
Chalmers has used the past two budgets to reveal initiatives to help households with price pressures, including handouts to reduce power bills, a large increase in rent assistance and this year’s re-jigged stage 3 tax cuts.
Pressed on Monday whether he would go further, the treasurer said he would not splash cash on programs that could ultimately add to inflation pressures.
“I want to reassure people and assure people that we will continue to put responsible economic management as the defining feature of this Albanese Labor government,” Chalmers said.
“This election was never going to be, from our side, a free-for-all of public spending. It wasn’t going to be before Saturday’s outcome and it’s not going to be after Saturday’s outcome.”
Chalmers said while he received free advice to either provide much more cost-of-living relief or “slash and burn” the budget and provide less assistance, he would be looking to strike a “series of correct balances”.
One area in which consumers have felt the most price pain over the past three years has been in supermarkets. Food inflation hit 9.2 per cent in the December quarter of 2022 – well above the overall inflation rate peak of 7.8 per cent.
Prices in key kitchen staples have fallen since. Bread inflation reached 14 per cent at the end of 2022 while for dairy goods, it climbed to 15.2 per cent. Both are expected to have fallen below 3 per cent in Wednesday’s report.
Some grocery items are likely to get cheaper over coming months, including dairy, meat, health and beauty, although a spike in global sugar and cocoa prices could push up chocolate costs.
The surge in prices has led to a substantial increase in the proportion of shoppers chasing specials between different supermarkets or specialist stores. In its recent submission to the competition watchdog’s inquiry into supermarkets, Coles noted its internal customer surveys showed 87 per cent of shoppers looked at ways to minimise their grocery bill over the past year.
Four in five consumers spread their monthly grocery shopping across multiple supermarket brands to find the best bargains.
Petrol, the single largest expenditure of most households, is also getting cheaper.
Petrol prices have fallen by almost 10 per cent since the start of July.Credit: James Davies
The Australian Institute of Petroleum on Monday reported the average price for a litre of unleaded fuel was 177.5¢ over the past week. In October last year, the national average reached $2.11 a litre.
Through the September quarter alone, average petrol prices dropped by almost 10 per cent.
Opposition Leader Peter Dutton said he believed the Liberal National Party’s victory in Queensland could be replicated at the federal level, partly due to the financial pain being felt by ordinary Australians.
“The lessons are that if you treat people with contempt, if you run up a huge debt, you mismanage the economy, you create a cost-of-living crisis, you can expect the electorate to punish and that is exactly what happened in Queensland,” he said.
As Australian shoppers cut their spending, more businesses are struggling to make ends meet.
Figures compiled by credit monitoring firm CreditorWatch show 16.2 per cent of businesses in the hospitality sector are at risk or high risk of failing over the coming 12 months.
High interest rates, energy price rises, fewer visitors to CBD locations and lower consumer demand are all hitting hospitality businesses. Expected failure reports for other sectors are substantially lower.
CreditorWatch chief executive Patrick Coghlan said hospitality businesses would enjoy a lift in conditions only if consumers felt a reduction in cost-of-living pressures.
“Discretionary spending is one of the few ways that consumers can actively cut costs, whether that’s eating out less, buying fewer coffees at cafes or not seeing so many concerts or theatre shows,” he said.
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