WILL THE BUDGET DRIVE UP INFLATION?
The federal authorities’s assertion that its $14 billion-plus cost-of-living bundle will decrease inflation has sparked debate.
* In the May price range, launched on Tuesday, the federal government mentioned its cost-of-living measures, together with power value aid plan, would shave 0.75 per cent off headline inflation in 2023/24.
* Treasurer Jim Chalmers mentioned these measures would straight decrease the buyer value index, as a result of the Australian Bureau of Statistics does account for rebates and subsidies.
* The concern is that decrease payments and the like will unencumber more cash for households to spend on different items and providers, which boosts demand and will put stress on inflation elsewhere.
* Dr Chalmers mentioned the general fiscal technique of the price range was contractionary when inflation was at its highest this yr – as a result of a $4.2 billion surplus is projected – and that the technique was “clearly not working against the Reserve Bank”.
WHAT ECONOMISTS AND ANALYSTS ARE SAYING
* Barrenjoey chief economist Jo Masters: “After looking at the measures in a variety of ways, we would broadly agree with Treasury’s assessment that this budget does not materially worsen the inflation problem but, importantly, these policies aren’t generating disinflation or deflation, leaving the job of bringing inflation back within the two to three per cent target band largely with monetary policy.”
* Commonwealth Bank chief economist Stephen Halmarick: “The move to surplus in 2022/23 represents a fiscal contraction that is helpful in moderating the inflation pulse running through the economy. But the move back to deficit in 2023/24 represents a loosening of fiscal policy. On balance, we have not changed our inflation forecasts and continue to see a return to inflation within the two to three per cent target by mid-2024.”
* Market Economics managing director Stephen Koukoulas on the Fear and Greed podcast: “There was an increase of about $20 billion in what we might term cost-of-living pressures. You’ve got to remember that the Australian economy expansion is going to be about $2.7 trillion. OK, $20 billion is still a lot of money that’s been put into the economy that year, but it isn’t enough to have a material change on the inflation pressures.”
* Rich Insights unbiased economist Chris Richardson on Sky News: “The budget did one of the two things that it had to do very well – it did spend on the vulnerable. On the other side of the ledger, if they wanted to take pressure off inflation, that meant making difficult decisions as well – saving enough money so that the protection of the vulnerable didn’t inject so much money into the economy that it added to inflation risks.”
* HSBC chief economist Australia, NZ and world commodities Paul Bloxham: “A large part of the revenue upside was saved, but ‘cost-of-living’ relief measures were announced which risk slowing the fall in inflation.”
* Westpac chief economist Bill Evans: “Really, what we’re saying is that $12 billion is going to be spent in the 2023/24 year … the RBA won’t be raising rates in anticipation of that $12 billion, but it could mean that over the course of that year that the opportunity to cut rates as early as February starts to fade away.”
Source: www.perthnow.com.au
