Economists have also brought forward their expectations to June for when the bank,which has had the official cash rate at 0.1 per cent since November 2020,will start lifting rates. The last time the RBA increased interest rates was November 2010.
The budget forecasts inflation to reach 4.25 per cent this financial year and then edge down to 3 per cent in 2022-23. Wages are forecast to grow by 2.75 per cent and then 3.25 per cent over the same period.
Economists at Goldman Sachs on Tuesday upgraded their interest rate forecasts,now tipping four consecutive increases starting from August.
UBS senior economist George Tharenou said the “significant” stimulus contained in the budget reinforced the case for the Reserve Bank to start lifting interest rates.
He said while financial markets appeared too aggressive by expecting rates to reach 3 per cent by the middle of next year,the case for the RBA to start moving sooner was strong.
“The persistence of additional fiscal stimulus – despite unemployment already at the non-accelerating rate of inflation and expected to fall further to 50-year lows – will put more upward pressure on wages and CPI,” he said.
ANZ economists said the budget contained $40 billion of new spending or revenue cuts of which more than half was due to hit the economy over the next 15 months.