Key Points
- The Reserve Bank will announce its official cash rate call for May on Tuesday.
- It's expected the central bank will leave interest rates at 4.35 per cent
- The May cash rate meeting will be the last before the federal budget.
The top line: Monthly mortgage repayments are expected to remain the same when the Reserve Bank of Australia (RBA) announces its official cash rate call for May on Tuesday.
The bigger picture: Ahead of the meeting, analysts forecast the central bank would be leaving interest rates at 4.35 per cent — where they have been since November last year.
But following stronger inflation, a shadow RBA board of economists at the Australian National University said they were less confident in their recommendation to hold interest rates steady.
The May cash rate meeting will be the last before the federal budget next week.
News that makes sense
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The key quote:
What we really need now is for the federal budget not to add to aggregate demand – it should be neutral, or if possible, even slightly contractionary.KPMG chief economist Brendan Rynne
What else to know: Economists and the Opposition have warned Labor to keep spending in check to avoid fanning inflation and putting pressure on the RBA.
KPMG chief economist Brendan Rynne said a budget in "expansion mode" would be the biggest threat to inflation taking off again.
He said government spending as a total of GDP was too high, running at around 27 per cent.
"What we really need now is for the federal budget not to add to aggregate demand — it should be neutral, or if possible, even slightly contractionary," he said.
What happens now: The cash rate will be announced at 2.30pm on Tuesday.
Treasurer Jim Chalmers will deliver his Federal Budget speech at about 7.30pm on 14 May.
