What's being said about the budget's inflation impact
WILL THE BUDGET DRIVE UP INFLATION?
The federal government's assertion that its $14 billion-plus cost-of-living package will lower inflation has sparked debate.
* In the May budget, released on Tuesday, the government said its cost-of-living measures, including energy price relief plan, would shave 0.75 per cent off headline inflation in 2023/24.
* Treasurer Jim Chalmers said these measures would directly lower the consumer price index, because the Australian Bureau of Statistics does account for rebates and subsidies.
* The concern is that lower bills and the like will free up more money for households to spend on other goods and services, which boosts demand and could put pressure on inflation elsewhere.
* Dr Chalmers said the overall fiscal strategy of the budget was contractionary when inflation was at its highest this year - because a $4.2 billion surplus is projected - and that the strategy was "clearly not working against the Reserve Bank".
WHAT ECONOMISTS AND ANALYSTS ARE SAYING
* Barrenjoey chief economist Jo Masters: "After looking at the measures in a variety of ways, we would broadly agree with Treasury's assessment that this budget does not materially worsen the inflation problem but, importantly, these policies aren't generating disinflation or deflation, leaving the job of bringing inflation back within the two to three per cent target band largely with monetary policy."
* Commonwealth Bank chief economist Stephen Halmarick: "The move to surplus in 2022/23 represents a fiscal contraction that is helpful in moderating the inflation pulse running through the economy. But the move back to deficit in 2023/24 represents a loosening of fiscal policy. On balance, we have not changed our inflation forecasts and continue to see a return to inflation within the two to three per cent target by mid-2024."
* Market Economics managing director Stephen Koukoulas on the Fear and Greed podcast: "There was an increase of about $20 billion in what we might term cost-of-living pressures. You've got to remember that the Australian economy expansion is going to be about $2.7 trillion. OK, $20 billion is still a lot of money that's been put into the economy that year, but it isn't enough to have a material change on the inflation pressures."
* Rich Insights independent economist Chris Richardson on Sky News: "The budget did one of the two things that it had to do very well - it did spend on the vulnerable. On the other side of the ledger, if they wanted to take pressure off inflation, that meant making difficult decisions as well - saving enough money so that the protection of the vulnerable didn't inject so much money into the economy that it added to inflation risks."
* HSBC chief economist Australia, NZ and global commodities Paul Bloxham: "A large part of the revenue upside was saved, but 'cost-of-living' relief measures were announced which risk slowing the fall in inflation."
* Westpac chief economist Bill Evans: "Really, what we're saying is that $12 billion is going to be spent in the 2023/24 year ... the RBA won't be raising rates in anticipation of that $12 billion, but it could mean that over the course of that year that the opportunity to cut rates as early as February starts to fade away."