Jim Chalmers is gearing up for his third and most important budget so far. If he spends too much and stokes inflation, he knows he’ll own the next rate increase.
hen the Reserve Bank of Australia kept interest rates on hold this week, there was both relief and trepidation within government.there was a shared view within senior levels of government that if the bank was going to move one more time, it would have been better to have done it this week. Because any increase from here onwards will be blamed squarely on the federal budget to be handed down Tuesday.
But with inflation both at home and abroad proving stickier than anticipated, and polls showing pessimism is entrenched, the emphasis has shifted to “These cost of living pressures are so acute that any help from state governments in taking some of the pressure off the people that we jointly represent is welcome,” he said.
Previously, it forecast headline inflation to fall to 3.3 per cent in June 2024 and to 3.2 per cent in December 2024. Now, the central bank expects headline inflation, currently 3.6 per cent, to accelerate to 3.8 per cent in June 2024 and stay at that rate until the end of the year.
Chalmers regards inflation primarily as a near-term challenge because the budget must also be about generating growth across the medium and longer term.This will be the visionary centrepiece of the budget, designed to take Labor to the next election and to give it a second-term agenda.
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