Once again the Treasury is warning the Australian government about the danger of inflation over the next couple of years as the resources boom powers yet another high growth year for the mining industry.
The federal budget next week is likely to include forecasts from the Treasury that show a 2-3 % rise in rates over the next two years as per senior government sources.
Spending cuts and returning the budget to surplus by 2012-13 is what the government will say is the reason for the tricky budget. The threat of inflation will doubtless be pushed by the boom in the mining industry and it would fall to the government to douse the price pressures as per Wayne Swan.
The Reserve Bank is likely to keep its official cash rate fixed at 4.75% interest rate at the meeting it will hold in Sydney. However the Reserve Bank governor Glen Stevens has already promised that the rate freeze may not last much longer given the economic situation.
The Treasurer said that the budget was likely to show unemployment falling to 4.5% by mid 2013 as 500,000 new jobs were likely to be created. Secure employment was the first responsibility of a federal government and that was the central emphasis of this budget as per Mr Swan.