SYDNEY (Reuters) -Australia’s government, preparing to announce the federal budget, said on Sunday inflation could moderate to the central bank’s 2%-3% target range by the end of the year, a faster easing than predicted in December.
The Labor government also lowered down its economic growth forecasts.
In the December economic and fiscal outlook, the government projected consumer price inflation would slow to 3.75% by mid-2024 and 2.75% by mid-2025, putting it back in the Reserve Bank of Australia’s (RBA) target band.
On Sunday the government said in a statement that official forecasts were now that headline inflation could hit the target band by the end of 2024.
RBA economists, by contrast, forecast inflation, at 3.6% in the first quarter, to pick up to 3.8% by June and stay there until the end of the year.
Treasurer Jim Chalmers said on Sunday the budget he will present on Tuesday will prioritise efforts to fight stubbornly high inflation, which has put many Australians under sustained cost-of-living pressure.
“Inflation is moderating in welcome ways but it’s not mission accomplished because people are still under pressure,” Chalmers said in the statement. “The Budget will put downward pressure on inflation, not upward pressure on inflation.”
On economic growth the government said its forecast was for real gross domestic product to grow 2.0% in fiscal 2024/25, below the 2.25% forecast in the December outlook, and 2.25% in 2025/26, down from the previous 2.5% forecast.
The economy has slowed due to the impact of global economic uncertainty, moderating but high inflation and higher interest rates, the government said.
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The RBA has fought persistently high inflation by raising interest rates 425 basis points since May 2022 to a 12-year high of 4.35%.
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