Australian Treasurer Responds Positively to Latest Inflation Data

Australian Treasurer Jim Chalmers has responded positively to the latest inflation data released on April 25, 2024. The data from the Australian Bureau of Statistics showed that the annual inflation rate falls to 3.6% in the 12 months to March, down from 4.1% in the year to December. However, quarterly inflation accelerated to 1%, higher than the expected 0.8% rise.

The main contributors to the quarterly increase were price rises in education (5.9%), health (2.8%), housing (0.7%), and food and non-alcoholic beverages (0.9%). Chalmers acknowledged that price pressures are still lingering but called for perspective, noting that annual inflation is now less than half its peak of 7.8% and is tracking below Treasury's forecasts. "Inflation has almost halved since the Labor government took office," he stated.

Why this matters: The inflation data has significant implications for the Australian economy and monetary policy. It has prompted some economists to push back their forecasts for interest rate cuts by the Reserve Bank of Australia, with the chances of a cut in 2024 now seen as slimmer.

Chalmers said the upcoming federal budget in May will focus on easing cost-of-living pressures while aiming for a second surplus to help curb inflation. He emphasized that any additional cost-of-living relief will be carefully targeted to avoid adding to inflationary pressures. The budget will also include measures to boost economic growth, such as the Future Made in Australia Act aimed at promoting investment in low-carbon industries.

Shadow Treasurer Angus Taylor warned the government to keep budget spending restrained to avoid driving up inflation and keeping interest rates high, which could put more pressure on households. However, Chalmers stated that the government's industry policy will not put upward pressure on inflation, contrary to the opposition's warnings.

The inflation data showed some progress in reducing price pressures, with annual inflation moderating to 3.6% in the March quarter. Chalmers acknowledged the lingering challenges but emphasized the government's commitment to managing inflation responsibly while providing targeted cost-of-living relief and promoting economic growth in the upcoming budget.

Key Takeaways

• Australia's annual inflation rate fell to 3.6% in March 2024, down from 4.1% in December.
• Quarterly inflation accelerated to 1%, higher than the expected 0.8% rise.
• Inflation is now less than half its peak of 7.8%, tracking below Treasury's forecasts.
• The upcoming budget will focus on easing cost-of-living pressures and aiming for a second surplus.
• The opposition warns against budget spending that could drive up inflation and keep interest rates high.