The federal budget has injected $22 billion of new policy spending over two years, which economists say will cause higher interest rates than necessary and delay any rate cuts.
Already a subscriber?The federal budget has already injected $22 billion of new policy spending into the economy over two years, which economists say will cause higher interest rates than necessary and delay any rate cuts by the Reserve Bank of Australia.
“Along with its strong advocacy for minimum and award wage increases for millions of workers and the significant fiscal stimulus enacted by state governments, governments in Australia are making the RBA’s job much harder. Independent economist Chris Richardson estimates that for every $7 billion in additional government spending, the RBA needs to lift the cash rate 0.25 of a percentage point higher than otherwise.“The year just finishing, their decisions have tipped about $10 billion into the economy, although there is no guarantee all of it is spent by people.“There is a case to say that over the past 12 months the government has been guilty of one of the interest rate rises.
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