Australian News Today

After a huge week of economic news, where did we land on the direction of interest rates?

After a huge week of economic news, where did we land on the direction of interest rates?

It’s been a big week for economic and business news.

Treasurer Jim Chalmers handed down his third budget on Tuesday, and the Bureau of Statistics published wages growth data on Wednesday and the unemployment rate on Thursday.

While the forecasters were busy updating their spreadsheets, each of these data releases tell us something about Australia’s biggest economic problem: elevated inflation.

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And, of course, the more we know about inflation, the better handle we have on the direction of interest rates.

So, given all the information, where did we land?

As far as the 2023/24 federal budget is concerned, the treasurer says, when all fiscal measures are taken into account, inflation could fall to below 2 to 3 per cent by the end of this calendar year.

“Treasury is now forecasting inflation could return to [the RBA’s] target [band] earlier, perhaps even by the end of this year,” he said.

A key reason for this is the government’s announcement of more financial help for low-income renters and the $300 energy rebate.

Economists agree these measures will help lower headline – remember that word – inflation.

“And all of those – the way they’re delivered – and they take out straight from your utility bills or rent, that actually does lower that component of [headline] CPI,” RBC chief economist Su-Lin Ong said.