The treasurer is concerned inflation will stick around for longer as energy prices remain stubbornly high.

Jim Chalmers said he was “very concerned” about the trajectory of energy prices and expected them to become a more significant driver of inflation in the next six to nine months.

“I think one of the reasons why this inflation will hang around longer than we want it to is because there are expectations around these electricity price rises being more problematic for longer,” he said.

It comes as the head of major energy company Alinta Energy warned retail electricity prices could lift by more than 35 per cent next year.

Dr Chalmers told ABC radio the energy sector faced a perfect storm.

“You’ve got this global energy crunch, we’ve got extreme weather and we’ve got the costs and consequences of a decade of denial and delay and all of the policy uncertainty that brought that about,” he said.

He said the government was focused on providing a stable policy framework and incentivising investments in “cleaner, cheaper and more reliable energy”.

In the lead-up to the election, Labor promised to lower electricity bills by $275 by 2025.

Dr Chalmers said the global economy was facing its third substantial economic downturn in the past decade and a half.

However, he was positive Australia’s economy would be spared.

“I’m optimistic about our economy but first we’re going to have to navigate what are increasingly difficult global conditions,” he said.

Dr Chalmers, who will deliver his first budget in two weeks, said he would be upfront with Australians about the challenges confronting government finances.

“Part of that is treating people like adults, not talking down to them,” he said.

“I think it means levelling with people about the challenges that we are grappling with as the government, challenges in the budget, in the economy and in our society more broadly.”

– AAP

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