Economists have warned that Labor’s budget spending could put pressure on the Reserve Bank to keep interest rates higher for longer.
Australians will be given $3.5 billion in subsidies to soften the blow from soaring energy bills in a federal budget that pours cash into household and business measures while promising to cut inflation before the next election.
Treasury estimates that the energy bill relief and other measures will cut the rate of inflation by 0.75 percentage points this year and 0.5 percentage points next year, prompting Chalmers to assure Australians he was helping to ease the cost of living. The budget also includes $1.9 billion in Commonwealth Rent Assistance, $531 million for home care packages for the elderly and $3 billion for cheaper medicines, as well as confirming recent announcements such as a $3 billion cut to student debt.
But the concept sets up a fundamental political dispute about “picking winners” with risky investments, as Opposition Leader Peter Dutton warns against big government spending programs.While the nation’s finances have benefited from strong commodity prices and higher company tax revenue, the budget shows total debt will rise to $904 billion by June 30 and surpass $1 trillion two years later.
In an important measure of federal outlays amid the political dispute over spending, total payments will increase to 26.4 per cent of gross domestic product next financial year and 26.6 per cent in the following year.
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