How wil '05-'06 Budget affect inflation? (1 Viewer)

[jonnathann]

Yep well any impacts on inflation as a result of the spending on policies or anything..?

 

[Rafy]

Well its an expansionary fiscal policy.

WIth Increased government spending and decreased taxes.

This will increase aggregate demand in the economy. (gov spending, and ppl spending tax cuts creating demand)

So basically you should see an inflationary effect.

 

[Suga_baibe]

you know what....

Well the recent budget will increase inflationary pressure due to increased spending due to increased disposal income caused by tax cut.

 

[hyperbole]

But, Costello argues that the tax-cuts will not result in any inflationary pressure, or any inflation that will raise interest rates because of the $8.9 billion surplus, and because the tax-cuts are occuring in two stages. Costello also said that previous tax-cuts were actually saved by households, and not spent, and he expects that the same will happen with these tax-cuts.
I read this in the paper. I'm sorry if I'm wrong. Feel free to correct me.