We needed cost-of-living relief. Did we get it?
Under the government’s plan, more than five million households will have up to $500 deducted from their power bills in the next financial year and GPs will be assisted to provide free consultations to about 11.6 million eligible Australians – including children, pensioners and other concession cardholders – with a $3.5 billion boost.
Those changes make sense, but many middle-income families feeling the immediate effects of high inflation who miss out might be disappointed. But there is some good news.
Inflation is expected to fall from 6 per cent this year to 3.25 per cent next year. Meanwhile, wages growth is now forecast to reach 4 per cent in the year ahead – up 0.25 of a percentage point from what was anticipated in October. This combination of lower-than-expected inflation and higher wages means a welcome return to real wages growth.
While the budget’s cost-of-living relief is relatively constrained, the overall effect of policy decisions means the budget is putting more money into the economy than it is taking out through taxation.
More cash in people’s pockets will in turn add to demand across the economy and potentially put upward pressure on inflation – exactly what the Reserve Bank is trying to prevent with its recent spate of interest rate increases.
The government’s attempts to alleviate cost-of-living pressures may not result in further interest rate hikes, but it could mean rates remain higher than they otherwise would have been.
That would be bad news for borrowers now under pressure, including first home buyers on lower incomes who took out a loan recently. The Reserve Bank says there are “early signs” of stress among some borrowers.
Chalmers claims his budget will not put upward pressure on inflation. His budget speech described it as “responsible and affordable”.
But with the official inflation rate still around 7 per cent, it is a fine balance.
What Treasurer Jim Chalmers giveth, Reserve Bank governor Philip Lowe can always taketh away.
Cut through the noise of federal politics with news, views and expert analysis from Jacqueline Maley. Subscribers can sign up to our weekly Inside Politics newsletter here.
For more latest Politics News Click Here
Denial of responsibility! FineRadar is an automatic aggregator around the global media. All the content are available free on Internet. We have just arranged it in one platform for educational purpose only. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, all materials to their authors. If you are the owner of the content and do not want us to publish your materials on our website, please contact us by email – [email protected]. The content will be deleted within 24 hours.