ANZ Bank warns that electricity cuts will only fuel inflation as Australians now have much more money in their pockets.
Prime Minister Anthony Albanese’s last budget introduced a $300 rebate for every Australian household, regardless of wealth, in four quarterly instalments of $75.
Queensland has gone one step further, with Premier Steven Miles announcing a $1,000 electricity rebate as Labor battles to win a fourth consecutive term in government in October.
Western Australia announced a one-off $400 electricity bill credit rebate in the May budget.
ANZ economists Madeline Dunk, Arindam Chakraborty and Catherine Birch warn that these electricity cuts will only fuel inflation, as they leave households with more money to spend on other things.
“Some of these cost-of-living support measures, such as energy discounts, will automatically lower inflation temporarily,” they said.
‘But it could increase demand if households spend some of the savings.’
ANZ’s warning contradicts Finance Minister Jim Chalmers, who claimed in May that the $300 electricity rebates would lower inflation.
ANZ Bank warns that electricity cuts will only lead to inflation as Australians will now have much more money in their pockets
“The main focus of our economic plan and budget is to ease the pressure on Australians and reduce inflation. Our new energy bill reduction does both,” he said.
According to financial comparison group Finder, New South Wales has the highest average electricity bill: $430 per quarter, or $1,720 per year.
In Western Australia, the average quarterly bill was the lowest at $280, which equates to $1,120 per year.
Inflation rose 4 percent in the year to May, further exceeding the Reserve Bank’s target of 2 to 3 percent.
But electricity bills rose 6.5 percent last year, monthly data from the Australian Bureau of Statistics shows.
The Reserve Bank left interest rates unchanged at 4.35 percent in June, the highest level in 12 years, but warned that the effects of electricity cuts would only temporarily reduce inflation.
ANZ economists Madeline Dunk, Arindam Chakraborty and Catherine Birch have warned that these electricity cuts will only fuel inflation, as they leave households with more money to spend on other things.
“Recent budget outcomes could also affect demand, although federal and provincial energy cuts will temporarily lower inflation,” the report said.
The cost of living crisis has forced state governments to increase spending, with coal-rich Queensland going from a record surplus of $13.93 billion in 2022-23 to a deficit of $2.631 billion in 2024-25.
“A key theme is the growing role of government in supporting the economy and households facing cost-of-living pressures,” ANZ economists said.