Economists say federal budget unlikely to have much effect on interest rates

Treasurer Jim Chalmers has downplayed any inflationary pressure from the budget and economists say it is unlikely to have much impact on further interest rate rises. Photograph: Lukas Coch/AAP

Economists say the federal budget is unlikely to have more than a marginal effect on the Reserve Bank of Australia’s interest rate stance, but several risks remain including the inflationary effects of a population boom on rents and how energy and commodity prices play out.

The Albanese government’s second budget, released last night, predicted inflation would slow from 7% in the March quarter to 6% for the April-June period and almost half that – to 3.25% – by June next year. That slowdown compared with the RBA’s 3.5% prediction for the June quarter of 2024 published last Friday.