The Chalmers offensive: Media blitz after rate cut hints at more cost-of-living relief

Prime Minister Anthony Albanese is primed to build on the Reserve Bank’s cut to official interest rates by promising more cost-of-living relief during the coming federal election campaign as new figures show wages growing at their slowest rate in almost three years.

Albanese and Treasurer Jim Chalmers used Tuesday’s rate cut, which will save $100 a month on a $600,000 mortgage, to conduct a media blitz while signalling it would be the start of reduced cost-of-living pressures.

Anthony Albanese at the Sydney home of James Declase and Louisa McSpedden and baby Rommie (one-year-old).Credit: Rhett Wyman

Inflation and the squeeze on household budgets will dominate the election that could be called within days.

Albanese portrayed the rate cut as part of the government’s successful efforts to help cash-pressed Australians.

“When we came to office, wages were in decline, inflation was on the way up, interest rates had started to rise. Now we see wages rising, inflation falling, interest rates falling and employment being maintained while tax cuts have been delivered,” he said.

The government has used successive budgets to provide direct cost-of-living assistance, including its $300 electricity subsidies and increases to Commonwealth Rent Assistance.

Chalmers, who is scheduled to deliver the next budget on March 25, signalled that the government would promise voters more help during the coming campaign.

“Even with the progress we made together on inflation and wages and now interest rates, we know people are still under pressure,” he said.

“We haven’t finalised the budget yet [and] obviously there is a range of measures which are under consideration. We have shown a willingness to fund cost-of-living help in a substantial way and a responsible way, if we can afford to do more in the fourth budget of course we consider that right now.”

Any extra government spending would likely be of concern for the Reserve Bank which is forecasting total public expenditure – including all levels of government – to grow by 5.3 per cent this financial year even as private business spending remains flat.

Treasurer Jim Chalmers.Credit: Alex Ellinghausen

Albanese argued the Coalition was disappointed the RBA had cut interest rates, saying shadow treasurer Angus Taylor looked like “someone had run over his cat in the driveway”.

Taylor would not be drawn on whether the Coalition would offer cost-of-living support to voters during the campaign, saying it was important to contain inflation.

“There’s no point continually putting a band-aid on a bullet wound, you’ve got to deal with the underlying source of that – the problem, and that is sustained high inflation,” he said.

The RBA cut rates on Tuesday, in part due to the receding threat of inflation rising due to higher wages.

Figures from the Australian Bureau of Statistics on Wednesday showed wages grew by a less-than-expected 0.7 per cent through the final three months of 2024, the slowest quarterly result since mid-2022.

Annual wage growth fell from 3.6 per cent to 3.2 per cent. Taking inflation into account, real wages lifted by 0.8 per cent over the past year.

In announcing Tuesday’s rate cut, the Reserve Bank said an unexpectedly strong jobs market was one of the biggest risks to inflation. The bank has assumed the rate of unemployment consistent with keeping inflation stable is 4.5 per cent.

But with the slowdown in wages growth, unemployment at 4 per cent and inflation falling to 2.4 per cent, the bank’s assumption has come under further scrutiny.

CBA senior economist Stephen Wu said the easing in wage pressures highlighted the rate of unemployment consistent with keeping inflation stable was probably lower than 4.5 per cent.

He said there were risks to the RBA’s forecasts, released on Tuesday, that wages growth would pick up in coming months.

“Wages growth would need to accelerate to 0.9 per cent a quarter in the first quarter of 2025 and remain there in the second quarter for wages growth to reach 3.4 per cent a year,” he said.

AMP chief economist Shane Oliver echoed Wu about the RBA’s unemployment rate forecast. “I would have thought slowing wages growth suggests [the non-inflationary unemployment rate] is lower than 4.5 per cent,” he said.

NAB senior economist Taylor Nugent said the latest wage growth reading alone would not be enough for the RBA to shift its assessment of employment, but that it would “keep them alive to the prospect the labour market may not be as inflationary as their forecasts”.

Private sector wage growth, at 0.7 per cent, was higher than that of the public sector at 0.6 per cent. Over the past year, private wages lifted by 3.3 per cent while public sector wages have increased by 2.8 per cent.

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