Prime Minister Anthony Albanese issued the snap call at the weekend, cutting the MPs' holidays short by almost two weeks.
The Prime Minister and Treasurer Jim Chalmers are preparing a new cost-of-living package, delivering more relief than the current energy bill rebates, according to reports in the Financial Review.
Treasury is scheduled to deliver advice to the Prime Minister and cabinet early this week on package options.
These will need to navigate the fine line between meeting the public’s expectations on cost-of-living relief and avoiding adding more fuel to inflation.
IMF urges Australia to cut spending to curb inflation
On Friday, the International Monetary Fund said the Australian government should cut its spending to help the Reserve Bank of Australia avoid raising interest rates further.
The RBA’s target range for inflation is between 2-3%.
The latest quarterly Consumer Price Index figures for the September quarter showed inflation in Australia had risen 5.4% over the previous 12 months.
However, the most recent monthly measurement found inflation is moderating at 4.3%, down 0.6%, the lowest annualised rate in two years.
The Australian Bureau of Statistics is due to release the December quarter CPI data on Wednesday 31 January.
Political move to address cost-of-living
Support for the Prime Minister and his government has been falling in opinion polls since the failure of the Voice referendum and amid persisting inflation.
However, the latest Roy Morgan poll, released last week, shows support for the Labor government increased in every Australian state on the back of the lower-than-expected inflation figures.
Voter support for the government increased 2.5% to 51.5%, ahead of the Coalition’s 48.5% on a two-part preferred basis.
The AFR is reporting Mr Albanese has decided to bring forward new cost-of-living measures well before the May federal budget.
Federal government coffers have been boosted with revenue from higher commodity prices and low unemployment.
But economists are warning the government must be careful not to fuel inflation by putting more money in people’s pockets.
Economist Chris Richardson told the AFR the key challenge for the Australian economy is getting inflation down so the stage three income tax cuts, due in July, are not an inflation problem.
“Cost-of-living relief delivers an obvious help to households, but they will use the extra money to add spending pressure back into the economy and make things more expensive," he said.
“The pain is mostly rearranged and there is a chance they add to it.”
Wednesday’s Labor caucus meeting follows the federal government’s announced review of the Food and Grocery Code of Conduct earlier this month in a bid to address rising food prices.
On Monday the Prime Minister dismissed claims the earlier return to Canberra is costing the country $450 million in travel and accommodation as “nonsense”.
He said ministers were already in Canberra last week and people were returning to the capital for his address to the National Press Club on Thursday.
Image by Marcus Rubenstein on Unsplash.