It’s not easy but new treasurer must come up with some solution to nation’s problems

Treasurer Jim Chalmers was at pains to make it clear to Australians this week there were no easy fixes to the slew of economic problems that have been laid at his door since he took office last month.

“Our ability to deal with some of these challenges in a way that you might have been able to in 2000 are not what they are now, so I just want people to recognise that,” he said, referencing the tight fiscal situation the government faces. “We’re not working up, as we speak, a package of household support.”

This might frustrate Australians, who are paying more for food, housing and fuel with each passing week and will soon be paying more for electricity and gas too, thanks to the energy crisis. However, the Organisation for Economic Co-operation and Development agrees with the treasurer’s stance. It has warned the government to curb financial support to households, which can increase inflation.

This is prudent advice but as Prime Minister Anthony Albanese declared on election night, “the Australian people have voted for change”. Labor is now in government, not in opposition. It cannot merely point out the nation’s problems, it has to find solutions too.

As treasurer, Chalmers’ job is to determine how best the government can intervene to support households and the economy. Like his predecessors, he is largely relying on monetary policy, which the Reserve Bank implements, to cool inflation through interest rate rises. Beyond that, if it is unwise for Chalmers to provide direct financial support to households, then he must set out what he will do instead to bring about further economic relief.

Chalmers is correct to point out this is not an easy task. The inflationary pressures are largely international in nature, stemming from pandemic-related supply chain issues and the war in Ukraine. This week, the World Bank painted a dismal picture for the global economy, comparing it with the 1970s and warning there is a very real risk of stagflation (when growth slows and inflation soars).

At home, high gas prices have risen further because of the cold snap and a shortage of coal. This is creating a big financial impost for small businesses, which could raise their prices to cover costs, further increasing inflation.

The agreement reached at an emergency meeting of the nation’s energy ministers on Wednesday night, called to address the energy crisis, is the type of long-term solution voters want from their new government. While it will not deliver immediate relief from high gas prices, it will help prevent similar crises by fostering the development of a reliable renewable energy network nationwide.

For his part, Chalmers cannot merely blame the previous government and external forces for the situation in which Australia finds itself. He has a wealth of knowledge at his disposal in Treasury to help him deliver long-term solutions to the challenges the nation faces.