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It’s the economy, stupid: Inflation won’t be sole focus in Budget as growth grinds to halt

Fighting inflation won’t be the sole focus of the upcoming federal budget, the treasurer has declared, warning the slowing national economy can’t be ignored.

Mar 07, 2024, updated Mar 07, 2024
Federal Treasurer Jim Chalmers at the National Press Club of Australia in Canberra, (AAP Image/Mick Tsikas)

Federal Treasurer Jim Chalmers at the National Press Club of Australia in Canberra, (AAP Image/Mick Tsikas)

Weak growth numbers on Wednesday revealed the economy grew by just 0.2 per cent during the December quarter.

Jim Chalmers said while there would not be a radical shift in the May budget away from reducing inflation, the issue of slow growth also needed to be addressed.

“Inflation is still the main game in our economy, but the balance of risks is shifting, and so will our strategy, not in fundamental ways, but in terms of the difficult balances that we strike between cost of living help and budget repair,” he told ABC Radio on Thursday.

“I don’t think it will be a fundamental shift, there will still be a focus on inflation, there will still be a premium on what is responsible and affordable, but we can’t and won’t ignore the way that the economy is slowing.”

Inflation remains above the two-three per cent target range, lifting 4.1 per cent in the 12 months to December, though has been cooling more quickly than expected.

Budget repair also remains a priority for the government ahead of its third edition, following a $22 billion surplus last financial year and expectations for another one in 2023-24.

Dr Chalmers said any growth to the economy was welcome amid global uncertainty.

While he said the first two budgets were focused on reducing inflation, economic conditions were shifting.

“We’ve got inflation coming off, in welcome and encouraging ways, but it’s not mission accomplished yet, because people are under pressure,” he said.

“Our strategy will be the best combination of relief from cost of living pressures, repair of the budget and reform of the economy so that we can lay the foundations for growth into the future.”

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Dr Chalmers previously flagged the clean energy transformation, investments in human capital via education and training reform, and the care economy as examples of policy areas where the government was already “laying the foundations for growth”.

Shadow treasurer Angus Taylor said he would not be surprised to see “the spigots opened” on government spending in the May budget.

Mr Taylor said additional spending was not the answer to the economic problems at hand and the focus should be on fostering a strong private sector, an area he said the government was lacking.

“We need to restore our standard of living and build the foundations for continued prosperity,” he said.

“A Coalition government will deliver policies that take pressure off small businesses and households, increase home ownership, boost productivity, and reward aspiration and hard work.”

Business Council of Australia chief executive Bran Black said the national accounts figures highlighted the need to stop capital leaving Australian shores, which would weigh on the nations’ future growth prospects.

“This isn’t just a concern for business — Australian quality of life is at stake when we start losing out to other nations, because our capacity to afford the future we all want is reduced,” Mr Black said.

He said red tape and regulation issues were making the country a less attractive place to invest.

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