Budget to drive ‘downward pressure on inflation’, says Treasurer
Tonight’s budget will contain restrained spending and form part of the solution to driving down inflationary pressures, according to Jim Chalmers.
Treasurer Jim Chalmers said Labor’s federal budget will be a “responsible budget” with a sharp near-term focus on addressing inflation.
“It’s the most important thing that we can focus on in the near term, but we need to remember that we’ve got a growth challenge as well, and so we’ll invest in the future,” Chalmers said in a recent ABC interview.
“The budget will be a responsible budget, it will ease cost‑of‑living pressures and it will invest in a Future Made in Australia. We won’t be slashing and burning in the budget because we know people are under pressure and the economy is weak.”
The Treasurer also downplayed concerns that the stage 3 tax cuts may lead to a slight acceleration in inflation.
“We think that the way that we’ve redesigned the tax cuts are bang on for the circumstances that we confront. A tax cut for every taxpayer is the foundation stone of the cost‑of‑living help in this budget,” said Chalmers.
The RBA revised its inflation forecast in its latest Statement on Monetary Policy with the bank now predicting that inflation won’t reach the target range until the second half of 2025.
RSM Australia economist Devika Shivadekar said the RBA likely took the upcoming tax cuts into consideration in its revised forecasts.
The Treasurer said it was difficult to predict when inflation would return to the RBA’s target range given current economic uncertainty.
“In every budget, we update all of our forecasts. These are uncertain times to be making forecasts about the economy, but people should expect to see that one of the consequences of our budget is lower inflation rather than higher inflation,” said Chalmers.
“We know people are still under pressure, but we have made pretty substantial progress in this inflation fight. It’s less than half what its peak was in 2022, but we know we’ve got more to do and you’ll see that in the budget.”
Senator Katy Gallagher said the Treasury forecasts now predict that Australia will reach the target inflation band by the end of this year.
“The Treasury forecasts have been made mindful of all of the decisions that we’ve taken in our budget and it’s going to be a responsible budget,” Senator Gallagher said.
“It’s going to put downward pressure on inflation, it’s part of the solution to the inflation challenge. So the Treasury forecasts outline that. Obviously, those decisions weren’t available to the RBA in issuing their forecasts.”
The Treasury forecasts also predict a slight uptick in the unemployment rate despite the resilient labour market.
Gallagher said it had been difficult for the government to manage inflation whilst also ensuring there is growth in the economy in the longer term.
“This [budget] has been particularly challenging as we try to strike the right balance between our priority focus on inflation, but also looking down time to how we manage growth and how do we invest in the economic growth of the country as well,” she said.
