The Zhitong Finance App learned that the Australian Treasury predicts that as part of the upcoming budget, the country's inflation may return to the central bank's target range by the end of 2024, which is earlier than the government or central bank's previous predictions.
According to a statement released last Sunday, the Australian Treasury's inflation forecast for the 2024/25 fiscal year is still 2.75%, but it now expects the inflation rate to fall within the RBA's target range of 2% to 3% by the beginning of 2025.
The department also expects inflation to fall faster than previously anticipated in the fiscal year ending June 2024, and is expected to lower its forecast to 3.5% in Tuesday's budget from 3.75% in December's economic update report.
After the adjustments, the outlook for the Australian Treasury is much more optimistic than the latest estimate released by the Reserve Bank of Australia last week. The Reserve Bank of Australia does not expect the inflation rate to fall below 3% until the end of 2025. However, the Federal Reserve's outlook does not take into account any unannounced measures that Australian Treasury Secretary Jim Chalmers will introduce in Tuesday's budget.
Chalmers said in a statement last Sunday: “Inflation remains a huge challenge facing our economy recently, which is why the government is doing everything it can. Our budget will be part of addressing the cost of living pressure.”
Swap traders currently expect the Reserve Bank of Australia to keep interest rates unchanged for the rest of the year and then cut interest rates in mid-2025. They also believe that December 2024 is the first meeting where there is an opportunity to cut interest rates, and the possibility of cutting interest rates at that time is about 16%.
At a time when the center-left Labor government will hold elections within 12 months, voters' concerns about rising prices and high interest rates have been affecting its approval ratings. It's also fueling that the government has proposed budget measures aimed at addressing these concerns, including extensive tax cuts and multi-billion dollar housing projects.
Finally, the Australian Treasury anticipates a further slowdown in GDP growth over the next few years compared to last December's forecast. While its growth forecast for the current fiscal year remains unchanged at 1.75%, its growth forecast for 2024/25 has declined from 2.25% to 2%. For the 2025/26 fiscal year, Tuesday's budget is expected to grow by 2.25%, lower than the 2.5% forecast for December.