Labor has accused the Coalition of dealing a “triple whammy” to the skyrocketing cost of living, rising interest rates and falling real wages for Australians.
Figures released on Wednesday show annual inflation hit its highest level in two decades as Prime Minister Scott Morrison dodged questions about impending tax hikes for millions of Australians during the election campaign.
Data released on Wednesday showed the consumer price index jumped to 2.1% in the March quarter – for an annual inflation rate of 5.1%, from 3.5% previously.
Fueled by soaring gasoline prices and higher construction costs, it puts inflation at its highest level since 2001 – when the GST was introduced. The figures will put pressure on the Reserve Bank of Australia’s board when it meets next Tuesday to discuss changes to official interest rates.
Shadow Treasurer Jim Chalmers lambasted the Coalition over the numbers.
“Australians are absolutely crushed by the rising cost of living under Scott Morrison’s watch,” Dr Chalmers told Sky News Australia.
“Cost of living pressures built up before the war in Ukraine.
“This is a government taking credit for the drop in unemployment in a welcome way.
“But he won’t take responsibility for the fact that real wages are falling in this country – more substantially than they are in the United States and elsewhere as well.”
But Treasurer Josh Frydenberg said the inflation rate reminded Australians of the volatile global environment, particularly with the war in Ukraine and the pandemic.
“Now is not the time to jeopardize the gains we have made. We have gone too far,” he said.
“It is a time of strength and stability. Now is not the time to roll the dice on bogus independents, a weak Labor leader and the chaos of a hung Parliament.
Wednesday’s figures came as Mr Morrison – who has promised no new taxes if the Coalition wins re-election on May 21 – was asked about the end of the Low and Middle Income Tax Compensation (LMITO) the next year.
An analysis by the Bankwest Curtin Economics Center found all households earning less than $90,000 will pay more taxes when LMITO ends, even taking into account the effect of the Coalition Stage Three tax cuts in 2024-25. That’s about 10 million Australians.
“It was a temporary measure that was spelled out in budgets and legislation,” Mr Morrison said, as he campaigned in Rockhampton on Wednesday.
“We are not changing any of these laws, we are not introducing any legislation to do so. It is a permanent feature of the tax system.
He dodged a question about how much tax low- and middle-income people would pay after the end of LMITO, speaking only of his party’s demand for lower taxes.
“What Australians will always face under our government is lower taxes,” he said.
“Over the next term, because of what we have already legislated…means the highest marginal tax rate that Australians will face, 94% of them, is a tax rate of no more than 30 cents on the dollar.”
Core inflation – which dampens volatile price swings and is more crucial to the outlook for interest rates – jumped from 1.4% to 3.7% for the year.
This is the first time the underlying rate has exceeded the Reserve Bank of Australia’s 2-3% target since early 2010.
The result could put pressure on the RBA to push the cash rate from a record high of 0.1%. If the council acts next Tuesday, it would be the first time since 2007 that it has raised interest rates during a federal election campaign.
The RBA has previously said it wants to see a significant pay rise before taking action.
But global inflation is on the move, as are other central banks, which argues for an RBA move sooner rather than later.
“The only real argument for delaying now is the current federal election – as was last the case in 2007, this is another good opportunity for the RBA to once again demonstrate its independence,” the economist said. BetaShares Chief David Bassanese.
ANZ urged the RBA to raise the case rate to 0.25% after the release of inflation figures.
“A cash rate target of 0.1% is inappropriate in this context,” read a report released by the bank.
A rise in the cash rate would force banks to raise borrowing costs for households and businesses.
The first $250 cost-of-living payments will hit the bank accounts of millions of eligible retirees, income assistance recipients, veterans and concession cardholders this week.
Lower fuel excise duties, along with a slump in global oil prices, brought some relief to the bowser after gasoline prices rose above $2 a liter in the March quarter.
However, last week the Australian Petroleum Institute said the national average petrol price rose 2.6 cents to 168.9 cents per litre, ending four weeks of declines.
Mr Frydenberg said the Treasury’s forecast for the temporary fuel excise halving was that it would take a quarter of a percentage point off inflation, which would be reflected in the June quarter.
“We are seeing price increases in a number of areas and that is largely due to international factors,” he said.
“But, again, this is the Treasury forecast, then independently reaffirmed by the Treasury and Finance Secretary, just after the election was called, … we expect to see inflation come down and we would like
then see wages rise.