Opinion piece: We need to stick to the plan to beat rising costs

Australians don’t need to be told there’s a cost-of-living challenge in the economy right now.

You see it and feel it every time you visit the supermarket and every time you pay a bill. It hits homeowners every time the mortgage payment is due, and it’s hurting renters too. Household budgets are feeling the strain.

There’s a number of causes for this. The big reason is the war in Ukraine, which has sent global energy prices higher. But there are still problems with global supply chains in the wake of the pandemic, which pushes up the costs of goods here. And there are challenges closer to home that have been ignored for far too long – like failing to invest in new forms of cleaner and cheaper energy, not training enough Australians to fill skills shortages, and not doing enough to boost our housing supply. 

So while these inflationary pressures are coming at us from around the world, they are being felt in different ways around the kitchen table.

When inflation is high, increases in interest rates are a consequence – we see that around the world. Central banks in the UK, US and Europe have all hiked rates in recent days. And Australia’s independent Reserve Bank, which started increasing rates before the election last year, continued tightening with its decision on Tuesday.

The decision didn’t come as a surprise to anyone, but that doesn’t make it sting any less. There’s no getting around the reality that another interest rate rise puts more pressure on people already feeling the pinch. 

The Reserve Bank acts independently of the Government – its job is to try and get on top of inflation without crunching the economy, and it does that without any interference from the Treasurer of the day.

Our job is to do what we can to address the broader pressures facing our people and our economy – and that’s exactly what the Albanese Government is doing.

Our plan to address inflation has three parts.

First, we’re rolling out responsible cost-of-living relief that helps take some pressure off household budgets, delivers an economic dividend, but doesn’t add to inflation.

We cut the cost of prescription medicines in January, and in July we are making child care cheaper for millions of families. The centrepiece of the May Budget will be direct energy bill relief for struggling families and businesses – taking some of the edge off high power prices.

Second, we’re removing some of the obstacles that are holding back the growth of our economy and putting more pressure on inflation.

Businesses are crying out for more skilled workers, and our plan for fee-free TAFE places will give people the skills they need for those jobs. We’re repairing the broken energy market so that power is more reliable and affordable over time. Our National Reconstruction Fund will help create more high-skill, high-wage manufacturing jobs in our suburbs and regions. And we’re working with other governments and investors to unlock more affordable housing.

Finally, we are managing the Budget in a more responsible way.  By being careful with our spending we make sure we’re not adding to inflation or putting extra pressure on prices.  The ratings agencies have given us a big tick for that.

Instead of spending the revenue windfalls in the last Budget, we banked more than 99 per cent of it over the next two years, when inflation is highest. This compares to just 40 per cent from the previous government.

We’re also working hard to get wages moving again – because in the end, that’s the best way for people to keep up, and get ahead.

It’s still early days, but after a decade of stagnant wages, we’re starting to see the beginnings of stronger wages growth.

Inflation is still unacceptably high right now, and there’s no use pretending otherwise. Unfortunately, inflation will stay higher than we like for longer than we like.

But after plenty of work, and plenty of sacrifices from Australians, we are seeing more evidence that inflation is now around its peak, and will start to moderate.

There’s still a long way to go, but the plan will work, and we need to stick to it.

The Albanese Government will keep its focus on delivering responsible cost of living relief and dealing with the inflation challenge – today, tomorrow, and every day in 2023.