Australian workers’ wages will rise faster than inflation from June next year and the worst cost-of-living crisis in three decades could ease by the end of 2023.
The good news is predicted when Treasurer Jim Chalmers announces a budget surplus – thanks to China’s insatiable demand for iron ore – making him the first federal Labor treasurer since 1989 to deliver a spending program in the black.
Headline inflation, also known as the consumer price index, reached a 32-year high of 7.8 percent in 2022, but fell to 7 percent in the last quarter.
The Treasury Budget papers predict that the CPI will moderate to 6 percent in June this year before falling to 3.25 percent in June 2024, putting it only slightly above the Reserve Bank’s target of 2 to 3 percent.
By then, the wage price index was expected to reach 4 percent, a level not seen since 2009 during the global financial crisis.
That means Australian workers, who have experienced an effective reduction in real wages, will finally see their wage levels rise faster than inflation by then.
Australian workers’ pay packages will rise faster than inflation from June next year and the worst cost-of-living crisis in three decades could ease by the end of 2023 (pictured is a traffic controller in Sydney)
Treasury now expects inflation to ease to 2.75 percent by June 2025, as wages have increased by a more moderate 3.25 percent. That means workers will still have more purchasing power, even if bosses give less generous wage increases.
Unemployment was expected to remain at a 48-year low of 3.5 percent in June 2023, but to rise to 4.25 percent in June 2024 as interest rate hikes caused economic growth to plummet from 3.25 percent to only 1.5 percent.
The RBA, which has hiked rates 11 times since May, doesn’t expect inflation to fall back to its target range until mid-2025 and Governor Philip Lowe has suggested rates will rise even more, with the spot rate rising to 11 in May. per cent. year high of 3.85 percent.
Despite the pandemic spending of 2020 and 2021, Dr Chalmers will become the first Labor treasurer since Paul Keating 1989 to deliver a budget surplus.
Dr. Chalmers announced a surplus of $4.2 billion for 2022-23, or 0.2 percent of gross domestic product.
The Treasury Budget papers forecast CPI to moderate to 6 percent in June this year, before falling to 3.25 percent in June 2024, putting it only slightly above the Reserve Bank’s target of 2 to 3 percent (pictured). is a Coles shopper)
This is a major reversal from the March 2022 budget — the last from his liberal predecessor Josh Frydenberg — which predicted a deficit of $78 billion, or 3.4 percent of GDP.
It is also a big improvement on the October 2022 budget – Dr Chalmers’ first – which predicted a surplus of $36.9 billion for 2022-2023, accounting for 1.5 per cent of GDP.
Dr. Chalmers proclaimed that this would be the first budget surplus since 2007-2008, without mentioning former Liberal treasurer Peter Costello’s last budget for the GFC.
“We now predict a small surplus in 2022-2023 – that would be the first in 15 years,” he told the House of Representatives.
But he warned that the 2023-24 budget is likely to show a deficit of $13.9 billion as iron ore and coal prices fall.
The spot price of iron ore – the commodity price used to make steel – was expected to fall from $117 per ton in the March quarter of 2023 to an average of $60 per ton in the March quarter of 2024.
The good news is predicted when Treasurer Jim Chalmers announces a budget surplus – thanks to China’s insatiable demand for iron ore – making him the first federal Labor treasurer since 1989 to deliver a spending program in the black
This is only slightly above the $55 per ton forecast for 2022-23 in the October budget.
The spot price for metallurgical coal would drop from $342 a ton to $140 by mid-2024, similar to the $130 a ton forecast in October for this financial year.
The price of thermal coal was expected to moderate from $260 a ton to $70, slightly above the $60 a ton forecast last year.
Public gross debt is now expected to exceed $1 trillion in 2025-25 instead of 2023-24 as predicted in the October budget.
The surplus promised by Dr. Chalmers is smaller than the $9.1 billion surplus announced by Mr. Keating for 1989-90, which was 2.5 percent of GDP.
Former Labor treasurer Wayne Swan – for whom Dr. Chalmers served as senior policy advisor – announced in May 2008 a budget surplus of $21.7 billion for the next fiscal year, or 1.8 percent of GDP.
This was billed as the largest surplus in nine years and the second largest in 35 years, relative to the size of the economy.
This did not happen, however, as Kevin Rudd’s Labor government spent $52 billion on two stimulus packages during the global financial crisis, including one giving Australians $900 in checks.