Spend or save? The Stage 3 tax cuts are still a wildcard for the RBA and rates.
No one really knows how people are going to use their extra cash — and what it will mean for interest rates.
Will workers spend or save their extra cash from the upcoming amended stage 3 tax cuts? It's a live question for the Reserve Bank as it puts its finishing touches on a fresh set of forecasts that will be revealed alongside next Tuesday's rates decision.
With less than two months until the tax relief starts flowing back into Australians’ pay packets, and amid a turbulent set of economic data this week, economists are warning the extra injection of cash is a wild card.
Even before the changes, economists were concerned about the volume of cash flowing back into the economy before the inflation fight was fully over. Regardless, both the RBA and the Federal Government have repeatedly assured the public that the amendments to the tax cuts are unlikely to affect the inflation outlook overall, as their size is broadly similar to those in the original Morrison government’s plan.
But in the current economic climate, with consumer sentiment low and discretionary retail sales plummeting, it’s highly uncertain how Australians will choose to spend the money.
