With an election due on or before May 17, the Albanese government had hoped a pre-election rate cut would restore its standing with voters, who have turned on the government over its handling of the cost of living.
But expectations have firmed over the past month that rate cuts will come too late.
Several forecasters, including NAB and Westpac, have shifted their forecast for the RBA’s first post-pandemic rate cut to May 20 from February 18, citing the ongoing resilience of the jobs market and a shift in language from the central bank.
The RBA board signalled this month it was highly unlikely to cut the cash rate in either February or April, stating it would want to see a sharp decline in inflation sustained over more than one quarter of data.
After the Australian Bureau of Statistics releases the December quarter consumer price index on January 29, there will not be a second quarterly inflation release available until the RBA’s May 20 meeting.
Deloitte Access Economics on Tuesday released its half-yearly budget monitor report, which projected the federal government would post an
underlying deficit of $33.5 billion this financial year, worse than Treasury’s forecast of a $28.3 billion deficit at the May budget.
The shift from a $15.8 billion surplus to a $33.5 billion deficit would represent the
sharpest deterioration in government finances on record outside the pandemic.
The deficit will be even deeper should the Albanese government extend its cost-of-living subsidies at the next election, as is widely expected.