Treasurer Jim Chalmers has warned families will face tough economic times in the coming months ahead of an expected spike in inflation.
Inflation levels are expected to rise when the latest Consumer Price Index figures are released later this month.
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Chalmers said if inflation were to flatten next year, Australians would suffer for the foreseeable future.
“Unfortunately, we expect this inflation challenge to get worse before it gets better, but it will get better,” Chalmers told Sky News on Sunday.
“We expect inflation to moderate next year, but we are going to have a tough time for many families.”
Inflation is currently at 5.1%, the highest level in two decades.
Chalmers said rising inflation would also likely have a ripple effect on the official interest rate.
The Reserve Bank of Australia will next meet on August 2, with another rate hike expected.
This comes after the cash rate has risen in each of the past three months, with the rate now sitting at 1.35%.
“It’s obvious that inflation of the type we’re seeing right now will lead to interest rate hikes from the Independent Reserve Bank,” Chalmers said.
“This will clearly slow the economy or slow our near-term economic growth expectations as interest rates rise in the manner indicated by the Governor of the Reserve Bank.
“It will make life even more difficult for many Australians who are already dealing with the soaring cost of living.”
Chalmers was with Reserve Bank Governor Philip Lowe at the G20 summit for finance ministers in Bali.
The treasurer told the forum that collective action was also needed to deal with the global economic pressures triggered by Russia’s invasion of Ukraine.
After unemployment figures fell to nearly 50-year lows, Chalmers said it was essential that more people have access to opportunities in labor markets.
The latest figures saw the national unemployment rate fall from 3.9% to 3.5%, the lowest levels since August 1974.
“That unemployment rate was an incredibly strong and very welcome outcome,” Chalmers said.
“It reinforces the need at our jobs summit to bring people together around some of the challenges associated with labor shortages and skills shortages.”