EDITORIAL: Jim Chalmers’ Budget must deliver hope to households

That inflation dragon just won’t die.

No matter how much Treasurer Jim Chalmers might like to believe it’s on its last legs, the data unfortunately says otherwise.

Data from the ABS released last month showed prices increased by 1 per cent during the March quarter, leaving the annual inflation rate running at 3.6 per cent, higher than economists had expected.

The Reserve Bank now predicts inflation won’t return to its target band of 2 to 3 per cent until December next year.

For now, the bank has held rates steady at 4.35 per cent.

But that’s far from locked in.

RBA governor Michele Bullock’s message was clear this week.

“I hope that we don’t have to raise interest rates again. Having said that, if we think we have to, we will,” she said.

Rates aren’t expected to come down until mid-2025.

The cost-of-living crisis which has squeezed households for the past two years is going nowhere.

Many families will be thinking there’s no fat left to trim from their budgets. The numbers back this up too.

Retail trade volumes were down 0.4 per cent in the March quarter. That makes it five quarters out of the previous six that we’ve bought less stuff.

Households are holding up their end of the bargain, behaving in exactly the way that these punishing interest rate hikes were designed to make them. But it doesn’t feel like it’s making any difference.

They’ll be looking to Dr Chalmers next week for some Budget relief.

They’ll also be hoping for some leadership; some hope that better times are ahead.

It’s not clear if they’ll get much of either.

Dr Chalmers says the Government will do what it “can afford to do” in delivering extra cost-of-living relief in Tuesday’s Budget but has warned households not to get their hopes up as the bulk of that relief will come in the form of already announced tax cuts.

But they’ll have to do something more than that if they’re to hold on to any hope of a second term in a majority government.

Throughout the first phase of this never-ending cost-of-living fiasco, the Government at least had the perfect villain in the form of then-RBA governor Philip Lowe. It was his fault, not Labor’s, that households were being faced with the choice of paying their mortgages or buying the kids the shoes they needed.

But Dr Lowe is gone and the heat is squarely on the Government — where perhaps it should have been all along.

His straight-shooting replacement in Ms Bullock is an entirely different kettle of fish. And now the public has wised up that their anger at Dr Lowe was potentially misplaced, it will be a lot harder to continue to shift the blame.

Of course alongside the danger of not doing enough to help with cost-of-living pressures is the perils of doing too much, and inadvertently causing the inflationary cycle to run longer than is necessary.

Economists are barracking for a constrained Budget that keeps spending at or below current levels.

To borrow a phrase from Dr Lowe, it’s a narrow path. The country can’t afford for Dr Chalmers to put a foot wrong.