SYDNEY: Australia’s recently elected Labor government plans to update its economic forecasts to account for faster inflation and rising interest rates, and is nearer to finalising details of an independent inquiry into the country’s central bank.
Speaking to reporters on Monday, Treasurer Jim Chalmers said he would release the new figures to parliament on July 28 and warned the economic picture would be “confronting” given ballooning government debt and the rising cost of borrowing.
“The world economy is a difficult if not dangerous place right now,” he said. “That combination of inflation, rising interest rates and slowing growth, combined with food and energy prices. “I will be providing a suite of economic forecast and an indication of what that means for the budget position as well.”
Inflation hit a 20-year high of 5.1% in the first quarter and figures due next week are likely to show it accelerated beyond 6% in the June quarter led by rising costs for petrol, food, housing and healthcare.
The Reserve Bank of Australia (RBA) has responded by raising interest rates for three months in a row taking them to 1.35%, and a further hike is expected in August.
Chalmers said inflation was set to get worse before it got better and that meant the RBA would continue increasing rates.
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The government, which ousted the Liberal National coalition parties in a May election, is planning a broad review of the central bank, its priorities and function, including on its handling of emergency policy stimulus during the pandemic.
Chalmers has also indicated he would like to see RBA’s policy making Board be more representative of Australia’s population.
Currently the Board is made up of the RBA Governor and his deputy, the Secretary of the Treasury and six non-executive members usually from business and academia.
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