Australia Budget Sets Up Tug-of-War With RBA on Inflation Fight

Australia’s central bank faces pressure to raise interest rates further after the center-left government failed to put a deep enough dent in budget deficits through to the end of the decade, putting the burden on monetary policy to restrain inflation.

Treasurer Jim Chalmers’ first budget since his Labor party won a sweeping election victory 12 months ago showed this year’s shortfall at A$28.3 billion ($20 billion), or 1% of gross domestic product, widening to A$31.5 billion in fiscal 2027 and holding in the low 30s for the ensuing two years. That exceeded economists’ estimates, though it compares favorably with a developed world average budget deficit of 2.5% of GDP.