Inflation pain may put stage 3 tax cuts back in play
The main economic battle of 2022 and 2023 has been inflation. But focus may soon shift to an even tenser fight – the future of the stage three tax cuts.
Australia's latest inflation scorecard is adding pressure on the Reserve Bank to get surging prices under control as economists' expectations for 2024 diverge. It's also heating up the economic debate over the rationale for stage three tax cuts.
Inflation increased 1.2% in the September quarter both in terms of the the headline and trimmed mean (which removes some volatile categories), latest Australian Bureau of Statistics data shows, and 5.4% annually. Housing and fuel continue to push up prices.
This is hotter than predicted and is reigniting concerns about a rate rise in November. ANZ warned in a note ahead of the data that a result of this magnitude would "be quite uncomfortable for the RBA". The bank is among those now tipping a rate rise next month alongside Barclays and CBA.
It's clear inflation is uncomfortably stubborn and that it's increasingly difficult to figure out where the economy is headed in 2024. This has implications for the government and its plans to inject billions of extra dollars back into the economy via the currently legislated stage three tax cuts.
