Oz Blog News Commentary

Grading the Budget, or not

May 27, 2024 - 17:29 -- Admin

The Conversation asked economists about the budget. I thought the questions poorly framed.

Q: What grade would you give the budget, given Chalmers’ stated objective of “fighting inflation in the near term and then growth in the medium term”? A, B, C, D, E or F

My answer: An exclusive, or even primary, focus on a rapid return to an arbitrary inflation target represents a misconception of the role of fiscal policy.

I decline to offer a rating on this basis.

Considered more generally, I would give the budget a grade of C.

It is essentially a continuation of the policies of the previous Coalition government

Q: Is the budget likely to achieve its aim of getting inflation back within the RBA target band by the end of this year and back to 2.75% by mid next year?

My answer: Again, both the RBA and the government are acting in a way that is inconsistent with the RBA’s official objectives and with the government’s stated objective of sustainable full employment.

Nothing in our economic situation justifies the priority that is being placed on a rapid return to the RBA target range.

I decline to offer a rating