The RBA's fight against inflation is about to get even more complicated
Billions of dollars in cost of living assistance including the stage 3 tax cuts and energy bill measures from state and federal governments are now set to hit bank accounts, just days after the latest data showed inflation has spiked.
When Treasurer Jim Chalmers was asked recently whether Australians should really be spending the extra cash that’s set to flow into their accounts from Monday, he stopped short of issuing instructions.
“Oh look, I don't give advice to people about their household budgets,” Chalmers said at a media doorstop in Sydney. Instead, he reiterated that he was focused on providing “substantial and meaningful and responsible cost‑of‑living relief”.
Chalmers is convinced that the government’s support won't worsen the Reserve Bank’s challenge of getting inflation back to within its target range of between 2% and 3%. He has repeatedly noted that Treasury modelling shows energy bill relief will bring down headline inflation (though the RBA targets underlying inflation) and that stage three tax cuts have long been built into the forecasts.
But not all economists agree that the impact is neutral. And this dispute is especially critical right now, as the RBA nears one of its most difficult rate decisions since the inflation surge began in 2022.
