Ongoing flooding will see fruit and vegetable prices spike 8 per cent and wipe a quarter of a percentage point off Australia's GDP growth, the Treasurer says.
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Treasurer Jim Chalmers on Friday has warned Australians gripped by a cost-of-living crisis not to rule out further pain, warning the figures were "just an initial estimate" and could ultimately prove "even more significant".
Dr Chalmers said responding to natural disasters would be "central features" of Tuesday's budget, his first, with a $3 billion boost to the Commonwealth's contingency reserve.
Treasury estimated extensive flooding across Victoria and NSW would see fruit and vegetable prices rise by 8 per cent before the end of the year, he said.
"We need to remember here that we are talking about some of the best producing land in the world, producing a lot of groceries for domestic consumption, but also for export," he said.
"What's happening here to these areas is particularly cruel, given how close many of these farms were to producing what was expected to be a bumper crop."
Dr Chalmers warned it was impossible to put a total dollar figure on the flood's impact at this early stage.
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But Treasury believed it would wipe a quarter of a percentage point from GDP growth in the December quarter, predicting that would be recovered in the subsequent two quarters.
"What we're trying to do at this late stage, putting the finishing touches on the budget, is to include some of those preliminary assessments of the likely impacts in the numbers that are released on Tuesday night," Dr Chalmers said.
Inflation has been forecast to peak at 7.75 per cent in the December quarter, but Dr Chalmers would not be drawn on whether recent developments would see it climb beyond the 8 per cent mark.
He said natural disasters and high energy prices would continue to be the most significant factors driving inflation.
"But in the broader sense, what we're seeing in the economy when it comes to inflation, is that some things are coming off quicker than what was anticipated earlier in the year. Petrol is one of those," he said.
"So, [it's] swings and roundabouts on the inflation figure."
Finn McHugh
Finn McHugh has been federal political reporter for The Canberra Times since July 2021. He joined the Canberra Press Gallery in 2019 where he was executive producer of Sky News's AM Agenda, before joining NCA NewsWire as a federal political reporter. He has previously interned at the Kuwait Times.
Finn McHugh has been federal political reporter for The Canberra Times since July 2021. He joined the Canberra Press Gallery in 2019 where he was executive producer of Sky News's AM Agenda, before joining NCA NewsWire as a federal political reporter. He has previously interned at the Kuwait Times.
