With inflation still too high, more than a dozen top analysts have warned that Treasurer Jim Chalmers needs to adopt spending restraint on May 14.
Already a subscriber?Leading economists say next month’s federal budget must be contractionary and take money out of the economy, or at least not hinder the Reserve Bank’s inflation fight, lest it further delays interest rate cuts.
Barrenjoey chief economist Jo Masters said that with inflation persisting around 3.5 per cent, fiscal policy needed to help monetary policy.Wednesday’s March quarter inflation figures are expected to show CPI rose 0.8 per cent to be up 3.5 per cent over the year. That would be an acceleration in quarterly terms, but the annual figure would be down from 4.1 per cent in the December quarter.
AMP Capital chief economist Shane Oliver said the treasurer needed to be running a surplus along with slightly contractionary net policy decisions for at least the next financial year.Economists say Treasurer Jim Chalmers’ third budget on May 14 must not stoke consumer demand.“Over the next two years, any extra spending should be offset by savings to ensure no net new stimulus and ideally a contraction in fiscal stimulus,” he said.
, he said his budget strategy would “shift a little” to reflect the risks and opportunities in the economy. Last week, the International Monetary Fund put Australia firmly in the first camp, despite forecasting the economyJBWere chief investment officer Sally Auld cited Australia’s strong jobs market, continued house price growth, and global evidence that services inflation was proving difficult to suppress as factors that support a “neutral” budget.
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