The International Monetary Fund has warned the Albanese Government, and indirectly the Coalition, about throwing around cash before next year’s election, arguing it would make the RBA delay any rate cuts, but worst still it could push up inflation, taking interest rates up as well.

This is what the IMF recommends for government policy:

1. Reduce tax breaks for property investors.
2. Make negative gearing less tax reduction attractive.
3. The tax cuts and the $300 energy subsidies added to demand, which does not help the RBA’s fight to lower inflation, so the IMF wants less of these political inducements which means increased spending.
4. State governments have to pare back on their big spending programs.

The Australian’s Jack Quail talked to Challenger’s chief economist Jonathan Kearns, who thinks the RBA can’t cut rates because inflation still too high. He argues both sides of Parliament can’t seriously offer “sweeteners” to voters ahead of the election, without hurting the fight against inflation.

“The RBA is still running restrictive monetary policy and so anything coming from the government that is stimulatory – which any election spending would be – is not particularly helpful,” Dr Kearns said.

Making life hard for Treasurer Jim Chalmers is an expected budget deficit which could be heading to $28.3 billion, which works against not only tax cuts but also big spending election promises.

Against all of this, it’s a vulnerable time for the economy, and the IMF could be underestimating both the economic slowdown happening now and the pace of inflation reduction, which is called disinflation.

This debate about what should happen to interest rates, has to be understood in the context of the later the first rate cut comes, the harder it will be for Albo and his team to get sufficient forgiveness from those voters who are praying for rate cuts to begin ASAP.

Labor would not see the IMF’s public warnings and criticisms as helpful, and they are not for a government losing popularity. That said, it also could be argued that the IMF is not internationally renowned for accurate forecasting!

Sorry, but I’ve been doing this economics commentary caper for a long time and I do have a memory.