Jim Chalmers says inflation is the 'dragon we need to slay' as he defends budget restraint

Dr Chalmers described rising inflation as "public enemy number one" as he delivered the traditional post-budget address to the National Press Club on Wednesday.

The Treasurer has also set the stage for a national debate on the state of the federal budget, leaving the door ajar to spending cuts and reforms to the tax system.

He also hasn't ruled out putting caps on gas price as the government considers a drastic intervention into the energy market.

Dr Chalmers' speech came just an hour after new figures revealed annual inflation was running at 7.3 per cent - the highest rate since 1990.

Dr Chalmers said Labor had chosen to exercise "spending restraint" in its first budget in almost a decade, attempting to ease the burden on households without fueling inflation and thus worsening cost-of-living pain.

He said it would have been easier to spend the temporary windfall in tax revenue, but argued that would not have been the "right fiscal strategy".

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"An indiscriminate spraying of cash would have made our inflation challenge more profound and more prolonged and ultimately more painful. People would have felt it through higher prices and higher interest rates as well," Dr Chalmers said in his speech.

Dr Chalmers doubled down on that position during a Q&A session with reporters, arguing the most damaging thing the government could do for low-income earners was to let inflation run rampant.

The Treasurer again painted a bleak picture about the domestic and international environment, saying "we are in genuinely difficult times".