Will the budget poke the 'inflationary bear'? Economists weigh in

The federal government delivered this year's budget on Tuesday aimed at addressing the cost-of-living crisis and investing in policies under the Future Made in Australia program. Here's what business leaders and economists say about the budget on LinkedIn.

Inflation

Economist Chris Richardson says the budget had one job to do: not poke the inflationary bear.

"I don't think it passed that test," he says.

Tuesday's budget included a $300 energy bill relief for all households and tax cuts for all taxpayers averaging $1,888 a year.

"The government said it would be careful not to frontload its new costs.?But that’s exactly what it did — its new dollars are both big AND fast. So this budget narrows the Reserve Bank’s already narrow path."

AMP Deputy Chief Economist Diana Mousina says there is a risk that the increased government spending will add to inflation later this year and early next year.

"The budget deficit looks worse than the government was forecasting last year and the reason they look worse is because the government announced quite significant spending programs in the budget," she says.

"A lot of cost-of-living relief for all households in Australia, policies related to Future Made in Australia as well. Those programs will add to spending and the risk is those programs will add to inflation."

Commonwealth Bank 's Chief Economist Stephen Halmarick says the budget could delay the Reserve Bank of Australia's plans for a November rate cut.

"We had flagged that fiscal policy was one of the risks that could delay our base case that monetary policy easing would start in November this year," he writes in a budget note .

"This risk is now more real."

However, Westpac Chief Economist Luci Ellis argues the government support for reducing electricity bills, rents, medicines and HECS debt will help bring down inflation. The government is forecasting inflation to return to target "perhaps even by the end of this year".

"Now that we have seen these policy responses introduced, the [RBA] inflation forecast for headline CPI at least will have to come down," she says in a LinkedIn video.

"Now, it may seem like a bit of a trick to reduce measured inflation in this way, but it does reduce people's actual experience of cost-of-living, it will probably reduce people's inflation expectations, and with lower measured inflation in 2024, that means future indexation of some of the administrative prices will actually be a bit lower. So there is a second round impact in the subsequent year."

Women

Superannuation fund HESTA CEO Debby Blakey says the budget delivered increased wages in female-dominated industries and super payment on paid parental leave, but there needs to be changes to the eligibility requirement for the super tax offset for low income earners, many of whom are women.

Verve Super CEO Christina Hobbs agrees the budget contains some wins for women, but it falls short of addressing the crisis issues women face including affordable childcare and homelessness.

"The government is telling women that they understand the feminised 'national emergencies' that we face, and that they understand the solutions. They're just not yet prepared to fund them in any meaningful way," she writes .

Property and construction

CoreLogic Australia 's Eliza Owen says the budget missed three key opportunities: better allocation of the Commonwealth rental assistance, a program to get skilled migrants on construction sites and bold tax reforms to address the demand side of the housing debate.

"It would be great to see more of an emphasis on skilled migration in the construction sector and expediting people who are ready to go on build sites," she says in a LinkedIn video .

Young workers

Vicki Doyle , CEO of superannuation fund Rest , says while the budget makes a significant step towards addressing the gender super gap, it falls short of providing equitable retirement outcomes for young Australians.

The super fund wants changes to the eligibility rule so workers under the age of 18 are eligible for super even if they work less than 30 hours a week.

"This change would mean that every young Australian can engage with and benefit from our super system from the day they earn their very first dollar," she writes.

Do you believe the budget addresses the cost-of-living crisis without adding to inflation? Share your thoughts in the comments below.

?? Liked this edition of the Finance Wrap-Up newsletter? Subscribe to our newsletter to discover more finance voices on LinkedIn .