Australians have been urged to remain positive about the economy despite the government’s forecast sluggish growth.
Treasurer Jim Chalmers said the Reserve Bank of Australia was “smashing the economy” through its cash rate rises, pre-empting the Australian Bureau of Statistics’ national accounts release on Wednesday.
The data is expected to reflect a soft economy with GDP growth likely to have been subdued during the June quarter.
If the economy does weaken, the RBA would be partly responsible because it was doing its job of trying to keep the inflation rate between two and three per cent, Monash University economics lecturer Isaac Gross said.
Dr Gross said Australians should be more upbeat about the state of the economy.
“A ‘smashed economy’ is perhaps too negative a description,” he told AAP.
“The unemployment rate is still at a very low level, the participation rates are near record highs, we’ve got more people in the job than ever before, wage growth is really, really strong.
“We’re at risk of being a bit too negative on what is still a very strong economy.”
The expected weakness in GDP is likely to have been concentrated in some of the more interest-exposed sectors such as business investment, and highly debt-exposed households that have run down their COVID-19 pandemic savings due to increased mortgage payments.
Even then, Dr Gross does not think GDP figures will be that bad.
“The good times after a post-pandemic boom were never going to last forever,” he said.
“The information we’ve seen so far is that GDP will be below where we ideally want it in the long run, but I don’t think it will be anywhere near a recessionary level.”
Australia’s annual inflation rate rose to 3.5 per cent in the 12 months to July, according to statistics bureau data released on Wednesday – slightly hotter than expected but down from 3.8 per cent in June.
Dr Chalmers said his government and the RBA both wanted to fight “sticky and stubborn” inflation, but each body had different responsibilities.
“It’s self-evident the interest rate rises already in the system are putting people under pressure and slowing our economy,” he told reporters in Western Australia on Monday.
“I think the Australian people expect me to tell it like it is.”
Opposition finance spokeswoman Jane Hume said inflation was the root cause of Australians’ economic woes.
“(This) is a continuation of the war that Jim Chalmers has with the independent RBA,” she told Sky News.
“If you’re feeling poorer, you are poorer – that’s not the RBA.”
Prime Minister Anthony Albanese acknowledged the nation’s economic growth was “very modest” and maintained the Reserve Bank was an independent body.
“We don’t give instructions to the Reserve Bank,” he told reporters in Perth on Monday.
“They’ll make their decisions.
“Rate rises have an impact on the economy – that’s what they’re designed to do – and the Reserve Bank have a role to play in monetary policy.
“We are focused on how you make cost-of-living relief in a way that doesn’t put upward pressure on inflation.”
