Here’s a post from my colleague David Taylor:

The end of the cost-of-living crisis is now in sight, according to Treasury’s latest inflation forecasts.

“So those forecasts from Treasury are the ones that will be published in the budget and they take into consideration all of the set of decisions that we’ve taken,” Finance Minister Katy Gallagher said on Monday.

She told the ABC there will be measures in the federal budget to help bring inflation down faster than expected.

NAB’s chief economist Alan Oster is taking the new Treasury inflation forecasts with a grain of salt.

“So I think the argument is, ‘Well, what we’re doing in cost of living will help inflation,’ but you know you need to be a bit careful because to some extent it’s a temporary fix.

“Whether it’s a permanent fix depends on where the economy is and what happens to inflation next year.”

But Treasury’s latest inflation forecasts have created an obvious gap between where it says inflation will be by year’s end, that is, under 3 per cent, and where the Reserve Bank forecasts inflation, that is, ABOVE 3 per cent.

“We think it likely reflects some possible policy announcements in Tuesday night’s budget, particularly around further utility assistance for households, maybe rental assistance as well,” RBC Capital Markets chief economist Su-Lin Ong.

“And all those — the way they’re delivered — and they take out straight from your utility bills or rent, that actually does lower that component of CPI.

“So it is possible that the difference at the moment with Treasury forecasting much lower inflation by the end of this year reflects some policies to be announced tomorrow.”

But here’s the thing, while Su-Lin Ong thinks tomorrow’s budget measures COULD artificially lower inflation in the short term, they won’t fix the broader inflation problem plaguing Australia.

“If you are, making something cheaper for households, it frees up their disposable income and allows them to spend in other areas, so it boosts income by more than would otherwise be the case and so that ultimately could add to demand and inflation.”

What Ms Ong is saying is that there’s simply no getting around this idea that the Reserve Bank wants us to take money out of the economy and that’s the way inflation’s going to come down ultimately?

Former Treasury economist Warren Hogan describes the lower Treasury forecasts as “controversial”.

“It is unusual but that’s because it’s so contestable.

“I think it’s also a somewhat controversial forecast particularly because they have given us it, it’s different to what most people are thinking, and they haven’t given us any explanation for it in terms of any measures in the budget.”

He says the Reserve Bank, which want inflation between 2 and 3 per cent, will ignore any lower-priced goods or services as a result of government budget measures or subsidies.

“They will look through any subsidy.

“They’re trying to work out what’s going on in the inflation process in this country.

“What they’re worried about is inflation getting stuck in the system and of course these sorts of subsidies actually only increase the chance of inflation getting stuck in the system which of course would completely rule-out rate cuts and might even increase the chance of a rate hike,” Hogan said.

Now… we wait.

“It’s a little bit more complicated than the headlines would suggest,” Su-Lin Ong said.

“But we will wait for budget tomorrow night and see if we get confirmation of a bit more of this cost-of-living relief and measures.

“And then ultimately we’ll need to see how they flow to the economy from an activity perspective as well.”