Budget has razor edge
Treasurer insists big spending won’t cause inflation
Jim Chalmers says Labor’s razor gang made hard decisions to bank extra revenue rather than spend it as he insists his second federal budget will drive down inflation.
The Treasurer has defended splashing $21bn amid debate over whether the measures will worsen the Reserve Bank to further raise interest rates.
A $14.6bn cost-of-living package will cover energy bill subsidies, an increase to Commonwealth rent assistance, bulk billing incentives and an expansion of income support for students and people out of work.
The budget forecasts total payments from the Commonwealth sector to go up by 3.7 per cent in real terms over the coming financial year.
Speaking at the National Press Club on Wednesday, the Treasurer said he was confident it would relieve the strain without adding to inflation.
Asked if it would be “his fault” should the RBA raise interest rates when it meets next month, Dr Chalmers stressed the independence of the central bank and said he wouldn’t pre-empt its decisions.
But he said inflation had been the “defining influence” on the expenditure review committee and federal cabinet in preparing the budget.
Dr Chalmers again promised the energy bill rebates and price caps on wholesale coal and gas would shave 0.75 percentage points off the inflation rate over a 12-month period.
He said many economists had welcomed the budget and others had said “at worst” its impact would be “neutral”.
“There won’t be unanimity … you can always find a view on either side of the spectrum,” he said. “We’re confident we got the balance right. We’re giving people a bit of help without making the costof-living challenge worse.”
The RBA will decide whether to lift the cash rate from 3.85 per cent when its board meets next on June 6.
Tuesday’s budget forecasts inflation to slow from 7 per cent in the March quarter to 6 per cent for the April-June period and down to 3.25 per cent by June next year.
Dr Chalmers on Wednesday said Treasury had advised the Government that none of its budget measures would have a “counter-productive impact” on inflation.
He said the cost-of-living relief for households would be delivered throughout the year rather than in “one big hit”.
The budget has forecast a slim surplus of $4bn in this financial year, which would be the first time a federal government has saved more than it spends in 15 years.