Australia's budget papers to be handed down on Tuesday evening Sydney time will show annual headline inflation is expected to ease to 3.5% by June and 2.75% by December.

This compares with the latest RBA forecast showing inflation to remain at 3.8% cent until December before falling to 3.2% in June 2025 and 2.8% in December 2025.

If the government is correct it'd mean RBA rate cuts are on the table sooner rather than later.

The Australian dollar is lower given this news. I'm sure its not because the market believes these budget forecasts, but rather that it sees such forecasts giving the government an excuse to add in some fiscal profligacy and thus subtracting from confidence in the government's economic credentials. But, perhaps not, the government might not add to spending, instead being happy that it may drag RBA rate cuts forward ahead of the next election. Either way, AUD taking a wee bit of a gentle hit.

aud budget inflation forecasts 13 May 2024 2