Australian Treasurer Says $14.6 Billion Living Cost Relief Won’t Add to Inflation

Australian Treasurer Jim Chalmers Delivers his Budget Address at Parliament House in Canberra, Australia, on Oct. 25, 2022. (Martin Ollman/Getty Images)

Australian Treasurers Jim Chalmers has refuted the idea that the newly announced $14.6 billion (US$9.88 billion) living cost relief will worsen inflation.

In an interview with ABC Radio, the treasurer said the relief package included “responsible spending” and would not add pressure to inflation.

Among the cost of living supports to be featured in the May 9 budget is an energy price relief of up to $500 for Australians on pensions and other types of welfare payments and small businesses.

Around 5.5 million households and one million businesses will benefit from this $1.5 billion spending.

The cost-of-living package will also include investments in cheaper medicines and tax incentives for electrification and energy efficiency upgrades.

“And the centrepiece of the budget tomorrow night will be this cost of living relief. That doesn’t add to inflation,” Chalmers said.

“And so what we’ve done is we’ve carefully calibrated and designed this budget so that it takes the pressure off the cost of living rather than add to it, and people will see how we’ve gone about that tomorrow.

“We’re conscious as we work through the various options of which ones do and don’t add to the inflation forecasts in the budget.”

Pointing to the energy price relief, the treasurer said it was the best example of responsible spending as it reduced pressure on the inflation forecasts in the budget by getting some of the energy bills lower than they would otherwise be.

A shopper holds asparagus spears at Paddy's Market in Sydney, Australia, on Oct. 22, 2022. (Lisa Maree Williams/Getty Images)

While Chalmers acknowledged that there would be different opinions toward areas of government spending when the federal budget was released on May 9, he said the priorities set in the budget would help in the fight against inflation.

Chalmers also mentioned that there was a big shift in the way the Labor government handled budget surplus compared to the previous Coalition government.

“My predecessors used to spend most of those upward revisions to revenue. I have saved most of it,” he said.

The Cost of Living Package Is Not Limited by Age

Regarding the speculated increase in welfare payments for job seekers aged 55 years and above, the treasurer did not confirm whether the policy was real, saying he did not intend to preempt the details in this cost of living package.

However, he noted that the cost of living support would be broader than was reported by the media.

“It won’t all be limited by age. When people see the package in its entirety, they will see what we’ve tried to do here is recognise the genuine pressures that people are under and to do what we can, beginning with the most vulnerable people,” Chalmers said.

Meanwhile, Opposition finance spokeswoman Jane Hume said the government needed to control its spending and tackle inflation to provide genuine relief for struggling households across the country.

“Getting inflation down is the only policy that would provide the cost-of-living relief to all Australians,” she said.

At the same time, the senator said the government had pushed its responsibility to reduce inflation over to the central bank.

Treasurer Says New Petroleum Tax Reform Is Reasonable

Apart from expressing the government’s views on the inflationary impact of the new cost of living package, the treasurer also defended the recently announced petroleum tax reform.

On May 7, the federal government introduced changes to the petroleum resource rent tax (PRRT) by imposing a new cap on the use of deductions.

From July 1, the proportion of PRRT assessable income that can be offset by deductions will be limited to 90 percent, which will result in energy companies paying more tax.

Woodside's North West Shelf Gas Venture near Karratha in the north of Western Australia on Jun. 17, 2008. (Greg Wood/AFP via Getty Images)

As the industry’s peak body accepted the changes, the government expected the move to raise $2.4 billion over the forward estimates.

While the Greens called on the Labor government to be more “ambitious” in its reform, the Opposition warned the interventions in the energy market could lead to higher inflation.

Chalmers said that according to the treasury’s advice, the new reform was the option that raised the most amount of revenue over the next ten years.

The treasurer also said that the government had consulted the industry to work out how to get more revenue for Australians from their resources without jeopardising investments in the sector.

“We want to see supply, and we want to make sure that we honour our international commitments,” he said.

“We recognise that this is an industry which is important to our economy and important to the net zero transformation that we want to see.

“Some people will say we should tax more. Some people will say we should tax less. I think we’ve struck the right balance here.”

Nina Nguyen contributed to this article.