Macroeconomic Policy

Australian growth target since 1996

3–4% real GDP evolving into 2–3%

Australian inflation target

2–3%

NAIRU estimate

4.5%

Fiscal policy time lags

Medium-term implementation lag, short-term impact lag (few months)

Monetary policy time lags

Short-term implementation lag (8 meetings per year), medium-term impact lag (6–18 months)

Microeconomic reform time lags

Long-term implementation (few years), long-term impact (up to 20 years)

RBA meetings per year

8

Simple multiplier formula

ΔY = k x ΔAD, where k = 1/(1-MPC)

2022-23 budget outcome

$19 billion surplus despite forecast $78 billion deficit

Last time government borrowed from the RBA (printing money)

1982

Fiscal position in 2019

Deficit narrowed to just $0.7 billion; cash rate 0.75%, growth 1.9%

Australia's first recession since 1991

COVID, -6.8% growth in June quarter 2020

COVID unemployment peak

7.5%

COVID deflation

-0.3% (demand-pull)

Long-term unemployment share during COVID

Rose from one-quarter to one-third of unemployed

MPS during COVID

0.24

China's growth in 2020

2.2%

COVID cash rate

Record low 0.1% in November 2020

RBA quantitative easing

$220 billion in government securities (secondary market)

RBA forward guidance

Lowe said no cash rate rise until 2024

Budget deficits 2019-20 and 2020-21

$85.3 billion and $134.2 billion

Total COVID fiscal response

$300 billion, raising NFD by 67%

JobKeeper

$89 billion, 3.8 million workers, $1,500 per fortnight

JobSeeker

$550 per fortnight

HomeBuilder

$25,000 write-off for new homes, $2.5 billion total

Underemployment rate masked by JobKeeper

8.7% (estimated 12–13% without)

Post-COVID recovery growth

10.1% in 2021

50-year record low unemployment

3.4% in November 2022

Budget surplus 2022-23

$22 billion

Post-COVID inflation peak

7.8%

Post-COVID growth and unemployment (2022)

3.1% growth, 3.4% unemployment

RBA share of inflation deemed cost-push

70%

Petrol price rise post-COVID

12.5%

Grocery price rise post-COVID

9%

Underemployment post-pandemic

Sticky at 6.1%

Contractionary monetary policy post-COVID

13 rate rises to 4.35%

Bracket creep of income tax

$40 billion

Real wages fall post-COVID

4.5% (CPI 7.8% minus 3.3% nominal wage growth)

2023 Budget energy bill relief

$3 billion

2023 Budget bulk billing spend

$3.5 billion; rent assistance up 15%; PBS scripts to $30

Post-COVID evaluation figures

Headline inflation 4.1%, growth 2.9%, unemployment 3.7%

RBA 2026 forecasts (as of May)

Headline inflation peak 4.8% mid-2026, unemployment 4.3%, growth 1.9%

Automotive fuel index March

Up 32.8%

House price growth since 2000

400%, 8% yearly

2026 cash rate

4.35% after three consecutive hikes

Bond yields

Highest since 2011

AMP recession odds

30% in the next year

Okun's law growth requirement

3% needed for low unemployment; HSBC predicts above 1.9% triggers inflation

2026-27 fiscal stance

Broadly neutral, $31.5 billion

Fuel excise reduction (2026)

$2.9 billion; excise 52.6 to 20.6 cents per litre for 3 months

Annual tax offset from 2027

$250 for earned income, benefiting 13 million workers

Additional tax cuts

$268 off, then $536 every year from 2027

Instant asset write-off for small business

$20,000

Local Infrastructure Fund

$2 billion, supporting 65,000 homes over the decade

Boyne Island Aluminium Smelter investment

$1 billion

Inflation stalled at (2026)

4.4%

Aging population share of expected spending increase

40% (6th Intergenerational Report)

Worker to elderly ratio by 2063

Every 5 working Australians to 2 older people

LFPR by 2060

Reduce to 63%

Projected budget deficit by 2040

In excess of 0.5% (vs 4% expected in 1st IGR)

Projected productivity growth

1.2% per year for the next 40 years

Government spending as share of GDP

Increase from 24% to 28%; tax revenue remains 26%