The politics are pretty obvious. In a cost-of-living crisis where families don’t have money but governments do, the pressure to help out is immense. So, in just six weeks’ time, Australian families will get truckloads of dollars – everything from tax cuts to electricity rebates, rent assistance and more.

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But there’s a chance that our governments have overdone it. The money that’s about to arrive in your pockets is the equivalent of almost half the money that the RBA deliberately took out of your pockets.

The Reserve Bank has been stomping on the brake, but now our governments are hitting the accelerator. What could possibly go wrong?

Some may have the comforting belief that governments know what they’re doing. But I’ve seen them all up close for many years, and a better description is that they all fly by the seat of their pants.

And while a week may be a long time in politics, it’s the blink of an eye when crafting a budget. It’s likely the feds started making key decisions to juice the economy via their budget goodies as long ago as February. But they’ve been caught on the hop by the extra cash top-ups from the states, and by signs that the fight against inflation is getting harder.

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So can the government gamble work?

Yep. The forecasts from the feds suggest we can have our cake and eat it too. We get our tax cuts, rebates and assistance, but we also get a rapid fall in inflation. And that is doable. But you may not be entirely happy if it does happen.

To make the juggle work means all the known good news on government money headed our way has to be offset by enough bad news on family spending. That’s why we’re in a bad-news-is-kinda-good moment.

It’s therefore good news for your mortgage that families are so worried about what happens next that they’re planning to trouser most of their tax cuts. If that happens, it would remove much of the inflation risk of coming months. Yet, remember families are currently spending 97¢ out of every dollar, so family spending may not be quite as weak as our governments are gambling it will be.

Best guess? There’s enough bad news on family finances that the good news on government goodies won’t push up interest rates any further. But it will be a long time before rates come down. Markets think the RBA won’t have enough wriggle room to cut rates for a year yet. That says the first rate cut would come five days before the most likely election date.

Chris Richardson is an independent economist.

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