‘Substantial risk’: Jim Chalmers reveals he feared a recession but worst is now passed

Jim Chalmers says the peak of inflation has passed but refused to predict when the nation would see interest rate cuts.

The Treasurer opened up about his sobriety, political ambitions and recession fears in a 7NEWS Spotlight profile that aired on Sunday.

Economic growth flatlined in the first two quarters of the year — increasing just 0.1 points in March and 0.2 points in June — and Dr Chalmers said there were pointers ahead of each set of national accounts that led him to fear the economy was going into recession.

“There were some moments in the lead up to the release of that data where there was a very substantial risk that the economy might have gone backwards – a lot of relief when we discovered that it hadn’t,” he said.

“But if you’re asking me was I worried at the time, too right I was.”

Since then, the monthly inflation has dropped back to 2.7 per cent, within the Reserve Bank’s target range for the first time, while unemployment has stayed stable at 4.1 per cent.

Dr Chalmers said the Government’s approach was cautious rather than complacent.

“There is light at the end of the tunnel, but there’s more work to do,” he said.

“One of the most heartening aspects of the most recent inflation data was the fact that the headline rate came down substantially, but so did underlying inflation, so did non-tradable inflation (and) services inflation.

“That was a really welcome sign that we’re making progress together in this fight against inflation.”

When asked when Australians would see the end of the cost-of-living crisis, Dr Chalmers said there were “better days ahead”.

“I think when it comes to inflation specifically, the worst is behind us,” he said.

“The peak in inflation is now in the rear-view mirror and we’re not complacent about that, we’re cautious about that, but we are confident that having been through a very difficult time together, better days are ahead.”

On the question of his political future, Dr Chalmers again insisted he was set on being Anthony Albanese’s treasurer long-term and ruled out a leadership challenge despite the latest Newspoll figures indicating diminishing support for the PM and his Labor Government.

He told Spotlight he had a “terrific relationship” with his leader.

“Relatively frequently the first person I hear from in the day was the prime minister. He knows I’m an early riser,” he said, adding they spoke about footy, family, “things that mates talk about in Australia” as well as work matters.

Dr Chalmers has been sober for four years, describing himself as a “pretty enthusiastic drinker” before giving it up after a skin cancer scare and complications on a related minor operation.

“What it has meant, giving it away, is there’s more room in my life for the things that are more important to me,” he said.