Whatever lies ahead, it surely won’t be peace for monetary policy. Adding the leaks from the budget together suggests both a “big” surplus (as a result of the strong growth of incomes in the economy) and greatly increased spending and tax cuts (to ensure the surplus remains a modest $15 billion or thereabouts). Result: fiscal policy will be putting upward pressure on interest rates.

Read more about the broader implications of this scenario here.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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