The Australian assistant treasurer has flagged further stress for household budgets following a spike in U.S. interest rates.
The U.S. Federal Reserve announced a 0.75 percentage point increase in official rates to a target range of three to 3.25 per cent, the highest levels in almost 15 years.
It comes off the back of higher-than-anticipated inflation figures, which have sent shockwaves through share markets,
Assistant Treasurer Stephen Jones says Australia’s economy isn’t immune to international pressures, including from the U.S.
Supply chain constraints from continued lockdowns in China and the war in Ukraine pushing up energy and commodity prices are also fuelling inflation and putting pressure on household budgets in Australia.
“There’s no doubt that anything that happens in the U.S. has an impact on us; this is the biggest economy in the world,” Jones told ABC Radio.
“When they start moving their rates, it has an impact on ours, it has an impact on our currency.”
While Australians are expected to face higher interest rates, the alternative path of rampant inflation would be worse for households and businesses, he said.
“Nothing is going to hurt households and businesses more than galloping inflation. This is pain, we know it’s painful, but it’s necessary.”
There are calls for the government to provide cost-of-living relief in its upcoming October budget after refusing to extend a temporary cut to fuel excise.
The treasurer has repeatedly said the government would maintain fiscal prudence, with Jim Chalmers describing the upcoming budget as “bread and butter”.
Jones said a temporary uplift in the budget’s bottom line—some $50 billion (US$33 billion) driven by high commodity prices and less than expected expenditure—would not remove the need for austerity.
“If you get a couple of overtime shifts, you don’t immediately go out and double your housing mortgage,” he said.
“We expect there’s going to be difficulty down the line. We know this is coming at us.
“Now more than ever, it’s important we deal with the issues, and we have a responsible budget that doesn’t add to the $1 trillion debt.”