There is a $44b inflation fib in the budget

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Jim Chalmers says this budget will help the RBA bring down inflation, but the failure to offset new social spending won’t help ease the pressure on interest rates.

is that it will help the Reserve Bank reduce inflation, when, in fact, Labor’s policies are tipping a net extra amount of $44 billion into the economy since it formed government.

Chalmers says the government expects to save more than 80 per cent of the revenue upgrades – much more than the Howard government, which recycled it into personal income tax cuts and family benefits, and the Abbott-Morrison-Frydenberg government. It’s a good start. The dilemma with prime minister Anthony Albanese’s mantra – “no one held back, no one left behind” – is that the government will struggle to make tough decisions.Government payments are set to be permanently bigger at above 26 per cent of GDP over the forward estimates – about $25 billion to $50 billion bigger in real terms than the pre-pandemic 1990s and 2000s.Politically, it is understandable a new Labor government wants to do “Labor things” after nine years in the wilderness.

The tax take is tipped to hit 23.9 per cent of GDP in 2023-24, equal to the former Coalition government’s notional tax cap. It is a tax level that was last exceeded by John Howard and Peter Costello in the early 2000s during the early days of the China mining boom that is now considerably bigger.

 

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