Treasurer Jim Chalmers acknowledged it would be difficult for the Reserve Bank to bring inflation down without crashing the economy into a recession.
On Wednesday,the government will release the national accounts figures for the first three months of the year,and Chalmers said he expects it will show a “substantial slowing” of the economy in the next 12-18 months.
“That is the inevitable consequence I think of higher interest rates biting at the same time as the global economy is a precarious place,” he said.
“The job that the independent Reserve Bank has is to try and get on top of this inflation challenge in our economy without crashing our economy,and we’ve known for some time that that is a difficult path to tread.”
When asked directly about the risk of a recession,in light of the most aggressive rate hiking cycle since the 1980s,Chalmers said it was not in any Treasury or Reserve Bank forecasts.
“That’s not our expectation,” he said. “When it comes to the independent Reserve Bank,I would rather focus on my part of my job,which is a budget which is designed to address these inflationary pressures that are pushing up interest rates.
“And I take responsibility for that,others can apportion blame where they like.”