The prime minister, Anthony Albanese, says a cabinet meeting on Thursday will consider how best to respond to the cost of living crisis facing Australians amid warnings inflation will significantly worsen this year.
The meeting of his new inner ministry comes after the Reserve Bank this week lifted the official cash rate by 50 basis points to try and get on top of rapidly growing inflation. All of the big four banks have passed on the rate hike to mortgage holders.
Facing calls to provide emergency assistance to those on low incomes hit hardest by rising costs, Albanese said on Wednesday that cost of living concerns would be “front and centre” of the cabinet meeting.
“We’ve been in government now for just a little bit over two weeks. These pressures have built up over nine years and … the former government had a policy of deliberately keeping wages low at a time when the cost of living and the price of everything was going up,” the prime minister said in Darwin after returning to Australia from a trip to Indonesia.
“My government does not have that policy. My government has a policy of doing what we can to assist cost of living pressures.”
When asked if that could see the government provide immediate relief to people struggling with rising costs before the October budget, Albanese said cabinet would consider what more could be done.
“Some measures are in place to alleviate some cost of living pressures, and they’re short term. That’s what the former government put in place with our support in terms of the budget measures,” he said.
“We will, of course, always consider what can be done, but there is a fiscal context here [and] we will be economically responsible as a government.”
The consideration of further cost of living relief comes as the government also mulls how to intervene in the energy market to get on top of soaring power prices, which are threatening to stoke further inflationary pressures.
Albanese will also meet with state and territory leaders on Friday 17 June for the first gathering of national cabinet since he became PM. The pressure on the health system is expected to dominate those talks.
The federal treasurer, Jim Chalmers, said that while he was not concerned about the risk of recession he was concerned inflation would eventually be “significantly higher” than 5.1% and stagnant wage growth remained a challenge.
Interest rate rises would have a “disproportionate impact” on people on the lowest incomes and there was a need to tackle wage growth in a collaborative manner with unions and business groups to try and get wages moving again, Chalmers told a Sky News economic forum.
“That is a problem ... wages are one of the defining challenges, and so what we would like to do as a government is: partner with the union movement, partner with business of all sizes to see if we can get … wages growth, which has been absent for too long now, by making our economy more productive,” he said.
Chalmers is due to meet with the RBA governor, Philip Lowe, on Thursday, and said he would like to update the public on the government’s expectations on inflation ahead of the budget, which is slated for around 25 October.
He has so far indicated that the government’s cost of living measures will focus on pre-election promises around child care, medicine costs and energy reforms, but has left open the possibility of doing more if necessary.
Amid the debate over rising cost of living pressures, the Albanese government has made a submission to the Fair Work Commission arguing that wages for the country’s lowest paid should keep pace with inflation to ensure they don’t “go backwards” in real terms, with a decision expected early next week.
Unions are hoping the FWC ruling will give one in four workers a pay boost of 5.5% from 1 July.
But the Australian Industry Group chief executive, Innes Willox, said on Wednesday he was concerned that a wage increase would further fuel inflation.
“We are now at risk of a wages and inflation and interest rates death spiral,” he said.
“We are unfortunately in a period where we are going to see increasing interest rates if we continue to see calls for wage increases that are not sustainable.”
In its submission to the FWC, the Ai Group argued that the reference to the “low paid” should only be understood to mean those on the national minimum wage of $20.33 per hour and those on “lower levels” of awards.
In past rulings, the commission has interpreted “low paid” to mean those earning two-thirds of the full-time median wage.
AiGroup has called for a “modest” 2.5% minimum wage increase, noting that the super guarantee will increase by 0.5% in July and minimum wage workers will receive the equivalent of a 1.3% boost to their pre-tax income through the government’s low and middle income tax offset.
“A wage increase of 5.1%, or anything like this level, would add substantially to the risks of raising inflation expectations, entrenching inflation and greater increases in interest rates,” it warned.
The Australian Council of Trade Unions secretary, Sally McManus, said that wage growth was needed for economic growth and employers could afford the increase, saying workers were “not asking for much”.
“For these employer groups there will never be a time when they will support pay rises. They are arguing against all available evidence against pay increases. They can afford it; they just do not want to pay it,” she said.
On Tuesday, McManus said there was “no doubt” that inflation was headed higher than 5.1% and, given productivity was already greater than 1%, the unions’ claim would not be inflationary.
