Dr. Karina Doorley:

I will respond on the carbon tax and let my colleagues speak on the temporary nature of inflation. Our post-budget analysis included the carbon tax. We looked at the effect of direct and indirect tax measures on household incomes. That included the increase by the carbon tax. Even accounting for the increase to the carbon tax next year, households are on average no worse off as a result of tax and welfare measures in budget 2022. That is because the carbon tax disproportionately affects low-income households because their fuel bill is a larger share of their overall consumption but there were well targeted increases to some social welfare payments that manages to compensate those households for the extra expenditure that they will incur as a result of the carbon tax. Taking the impact inflation on top of the carbon tax increase, if it does not exceed the forecasts which are around 2% or 3% next year, then low-income households should be reasonably well insulated from the impact of inflation and from the carbon tax increase. In other parts of the income distribution, depending on how much inflation exceeds forecasts, some households may be left worse off. However, for the lowest income households, the direct tax and welfare measures announced in budget 2022 should compensate them from carbon tax increases and forecast inflation.