Australians won’t have to contend with higher interest rates while swallowing the bitter pill of the federal government’s budget.
The latest official inflation numbers proved tamer than feared, keeping the consumer price index within the Reserve Bank’s two to three per cent target band and suggesting interest rates will remain stable for a while yet.
The data came as Prime Minister Tony Abbott was again warning of a big repair job when the government’s first budget is handed down on May 13.
“You have got to fix the budget if you are going to fix the economy,” he told reporters in Canberra on Wednesday.
The budget will be about long-term structural reform after a six-year “reform holiday” under Labor, he said.
He wouldn’t comment on pre-budget speculation – such as a $6 co-payment for a visit to the doctor and an increase in the pension age to 70 – but did re-commit to promises made during last year’s election campaign.
The government’s keenly awaited commission of audit will be released next Thursday, a report that contains 86 recommendations.
Treasurer Joe Hockey told a Sydney audience that while the report will help him prepare his budget, he will not be automatically accepting all the commission’s ideas.
Australians should not judge the budget on what they get or lose on May 13, he said.
“This budget is about our quality of life for the years ahead. We must build prosperity now,” he said in a speech hosted by the Spectator Magazine in Sydney.
Opposition Leader Bill Shorten described the report as an alibi for the prime minister’s broken promises.
“The Abbott government wants to cut the pension at the same time as giving $75,000 to millionaires to have a baby. Pensioners will see through their weasel words,” he told AAP.
The CPI rose 0.6 per cent in the March quarter, lower than the 0.8 per cent expected by economists, after solid increases in the previous two quarters.
However, annual inflation still rose to 2.9 per cent from 2.7 per cent, its highest level in just over two years.
More importantly for the RBA’s cash rate deliberations, the underlying measures of inflation rose modestly.
Opposition finance spokesman Tony Burke said the figures further reinforce the RBA’s “neutral bias” for monetary policy.