Treasurer insists budget will ‘take edge off’ inflation

The government's core focus is the cost-of-living crisis, but it must also control inflation.

Transcript

00:00 We heard day after day, maybe hour after hour from the Treasurer Jim Chalmers that a key

00:08 measure of this Budget was rolling out targeted relief to households doing it tough, but also

00:15 ensuring that inflation doesn't get stoked.

00:19 Now there are some concerns this morning that in particular the energy rebates which go

00:25 to all Australians, not just Australians doing it tough, could actually have the effect of

00:31 putting some pressure on inflation.

00:33 The big ratings agencies, S&P Global and Moody's Ratings have indicated they have some slight

00:41 concern there could be some pressure on inflation and also an increase in debt.

00:48 By the way, both Standard & Poor's and Moody's have reconfirmed their AAA rolled gold credit

00:54 rating for Australia.

00:56 But there is that big question that Tom Lowry was talking about, the lack of means testing

01:02 in relation to the energy relief.

01:05 Now Jim Chalmers argues that this isn't cash going into people's pockets or into their

01:11 bank accounts or their pay packets.

01:13 It's going to be coming off bills so people are more likely to use that as savings rather

01:18 than pump it into the economy.

01:20 But there is the risk that these measures could be stimulatory, they could stimulate

01:26 inflation and that's been the big concern.

01:29 And just this morning we did hear from the Chief Executive of the Business Council of

01:33 Australia that while the budget has been welcomed as being mainly restrained, that with that

01:39 extra money going into the economy on top of energy relief we've seen from Queensland,

01:44 Victoria and WA could actually create more inflation and put that pressure on the Reserve

01:50 Bank to slow any interest rate cuts.

01:54 Last week the Reserve Bank Governor Michelle Bullock, when I put the question to her directly

01:58 if they did consider hiking interest rates at last week's meeting, she said yes, it was

02:05 considered, it was an option on the table but they decided to back off and wait for

02:10 more information coming in.

02:12 And speaking of more information, we'll be getting an update on wages growth, the wage

02:17 price index out later on this morning.

02:20 And then tomorrow the all-important labour force figures for the month of April.

02:25 Now most economists are seeing the jobless rate ticking up from 3.8% to 3.9% with maybe

02:33 about 20,000 new jobs created.

02:36 The labour force or employment, a very tight labour market is another pressure on inflation

02:42 so that's going to be very closely watched to see if that tight labour market does put

02:47 more pressure on the Reserve Bank.

02:50 And we are hearing that probably any interest rate cut later on this year is probably off

02:55 the table, interest rates staying on hold at 4.35%, maybe till the end of the year.

03:00 And there might, there might just be one interest rate cut in the beginning of next year, in

03:06 the first quarter of next year, perhaps timely for an election to be called.

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