The Albanese government may have underestimated state and federal government spending by $70 billion, and consequently misjudged the inflationary effects of wage rises, subsidies and public sector employment, as well as the scale of the Reserve Bank’s task in bringing inflation under control.

Treasurer Jim Chalmers has been forced to defend strong growth in state and federal spending, which the government has labelled vital to keeping the economy afloat. However, some experts say it is pushing out the timeline for the interest rate cuts needed to bring relief to struggling households.