Treasurer Jim Chalmers expects inflation to be “significantly higher” than expected.
Total inflation in the period to March has risen to 5.1 percent, the highest since 2001.
dr. Chalmers said he will update parliament when it resumes next month ahead of October’s budget.
“Inflation will be significantly higher than what was expected in the most recent government budget — which was also expected at election time,” he told ABC’s Insiders.
“Certainly higher than the 5.1 percent we saw in the March quarter. This inflation problem will become more difficult.
“We will do the work between now and July to give people the most accurate assessment of where we think this inflation challenge is headed.”
Experts and the government both warn that inflation will get worse before it gets better.
Reserve Bank governor Philip Lowe predicted last week that inflation would hit a 32-year high of 7 percent.
It is not expected to fall towards the central bank’s target of two to three percent until 2023.
But his warning of a wage price spiral in the 1970s angered union boss Sally McManus, who claimed the RBA chief had lost touch with reality.
On Sunday, Dr. Chalmers and Mr Lowe insisted that an upcoming review of the Reserve Bank was not to “take shots” at the governor.
However, he indicated that in the future there could be a place for the unions on the board of the RBA.
“It wouldn’t be unprecedented to have someone from that side of the conversation represented on the board,” the treasurer said.
The government is likely to hold a jobs summit in September to discuss wage agreements and productivity in a bid to raise wages.
Increased immigration, skills policies and simplification of collective bargaining will be key topics of discussion.
When asked whether Australians could expect a real wage increase within this term, Dr. Chalmers that the government had already taken care of low-paid workers.
“What we said is that low-paid workers are our number one priority. We have achieved that,” he says.
However, when it was pressed, the treasurer said he eventually relied on it to control inflation.
“It relies on inflation, wages and making sure we have a more productive workforce so that the sustained, strong wage increases we hope to see don’t add to the inflationary pressures.”