Budget to target inflation while reducing deficits

The New Zealand government this week reduced fuel excise taxes by 25 cents per litre for three months. And Australian Treasurer Josh Frydenberg has indicated the Australian Budget due on the 29^th March will include a package to help ease the rising cost of living. But given the Australian government’s desire to begin reducing the budget deficit, we expect that package to be modest. And even a large reduction in fuel excise taxes would not prevent Australian inflation from reaching the highest level in years over the coming quarters. That’s why we expect the RBA to begin its hiking cycle in June.