Federal budget sparks fresh concerns of more rate hikes

Treasurer Jim Chalmers has rejected concerns his cost of living budget will fuel inflation and trigger more interest rate rises.

His second budget juggled several priorities, namely keeping a lid on inflation while offering some cost of living support to those most in need.

Independent economist Chris Richardson said the budget lacked the hard decisions needed to let the central bank keep interest rates on hold, and would pump money into the economy.

“I had thought after the surprise rate rise from the Reserve Bank last month that they were done and dusted. I’m less clear now that that’s the case,” he said. 

But Treasurer Jim Chalmers insisted his budget would not push up prices and the hip pocket help had been carefully calibrated so as not to drive inflation. 

“The restraint we’ve shown, and the investments in the supply side of the economy, and the way we’ve targeted and staged our cost of living package, is because inflation is the biggest challenge in our economy,” he said.

Shadow treasurer Angus Taylor said the government has delivered “typical big-spending, big-taxing Labor budget”.

“We needed a budget that reduces inflation and reins in spending to combat the cost of living crisis facing all Australians,” Mr Taylor said.

“Instead, this budget makes life harder for Australians.”

Commonwealth Bank of Australia chief economist Stephen Halmarick said the budget would not jeopardise its forecasts of inflation returning to the RBA’s target range by mid-2024.

“The move to surplus in 2022/23 represents a fiscal contraction that is helpful in moderating the inflation pulse through the economy,” he said.

“But the move back to deficit in 2023/24 represents a loosening of fiscal policy.”

Some interest groups also raised concerns about the inflationary impact of the budget, including the Master Builders Association and the Australian Taxpayers’ Alliance.