Jim Chalmers addresses business leaders after 10th interest rate hike

Jim Chalmers says inflation is still unacceptably high and too persistent but he’s optimistic it’s slowing down after the Reserve Bank hiked interest rates for a tenth consecutive time.

The Treasurer has named the cost of living as the number one fiscal challenge facing Australia a third of the way into what he describes as a “defining decade” ripe with opportunity to modernise the economy through the climate and energy transition.

Speaking to business leaders about five hours after the Reserve Bank’s decision on Tuesday, Dr Chalmers said the government was hopeful inflation had passed its peak.

“That’s what the Treasury expects, that’s what the RBA expects and that’s what last week’s monthly read indicated too,” he told a summit hosted by the Australian Financial Review.

The central bank’s board lifted the cash rate, which guides interest rates set by lenders, by 25 basis points to 3.6 per cent, its highest since June 2012 and in line with market expectations.

Offering a glimmer of hope for stressed mortgage holders, RBA governor Philip Lowe said inflation – which hit 7.8 per cent in the December quarter — was forecast to decline this year and next.

He said the bank believed inflation could be brought back within the target range of 2 to 3 per cent by mid-2025 and tempered predictions there would be multiple rate rises to come.

With Labor trying to shore up support from industry for reforms including its centrepiece manufacturing policy, Dr Chalmers told guests at the summit he’d made a “quick dash” from Canberra — where parliament is sitting — to Sydney just to speak to them

“I believe we’re a better government because we’re taking these chances to work with you and learn from you,” he said.

Dr Chalmers said inflation was his top priority, pointing to recent national accounts figures that showed Australian households spent $20bn on mortgage interest payments in the last quarter, nearly double the $11bn they spent in the same period the year before.

But he repeated the government’s messaging that it is being fiscally responsible as it tackles the cost of living crisis.

“While the Reserve Bank does its difficult job, we do ours using the levers we have available to us – a combination of relief, repair and restraint,” he said.

Naming the government’s longer-term plans, Dr Chalmers said the climate and energy transition should be used to build a “bigger and better” industrial base, that Australia should embrace the adoption of data and digitalisation, and ensure the care sector can meet growing demand.

Successfully navigating these three “big shifts” would define Australia’s success over the next decade and require investment and input from the business sector, he said.

“To get there, we’ll need hundreds of billions of dollars in new investment by 2050 – plus thousands of new clean energy workers in just the next few years alone,” he said of the energy transition.

“And now there’s a race on for clean energy capital – and this means understanding our comparative advantages and remaining a reliable global partner open to trade and investment.”

Dr Chalmers also revealed he would release the Productivity Commission’s five-yearly review of Australia’s economic performance in the medium term ahead of schedule.

“It’s not due till May, but I’m releasing it early so that you can see what we need to grapple with and where we’re already acting to get us on a better productivity trajectory,” he said.

“It’s always frank, it’s always respectful, and for me at least, it’s always productive. I get a lot out of it.”