Upcoming consumer price data is set to show “welcome progress” in the fight against inflation, the treasurer says, but he warns it is too early to predict if it will fall back to the Reserve Bank’s target.
Monthly inflation data for August will be released on Wednesday, and while Treasurer Jim Chalmers said the figures would be volatile, forecasts showed it was on track to ease.
While inflation was at 3.5 per cent for the month of July, it’s still higher than the target band of between two and three per cent outlined by the central bank.
“Most economists expect that number will be down and it will show a further welcome progress towards lower inflation in our economy, whether it’s in the low threes or in the high twos,” Dr Chalmers told Sky News on Sunday.
“We’ve seen some good progress, some welcoming, encouraging progress. We’ll learn a bit more about that on Wednesday.
The inflation data will come just a day after the Reserve Bank hands down its latest decision on interest rates on Tuesday.
The central bank has kept rates on hold at 4.35 per cent since November, but despite a reduction in interest rates in the US by 50 basis points, Dr Chalmers said that would not necessarily mean a drop in Australia.
“Even with that 50 basis point interest rate cut in the US, their interest rates are still higher than in Australia. They went up by more, inflation was higher,” he said.
“The main reason why our inflation is a little bit higher than some of those countries is because they peaked earlier than we did.
“The shape of our inflation is broadly the same as a number of other countries, but a couple of months behind the trajectory that we’ve seen elsewhere.”
Opposition environment spokesman Jonno Duniam said while he would love to see a rate reduction, it was unlikely to happen.
“The RBA are constrained by the circumstances they’re dealt and those circumstances are dictated by government spending and government policy,” he told Sky News.
“I’ve seen no change in policy that has enabled the RBA to deal with the inflationary pressures.”
It comes as the treasurer said the budget was on track to record a higher-than expected surplus.
While May’s federal budget predicted a $9.3 billion surplus for the 2023/24 financial year, Dr Chalmers said it was on track to record one in the “mid-teens”, when the final figures are released later in September.
“What it will show is that upgrade in the surplus from $9 billion to the mid-teens is not actually a pick-up in revenue,” he said,
“What it shows is that we’re getting less revenue towards the end of that last financial year than we anticipated in May. The big improvement is from less spending.”
