No extra cost of living relief but budget repair job is underway: Chalmers

The federal government is not considering extra cost of living relief for now but is repairing the budget so it’s in a position to ease pressures on households if the economy decays further.

Treasurer Jim Chalmers said a healthier budget would give the government more flexibility to respond to economic challenges in the future.

“The textbook response in the kinds of economic conditions we confront together is, you get the budget in much better nick — not at the expense of people doing it tough — but so you can provide a much more solid foundation to help them,” he told ABC radio.

His comments follow a speech on Tuesday evening where he explained his rationale for delivering a surplus at a time when households are struggling from the high cost of living and rising interest rates.

The government is tracking towards a potentially record-breaking surplus but the treasurer said this had not come at the expense of helping people, with the Commonwealth providing targeted energy, medicines, and rent relief in the last budget.

The high inflationary environment is limiting what the government can do to assist households and businesses, with too much support likely to fuel demand and keep upwards prices high.

New data suggests households and businesses are already hurting as economic conditions decline.

The Airwallex digital economy index recorded Australians on average spending almost $600 less online annually than they were a year ago, with a steep drop in online subscriptions and travel expenses indicating a marked decrease in discretionary spending.

The private sector is also hurting, with business-to-business trade payment defaults jumping to a high of 1586 in June — a 52% increase on the previous year — according to the latest CreditorWatch business risk index.

The data shows businesses are increasingly coming under financial stress as the Reserve Bank’s 12 consecutive interest rate hikes put the squeeze on companies and consumers alike.

With the RBA’s latest pause likely to only be temporary, the coming months are set to result in growing rates of insolvencies, CreditorWatch chief executive Patrick Coghlan said.

“The impact of the rate rises, as well as high inflation, is increasingly being felt by businesses as consumers tighten their belts,” he said.

“Forward orders are going down as demand falls away and both business and consumer sentiment is in rapid decline.”

This article was first published by AAP.