Jim Chalmers confident Australia will avoid recession despite warnings of more interest rate rises

The treasurer also noted ‘very encouraging’ signs on power prices falling, saying Labor’s energy price relief package was working

The treasurer Jim Chalmers says there are “very encouraging” signs on power prices falling and is still confident Australia will avoid a recession despite continuing interest rate rises.

Last week in its first meeting for the year, the Reserve Bank increased the cash rate for the ninth time in a row to 3.35% and warned it was considering even more interest rate rises in coming months.

But the treasurer told ABC’s Insiders on Sunday that said he still believed Australia would avoid a recession, although he acknowledged there were some “tricky” conditions.

“Well, that’s our expectation based on the government’s forecasts and the Reserve Bank’s forecasts,” he said.

“Both of those institutions expect us to avoid that scenario. But, clearly, we’ve got a combination of challenges in the economy right now and we expect our economy to slow considerably this year, both the Reserve Bank and the Treasury expect that to be the case.”

The government announced a $1.5bn energy price relief package in December in a bid to bring down power bills.

Chalmers said the latest data showed the intervention was working, with electricity prices forecast to rise 23%, down from the 30% forecast in October.

“The most important thing to understand is that these new numbers out today, which are about the prices which are expected to flow in 2023 as a consequence of our plan, they are lower than they would otherwise be because of the steps that the Albanese government is taking,” Chalmers said.

Chalmers would not be drawn on whether the RBA governor Philip Lowe was doing his job properly and said he respected the independence of the central bank.

MPs will have two opportunities to question the Reserve Bank governor this week at two different parliamentary committees. Chalmers said Lowe could explain his decision to attend a private lunch with bank traders, instead of giving his traditional National Press Club speech, as reported by the Australian Financial Review.

“No doubt people will want to ask him about that and he can explain it,” Chalmers said.

“I think there’s a broader issue here about how the bank communicates the context for its decisions. This is one of the things that I’ve been discussing with the RBA review panel. I actually discussed it with them on Friday in one of the regular meetings that I had with the review panel – how they communicate their decisions and the context behind their decisions is one of the key focuses of that.”

Lowe’s term as governor expires in September, with the government weighing up whether to renew his contract. The review Chalmers ordered into how the RBA operates and what improvements can be made will be handed to the treasurer next month.


Amy Remeikis

The GuardianTramp

Related Content

Article image
Central bank decision a ‘wake-up call’, opposition say – as it happened
This blog is now closed.

Emily Wind and Natasha May (earlier)

02, May, 2023 @8:17 AM

Article image
Federal budget 2024: $300 energy rebates, cheaper medicines and rent relief in Jim Chalmers’ cost-of-living budget
Treasurer takes gamble on pre-election cost-of-living package that is likely to spark debate about whether the government is doing enough to tame inflation

Paul Karp Chief political correspondent

14, May, 2024 @9:39 AM

Article image
Federal budget improvement is good news for Jim Chalmers but households still face squeeze
While commodity prices are propping up revenue and a likely surplus, household consumption is flat and savings have fallen – and there’s an election coming

Peter Hannam

13, Dec, 2023 @12:33 AM

Article image
Jim Chalmers welcomes OECD prediction RBA has reached interest rate peak
Federal treasurer downplays prospect of posting a second successive budget surplus

Peter Hannam Economics editor

29, Nov, 2023 @10:59 PM

Article image
RBA signals it may pause further interest rate rises
Minutes of November Reserve Bank of Australia meeting say board is ‘prepared to keep rates unchanged’ while it assesses state of economy and inflation

Peter Hannam

15, Nov, 2022 @4:53 AM

Article image
Greens-Coalition alliance may force Chalmers to keep power to overrule RBA on rates
Chalmers had announced plans to scrap the veto power but former treasurers and RBA governors say it is a vital ‘safety valve’

Amy Remeikis

25, Feb, 2024 @2:00 PM

Article image
Chalmers says Dutton’s budget reply lacks economic credibility – as it happened
Treasurer accuses opposition leader of failing to explain how he would pay for suite of measures

Josh Taylor and Rafqa Touma (earlier)

17, May, 2024 @7:42 AM

Article image
Rising interest rates may be Labor’s kryptonite – but remember it never ended up killing Superman | Peter Lewis
Are the Reserve Bank’s decisions to keep hiking the cash rate damaging the Albanese government’s economic credentials?

Peter Lewis

21, Feb, 2023 @1:15 AM

Article image
Reserve Bank’s dovish interest rate rise gives Jim Chalmers more cause to grin than grimace
The treasurer was used to empathising with borrowers after the RBA’s ‘supersized’ rises – instead, he got to talk about the budget

Peter Hannam Economics correspondent

04, Oct, 2022 @4:30 PM

Article image
Australia’s inflation falls further than expected as prices rise at slowest pace in almost two years
November figures will give RBA some comfort that its interest rate hikes are working

Peter Hannam

10, Jan, 2024 @12:46 AM