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.
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“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.