Treasurer Jim Chalmers has flagged spending cutbacks during a sombre update on Australia’s finances.
Dr Chalmers downplayed concerns Australia could be headed for a recession, before presenting his economic update to the House of Representatives on Thursday.
Mr Chalmers revealed inflation is expected to peak at 7.75 per cent by the end of this year – up from the previously anticipated 4.25 per cent.
This was one of a number of relatively dramatic changes to the economic forecasts produced by Treasury before the federal election.
The forecast for gross domestic product growth in 2022-23 will be revised down from 3.5 per cent to three per cent.
Economic growth is expected to slow further in 2023-24, at two per cent – down from the 2.5 per cent previously predicted.
Dr Chalmers sought to place some of the blame for Australia’s gloomy economic outlook to the debt burden left after the Coalition’s decade in office.
“This isn’t just Covid-19 debt that we are repaying. Our predecessor had more than doubled gross debt before the pandemic hit,” he said.
“We know that interest payments on government debt will be the fastest growing area of government spending … faster than the NDIS, faster than aged care.
“Our government must make the hard decisions necessary for responsible budget repair.”
In his reply speech, opposition treasury spokesman Angus Taylor said the government needed a “plan”.
“No one blames the government for the global circumstances challenging Australians, but we can and will hold them to account on how they respond to it,” he said.
“The single greatest tool government has to ease pressure on inflation (and) interest rates is to manage its budget.”
Earlier, Dr Chalmers said the economists advising the federal government weren’t expecting Australia to be facing a recession.
“That’s not the Treasury’s expectation,” he told Nine.
“I think what we’ve got … is an economy that’s growing but so are our challenges.”
Senator Jacqui Lambie earlier on the same program said Australia was “without a doubt” heading for a recession and claimed a Sunday roast had become “a luxury”.
He told the ABC he was committed to fulfilling the Albanese government’s election promise to get real wages growing for Australians within its first term despite record high inflation.
“That is our expectation, that we will get real wages growth this term,” he said.
“But equally there is no use pretending to people that — with inflation north of 7 per cent — there will be wages outcomes in the near term that keep up with that inflation.”
The Treasurer told parliament that higher interest rates, combined with a global slowdown, will hinder the nation’s economic growth.
“The headwinds our economy is facing – higher inflation at the top of that list, along with slowing global growth – are now reflected in the revised economic outcomes and forecasts,” he said.