Economists are divided on what impact the faster than expected rate rises will mean for Treasurer Tim Pallas’ projected surplus of $650 million in 2025-26. | sumeyyailanbey, annikasmethurst SpringSt
in 2025-26, with one arguing the effect will be minimal while another says the RBA’s moves will have a deeper impact because rates are rising faster than the market anticipated and the government’s budget forecasts were based on optimistic assumptions.
Treasury did not stipulate what it expected the interest rate figure to be over its forward estimates but noted the economic forecasts were based on rates that “broadly follow market economists’ expectations”, which would have factored in rate rises. But it conceded the RBA could lift interest rates faster than initially assumed.
The government also banked on a $6.4 billion increase in the stamp tax haul, but the property market has slowed considerably because of rising interest rates. Premier Daniel Andrews and Pallas have previously said “austerity is not a solution” and vowed to grow their way out of debt. “Interest rate rises have no impact on the substantial proportion of bonds that are already locked in at fixed rates for extended periods,” the spokesman said.