Living Cost Relief Could Worsen Inflation: Australian Treasurer Warns

Federal Treasurer Jim Chalmers speaks at Parliament House in Canberra, Australia, on July 28, 2022. Martin Ollman/Getty Images

Australian Treasurer Jim Chalmers has warned that some cost of living reliefs to be outlined in the Oct. 25 federal budget could flare up the already high inflation as the federal government is considering extra support for farmers impacted by the recent flooding.

Speaking to the Nine Network, Chalmers said Australians could face a surge in living costs due to higher grocery prices caused by devastating floods in agricultural regions across New South Wales, Victoria and Tasmania.

“I think Australians will be bracing for even more expensive groceries as we head toward Christmas as a consequence of what’s happening here,” he said.

While the treasurer has attended preliminary talks about the economic damage of the floods, it is still early to tell the full picture of the impact.

“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,” Chalmers said.

“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.”

People shop for fruit and vegetables at Victoria Market in Melbourne, Australia, on July 5, 2022. William West/AFP via Getty Images

Meanwhile, Nationals Leader David Littleproud allegedly said that the Labor government was trying to cover up policies that were inflating food prices with the recent flooding.

He cited a labour shortage due to the cancellation of an agriculture visa, which was supposed to attract workers from Southeast Asian countries.

“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.”

Treasurer Wants Balance in the Federal Budget

As the federal budget release is approaching, Chalmers said he did not want any living cost measures to be counterproductive and that there needed to be a balance.

“What we don’t want to do, and we’ve seen this overseas, is provide a 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.”

The treasurer added that the federal government had taken lessons from the recently scrapped tax cuts announced in the United Kingdom, which sent the country’s financial market into turmoil.

“The UK government itself is recognising that perhaps they got this balance wrong, and they’re trying to recalibrate their settings,” he said.

“That is an important lesson for all of us. What we’ve tried to do is make sure that the cost of living relief that we give doesn’t make the job of the Reserve Bank harder.”