Treasurer Jim Chalmers has warned that Australian households face significant additional cost-of-living pressures due to the conflict in the Middle East, with inflation expected to rise beyond 4.5%. Speaking on Sky News, Chalmers said Treasury modelling suggests inflation could peak between the mid to high fours, based on realistic assumptions about global oil prices.
Despite the inflationary pressures, Chalmers stated that the federal government does not anticipate or expect a recession, defined as two consecutive quarters of negative economic growth. He noted that Treasury scenarios indicate a hit to growth but not one that would shrink the economy in the coming quarters.
The Reserve Bank board is set to meet this week to consider the cash rate, with economists from the big four banks predicting an increase, followed by another in May—just days before the federal budget on 12 May. Greens leader Larissa Waters called on the RBA not to raise rates, arguing that a rate rise would not stop the supply-side inflation driven by the war.
Chalmers confirmed that the economic shock would not derail reform priorities for the upcoming budget, which is expected to include a reduction to the capital gains tax discount. He said Treasury is working on a number of tax reform options for cabinet consideration.
On fuel supply, Chalmers assured that Australia has more than enough supply despite disruptions in the Strait of Hormuz. However, One Nation MP Barnaby Joyce called for Australia to send a navy ship to the Middle East as part of a global effort to secure fuel supplies. Fuel transport companies supported Joyce's proposal to reserve fuel for farmers and regional areas, but the NRMA opposed it, urging Australians not to panic buy or stockpile fuel.
