SYDNEY, Dec 14, 2007 (AFP) – Australia faces an extended battle against inflation as China and India fuel an unprecedented economic boom in a period of global uncertainty, the country’s new Treasurer Wayne Swan warned Friday. The treasurer outlined plans to combat price rises by launching an era of strict fiscal discipline to slash “wasteful spending” and bolster the budget while also boosting economic capacity by developing Australians’ skills. In his first major speech since taking office less than two weeks ago, Swan told business leaders the economy was running at close to capacity with demand firmly outstripping supply, creating inflation pressure in the next 18 months.
“We have also come to office at a time when inflationary pressures have been building for some time, and interest rates have risen 10 consecutive times,” he told an Australian Industry Group luncheon in Sydney.
“Supply is simply not keeping up with demand. Inflation is a major threat to sustained Australian prosperity.
“Let me be very clear, and very upfront with you today — even though we will start immediately to deliver the plan I’ll outline here today, I warn you we face an extended period of elevated inflation,” Swan said.