Reduced debt levels may have given a boost to the budget bottom line, but the opposition says Australia remains well behind similar countries in the fight against inflation.
The federal government has spruiked figures showing a $149.1 billion improvement in debt levels compared to 2022 forecasts as the Reserve Back meets on Tuesday to decide on its next move on interest rates.
Prime Minister Anthony Albanese said the lower gross debt of $906.9 billion allowed for further action in addressing cost-of-living concerns,
“If you lower debt, if you produce surpluses, that has downward pressure on inflation. That doesn’t happen by accident,” he told reporters in Canberra on Monday.
“That happens because of good, responsible economic management.”
Some $80 million in savings on interest repayments – including $4 billion in that financial year – provided wiggle room to address structural pressures within the budget, Finance Minister Katy Gallagher said.
“That just gives you a bit of a sense of why we’re having to look at how we get the budget in much better shape,” she said.
“The debt is lower, we’re paying less interest, and because we’re paying less interest it gives more room in the budget to fund some of those big pressures that we’ve got coming at us.”
The final budget outcomes will further show a surplus for 2023/24 in the mid-teen billions, compared with a $9.3 billion prediction.
But shadow treasurer Angus Taylor said Australia was facing higher levels of inflation.
“Australia is at the back of the pack in bringing inflation down,” he said.
“Our core inflation is stuck. It hasn’t moved since January this year.
“The government has had its foot on the accelerator at exactly the time the Reserve Bank has had the foot on the brake … we are seeing a situation where we have persistent high inflation, more persistent and higher than any of our peer countries.”
The cash rate is largely tipped to stay the same, with the RBA governor flagging no interest rate relief before 2025.
Chief economist at CreditorWatch Anneke Thompson said a decision to leave interest rates at 4.35 per cent, where they have been since November, would not be surprising,
“If the data continues its current trajectory of slowly softening, then the RBA is unlikely to change course and the first cut is unlikely to be before the year is out,” she said.
“However, one soft unemployment report could change this thinking quite rapidly.”
Opposition Leader Peter Dutton blamed sticky inflation – which remains slightly higher than the federal government wants – on Labor’s spending.
“I really hope for Australians with a mortgage that rates go down, but the Reserve Bank can only respond to the economic settings,” he told Sydney radio 2GB.
“The extra money that’s being pumped into the economy, by the migration program, through government spending, all of that is working to keep inflation higher for longer.”
