Chalmers plays down another fuel discount as Australian inflation rises to 4.3%

Australian Treasurer Jim Chalmers played down another fuel excise discount on 28 October after annual inflation rose to 4.3% in September, ABC News reported. The prospect of continued fuel relief matters to households facing higher petrol and diesel prices, while the Reserve Bank of Australia prepares for an interest rate decision next Tuesday.

Asked about resuming the discount, Chalmers said, ‘The budget can't afford to do that forever,’ according to ABC News. His remarks lowered expectations of another cut to the fuel excise; he did not announce a new measure.

Fuel prices and the September inflation result

Inflation pressure extended beyond the largest price movements. ABC News reported that underlying inflation for the September quarter was 3.7%, above the Reserve Bank's August forecast of 3.5%. The Guardian reported that annual underlying inflation had increased from 3.6% to 3.7% in the year to that quarter. The measures cover different periods, so the quarterly result and annual comparison should be read separately.

Chalmers’s explanation and the rate decision ahead

Chalmers called inflation too high but argued that the government budget was not its main driver, ABC News reported. He pointed to the Middle East war and unexpectedly strong private investment, including in data centres. Treasury Secretary Jenny Wilkinson backed his assessment that the budget was not the main cause, while Reserve Bank Governor Michele Bullock cited private activity, global pressures and weak productivity without commenting directly on the budget, according to ABC News.

The political disagreement is visible in public opinion. The Guardian reported an Essential poll in which nearly a third of voters named government spending as the leading cause of rising living costs, compared with 24% who named overseas events such as the oil shock and 19% who named supermarket price gouging. Those responses measure voters’ views, rather than the relative contribution of each factor to inflation.

Economists and financial markets increased their expectations of a rate rise at the Reserve Bank’s next meeting on Tuesday, ABC News reported. It said a 25-basis-point increase would take the cash rate to 4.85%, its highest level since 2008. That remains a possible decision, rather than one the bank has made. The Guardian also reported Reserve Bank chief economist Sarah Hunter’s assessment that there were no signs of a recession in the near term.