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Pork barrel versus inflation showdown

Labor’s spending promises during the election may have to be re-evaluated due to the threat of another interest rate rise. It is predicted that the Reserve Bank will raise the rate beyond three percent early next year, making the cash rate seven percent.

"In the short term, the main economic challenge the new government will face will be to manage the inflation pressures generated by what is now a very mature economic expansion,'' said Stephen Halmarick, director of economics at Citigroup. "The election promises of new government during the campaign will need to be reassessed in the light of this harsh reality.”
However, Halmarick noted that the WorkChoices rollback would barely register on the economic radar because only 10 percent of the workforce is on Australian Workplace Agreements. “It is unlikely to have as dramatic an effect on the economic outlook as either party would suggest,'' he said.

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