Treasurer Jim Chalmers is facing criticism for remarks made in an interview about the cost-of-living crisis and painful pressures facing millions of Australians.
Speaking with veteran political commentator Michelle Grattan for her podcast on The Conversation, Dr Chalmers implied those struggling will have to wait until next year for relief.
Dr Chalmers said he expects Australians to be better off by the end of 2024, largely due to anticipated continued wages increases.
“That’s certainly the expectation,” he told Grattan.
“If you look at the forecasts in the mid-year budget update, Treasury expects inflation to moderate further, they expect wages to grow, and we expect annual real wages growth as well.”
The Coalition’s treasury spokesman Angus Taylor slammed Dr Chalmers’ comments, saying they “demonstrate the lack of urgency from Labor in responding to the cost-of-living crisis”.
“Middle Australia is being crushed due to Labor’s failure to get inflation under control,” Mr Taylor told news.com.au.
“Since the Albanese Labor Government came to power, interest on mortgage repayments has almost tripled, prices have gone up by more than nine per cent, and Australian are paying 27 per cent more tax.
“This is the result of homegrown inflation that’s higher and more entrenched than our peers.”
Mr Taylor attacked what he called “spin” from Dr Chalmers and said households are “going backwards – and they are going backwards fast”.
“The treasurer should take responsibility for the dire consequences of his economic mismanagement,” he said.
Defending the government’s action on tackling the crisis, Dr Chalmers blamed inflation but said his dogged focus on “running a tight ship when it comes to the budget” would help.
The recent mid-year budget update shows economic growth is forecast to slow and unemployment is forecast to rise over the coming months. Dr Chalmers is expecting to record a small surplus in the next budget, due in May, which he celebrated as “quite a historic turnaround”.
“We’re getting the budget in a much better nick at the same time as we’re rolling out tens of billions of dollars in cost-of-living help and investing in housing, skills, Medicare and the energy transformation,” he told Grattan.
But that message is simply not being heard by many, who feel the government has left behind those struggling to make ends meet, with new polling showing most Aussies feel Anthony Albanese isn’t prioritising the right issues.
“The Albanese government’s capacity for navel gazing on issues that aren’t personally relevant to most voters is starting to become a big political problem,” Tony Barry from RedBridge, which conducted the poll, told The Daily Telegraph.
And speaking with news.com.au, Mr Barry added: “This is a government that is ageing prematurely because of the Prime Minister’s lack of focus on the things that matter, and chronically poor political judgement.”
Need to change perceptions
Kos Samaras is the director of strategy and analytics at RedBridge and said the latest polling should ring alarm bells for the government.
“The challenged faced by the Labor government is overcoming a baked in perception that they have not been focused on the right issues,” Mr Samaras said.
“This is really a battle about perception, as all governments would say they are trying to help people suffering financial hardship. But perception is a lot harder to tackle as a problem.”
Between now and the next election, Mr Albanese and Dr Chalmers face the tough task of “convincing enough Australians that they have stood in their corner” on the issue of inflation and cost-of-living.
“For many Australians some of those causes are more sinister, like retailers artificially inflating their prices during an inflationary crisis.”
But many voters see the buck as ultimately stopping with the government, requiring swift and sweeping action.
A meagre Christmas on the cards
It comes as polling shows two-thirds of Aussies plan to spend less over Christmas than they did last year because of pressures on household budgets.
The Resolve Political Monitor survey, published in The Sun-Herald yesterday, shows 66 per cent of respondents will reign in spending and 67 per cent will spend less on presents.
More than half are scaling back their usual Christmas travel plans and 63 per cent will spend less on food and going out.
“Christmas is fast becoming a luxury rather than a calendar staple,” Resolve director Jim Reed told the newspaper.
There’s a “worrying fragility” in personal finances, Mr Reed added, with half of households unable to cover a sudden expense like a broken fridge or car repairs not covered by insurance.
‘Thousands at breaking point’
Not-for-profit support service Mission Australia said thousands of families are at risk of being forced into homelessness each day by skyrocketing cost pressures.
An unexpected illness, job loss, mental health issues or domestic violence are all that stand between many people and losing the roof over their head, it said.
“In Australia, the cost-of-living crisis has put even more people at risk of homelessness and pressure on already vulnerable families,” according to Mission Australia.
“Even if we don’t see it, homelessness is all around us. Hidden homelessness can happen to anyone, through no fault of their own. Every night, over 122,000 Australians are homeless – living in their cars, a garage or other temporary, often insecure accommodation.”
The organisation runs number programs and services across the country to help those most in need but says “more support is required to address homelessness for vulnerable Australians”.
The Salvation Army has issued a similarly stark warning, saying Australia is “in the grips of a social crisis” that has seen “the average household budget being stretched to breaking point for thousands of families”.
“Additionally, with historically low rental vacancy across the country, inadequate supply of social housing and thousands of families on wait lists for public housing, the situation is set to get much worse for Aussies already struggling to afford a full meal or a week’s rent to keep their families fed and safe,” the charity warned.
Research indicates 40 per cent of households have struggled to make ends meet over the past few months, with basic necessities now out of reach.
More than half of Aussies worry they will struggle to pay essential bills in the next three months, the group added.
The truth about wages growth
Dr Chalmers’ claim that cost-of-living relief will come in the form of higher wages will ring hollow for many Australians, who have seen their net positions decimated.
The government has recently touted its credentials on wages growth, with the largest annual increase since 2009 recorded recently.
But factoring in inflation and other measures that reduce ‘real’ wages growth, many workers are worse off than they were last year.
And real wages are about where they were more than a decade ago.
Economist Greg Jericho from the Australia Institute said while real wages have stopped falling in recent months, the road back to the growth trajectory seen pre-Covid is long and slow.
“When you combine the increase in interest rates and falling real wages, you get a picture of households being hit two ways,” Mr Jericho said.
Analysis conducted by the think-tank, offering a scenario of a typical household with a decent income and an average-sized mortgage, illustrates the point.
A couple with a combined income of $130,000 and a home loan of $650,000 would’ve been forking out about $2901 per month on a 3.45 per cent interest rate back in May 2022 before the RBA began aggressively hiking rates.
“This left the couple with $5,980 left each month to spend on non-mortgage goods and services – or around 67% of their after-tax income,” Mr Jericho said.
If that couple got a 3.7 per cent wage increase, in line with the average wage price index growth in March 2023, their pre-tax income rises to $134,810.
“Because of bracket creep, their after-tax income only increases 3.1 per cent, leaving them with $109,839,” Mr Jericho said.
“But the [average] discounted [mortgage] interest rate is now 7.06 per cent. That has raised their monthly repayments by $1450 to $4351.
“That now leaves them with just $4802 left to spend a month – a decline of 20 per cent.”
But factoring in the rise in inflation since March 2022 of 8.2 per cent, their post-tax and post-mortgage repayment income per month has fallen to $4439, or a reduction of 26 per cent.
The Coalition’s spokesperson for finance, Senator Jane Hume, blamed the government for inflation remaining stubbornly high.
“We know that inflation is going to be higher for longer, because of the Labor’s lack of action,” Senator Hume said.
“That means that interest rates are also going to be higher for longer. The data shows it is working Australian mortgage-holders who are feeling it most.
“Labor was elected on a promise to make life ‘cheaper’ for Australians, but like so many of their promises, this one is well broken. With interest rates rising and real wages going backwards, Australians are continuing to pay the price for Labor’s cost of living crisis.
“Tackling inflation is the only way we can give cost of living relief to all Australians, but unfortunately Labor doesn’t have a plan. Australians can’t afford another year of Labor’s inaction.”