Jim Chalmers says inflation is heading to 7% as food and fuel prices soar


Grim warning about the economy for every Australian until the end of the year – as grocery and fuel prices soar

  • Inflation expected to reach seven per cent as Australians endure soaring prices 
  • Treasurer Jim Chalmers has warned the inflation problem will ‘get worse’ 
  • National average for petrol struck its second highest level in history last week 

Inflation is expected to reach seven per cent as Australians endure soaring prices at the bowser and in supermarkets.

Treasurer Jim Chalmers has warned the inflation rate will be ‘certainly higher’ than the 5.1 per cent rate in the March quarter and will get worse.

Speaking on ABC show Insiders on Sunday, he said: ‘Inflation will be significantly higher than what was expected in the last government’s most recent Budget.

‘Certainly higher than the 5.1 per cent we saw in the March quarter.’ 

He added: ‘This inflation problem will get more difficult before it starts to ease.’ 

Inflation is expected to reach seven per cent as Australians endure soaring prices at the bowser and in supermarkets

Inflation is expected to reach seven per cent as Australians endure soaring prices at the bowser and in supermarkets

Treasurer Jim Chalmers has warned the inflation rate will be 'certainly higher' than the 5.1 per cent rate in the March quarter and will get worse

Treasurer Jim Chalmers has warned the inflation rate will be ‘certainly higher’ than the 5.1 per cent rate in the March quarter and will get worse

Most developed nations are battling high inflation largely due to supply chain disruptions, the large amount of money printed during the Covid pandemic and high energy prices due to Russia’s war on Ukraine.

The Reserve Bank has foreshadowed a rate of about seven per cent which would be the highest since the 7.7 per cent rate in the June quarter of 1990.

‘The Reserve Bank has said something around seven per cent and that doesn’t seem to me to be wildly off the mark,’ Dr Chalmers said.  

Inflation is bad news for mortgage holders because the Reserve Bank will raise interest rates to bring it under control.

The market expects a 3.65 per cent interest rate by March 2023 with nine rate rises from the existing 0.85 per cent level.

The national average for unleaded petrol struck its second highest level in history last week

The national average for unleaded petrol struck its second highest level in history last week

The dire warning comes after the national average for unleaded petrol struck its second highest level in history last week, with every state and territory now paying more than $2 per litre.

The Australian Institute for Petroleum said the national average for petrol rose 6.4 cents to 211.9 cents per litre in the week ending June 26.

This was a fraction shy of the peak set in March, prior to the federal budget which halved fuel excise for six months, cutting prices by 22 cents a litre.

That tax break will be removed on September 28. 

Reserve Bank of Australia governor Philip Lowe believes inflation will slow down in 2023.

‘We have reasonable confidence that inflation will start trending lower next year,’ he said in a meeting in Switzerland on Friday.

‘The problems in the global economy from Covid are gradually being resolved.

‘That’s not to say we mightn’t get hit by another shock.’

Finance Minster Katy Gallagher said the cost of living was ‘through the roof’ and insisted Labor’s policies would help. 

‘We have got cost of living going through the roof, we have got rising interest rates, we have got wages still stagnant and that is presenting some real challenges to people,’ she told Sky News on Monday.

‘The job for government is to look at how we can make our policies, our sensible investments drive the productive capacity of the economy.’

This includes Labor’s child care reform, skills training and taking advantage of the opportunities that emerge from renewable energy.

‘They are things that will help the economy in the long term without adding to inflation in the short term,’ Senator Gallagher said.

The Labor government is also looking at ‘sensible savings’ when it hands down its first budget in October.

Finance Minster Katy Gallagher (left) said the cost of living was 'through the roof'

Finance Minster Katy Gallagher (left) said the cost of living was ‘through the roof’

Australia is at least benefiting from a commodity price boom as a result of the war in Ukraine.

The monthly financial statement released by the Department of Finance on Friday showed the underlying budget deficit was $33.4 billion in May, compared with a 2021/22 deficit of $79.8 billion forecast in the March budget.

Senator Gallagher welcomed the improvement given the budget Labor inherited was in ‘pretty rough shape’.

‘We are seeing improvements; it is in those areas that are highly volatile, around commodity prices, and we have seen some softening in those in the past week,’ she told told ABC radio.

‘We don’t expect (the budget improvement) will continue at this rate.’

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