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RBA will look past impact of energy rebates

This week the Queensland government followed in the footsteps of the Western Australian government and the Commonwealth by announcing significantly more generous energy subsidies for households. With the expanded electricity credits coming into effect next quarter, we think headline inflation could soon enter the RBA's 2-3% target range. However, the measures are unlikely to bring the Bank any closer to cutting rates. Indeed, new survey data show that firms continue to face strong cost pressures, consistent with our view that underlying inflation will be much slower to abate.

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