When setting monetary policy, the RBA will look through temporary factors impacting prices to understand the underlying trend for inflation within the economy.
The Treasurer can say it until he is blue in the face, but Australia’s fiscal settings as revealed in Tuesday’s budget will not help bring down inflation.
The Treasury forecasts for inflation to fall to 2.75 per cent by June 2025 are mainly due to an extension of the energy rebate and rental assistance. These subsidies are estimated to reduce measured inflation by half a percentage point next year.
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Warren Hogan is managing director of EQ Economics.
