RBA governor Michele Bullock won’t be locking in a ‘Chalmers-bequeathed’ rate cut any time soon

Watch out for all the spin in Tuesday’s federal budget. The future remains uncertain and Jim Chalmers won’t be `delivering it’.

Reality check for home loan borrowers. Don’t rush to spend the ‘Jim Chalmers interest rate cut.

Reality check for home loan borrowers. Don’t rush to spend the ‘Jim Chalmers interest rate cut’.

We will only find out whether inflation has fallen back below 3 per cent for 2024, to be predicted in Tuesday’s budget, at the end of January next year when the Australian Bureau of Statistics publishes the numbers.

Yes, the Treasurer is going to use the Treasury forecast of it falling below 3 per cent as one of his two ‘big budget headlines’ – the other will be a forecast of another budget surplus.

But that does not make it a fact; and certainly not a fact ‘now’, with nine months to go.

And even more importantly, not a ‘take-it-to-the bank fact’, prompting Reserve Bank governor Michele Bullock to cut interest rates at the next meeting in mid-June.

Quite simply, quite bluntly, Treasury forecasts – especially about the future – are dodgy.

They are sometimes only marginally wrong, but often way-off-the-planet dramatically wrong.

But they are always wrong.

The one thing that can be said with absolute certainty about Tuesday’s budget – about every budget – is that every future-pointing number in it, and I mean, every number, will be wrong on outcome.

Prime Minister, Anthony Albanese and RBA Governor Michele Bullock.

Now, this low-inflation forecast is absolutely critical to two linked messages that Treasurer Jim Chalmers wants to project.

That interest rates are coming down; and that he, ‘Wunder-treasurer’ Chalmers, is really responsible for delivering them, not the RBA.

This in turn feeds into his bigger, broader, overall message: that he’s reinvented activist fiscal policy for the 21st century.

The directing of your money to delivering a “Future Made in Australia”.

In fact, all he is doing is spending your money, in the time-honoured way we have seen so often from spendthrift governments and lazy treasurers.

Except, it’s so much worse from him, because he is riding a $100bn-a-year extra revenue surge, thanks to our booming coal, gas and iron ore exports. Plus the income tax revenues from all the new migrants.

Now, while the budget, we are told, will predict inflation falling below 3 per cent by Christmas, the RBA forecasts only a week ago, had it then at a still far-too high (for rate cuts) 3.8 per cent.

The treasurer says the RBA didn’t know all that was in the budget. Specifically, the handouts that will use the lush China-driven revenues to quite literally ‘buy’ a lower headline inflation rate, like the energy rebates.

First off, the RBA wants sustained lower inflation, not a tricked-up lower number.

But secondly, the budget is just one influence that goes into the inflation pot. Unlike treasurer Chalmers – and so many commentators – Bullock knows that a forecast is always only a forecast.

She and the RBA will be judging what is actually happening to inflation through the end of the year; and how all the factors are impacting its likely course into and through 2025.

The future remains uncertain; Chalmers won’t be ‘delivering it’ Tuesday night.

That’s exactly why Bullock is still ruling nothing in or out. Why she won’t be rushing to lock-in a ‘Chalmers-bequeathed’ rate cut at the mid-June meeting.

Originally published as RBA governor Michele Bullock won’t be locking in a ‘Chalmers-bequeathed’ rate cut any time soon