The RBA and Jim Chalmers are singing the same tune on the economy. But how long will that last?
The RBA is expected to keep rates steady this week, but markets pricing in near term cuts could be in for a white-knuckle ride as political and economic forces collide.
The Reserve Bank of Australia will almost certainly keep interest rates steady on Tuesday. But the moment could be fast approaching where the politics and economics of Australia's post pandemic recovery will either collide or align.
That moment will be around the federal budget in May, when Treasurer Jim Chalmers will either stare down pressure to spend to jumpstart the faltering economy, or succumb to it.
At the moment, Chalmers is singing from the same hymn sheet as RBA governor Michele Bullock on the need to fully defeat inflation in the economy. Last week he described his approach to the upcoming budget as more "protein, not carbs”. In other words, don't expect any major new spending initiatives.
But Chalmers has also been softening the ground for a shift away from fighting inflation to restoring growth. The national accounts released earlier this month showed that the economy expanded by a mere 0.2% in the December quarter, and by 1.5% in 2023 — the weakest annual growth in decades excluding the pandemic years.
