Cost of living relief could spur inflation

Treasurer Jim Chalmers has downplayed expectations of cost of living relief in next week’s federal budget, warning some measures could push inflation even higher.

Dr Chalmers noted the cost of living could surge due to devastating floods in NSW, Victoria and Tasmania pushing up the price of some groceries.

Preliminary talks have already been held with Treasury about the economic impact of the floods.

“There will be a substantial impact on the cost of living, there will be a substantial impact on the budget and there’s no pretending otherwise,” Dr Chalmers told the Nine Network on Tuesday.

“We don’t yet know what the full impact will be on the cost of living, we don’t yet know how many billions of dollars this flood and its recovery will cost.”

Nationals leader David Littleproud said the government was trying to use the floods as a cover for policies that were driving up food prices.

He said the scrapped ag visa was leading to a shortage of labour on farms.

“After the floods we are currently experiencing in Victoria, the worry is that farmers may not re-plant at all,” he said.

“It is simply too hard for farmers to get labour supply.”

Ahead of next Tuesday’s federal budget, Dr Chalmers said he did not want any cost of living measures to be counterproductive.

Dr Chalmers said an important balance needed to be struck.

“What we don’t want to do, and we’ve seen this overseas, is provide cost of living relief in a way that just creates more inflation and pushes interest rates up higher than they would otherwise be,” he said.

“It’s not an easy balance to strike, but we’re trying to strike it for the right economic reasons.”

Any cost of living relief in the budget will need to offer an “economic dividend”, the treasurer has said repeatedly, such as raising paid parental leave from 18 to 26 weeks.

A Senate report released on Tuesday calls on the government to use the October budget to address low wages in the care economy.

“The new government, in delivering its first budget, has the opportunity to address wages and job security, particularly in feminised workforces and workforces with large numbers of part-time and casual workers – as these are the workforces most impacted by the competing responsibilities of work and care,” the interim report said.

The report found jobs in aged care, child care and disability care had been “feminised” and as a result have been systemically undervalued.

Andrew Brown and Poppy Johnston
(Australian Associated Press)