Get all your news in one place.
100’s of premium titles.
One app.
Start reading
AAP
AAP
Business
Poppy Johnston

New off-budget funds won't fuel inflation: Treasury

Treasury secretary Steven Kennedy says the off-budget funds are unlikely to fuel inflation. (Mick Tsikas/AAP PHOTOS) (AAP)

The top Treasury official has dismissed concerns the federal government's off-budget funds will fuel the immediate inflation challenge.

Australia is fighting elevated inflation that's triggered a policy tightening cycle from the central bank and put pressure on the government to keep spending restrained.

Treasury secretary Steven Kennedy said the government's plans to introduce additional off-budget funds were unlikely to add significant demand over the next year or two.

Dr Kennedy told a parliamentary committee the inflationary impact of the new funds in part came down to timing.

"In terms of adding to demand, this is all a question of timing," he said.

"We expect growth to slow significantly over the next year or two - I'd be quite surprised if the establishment of those funds shifted demand in any significant way across that period."

Off-budget funds have emerged in recent years to unlock finance for key policy areas and now the Albanese government wants to legislate more, including the $10 billion Housing Australia Future Fund and the $15 billion National Reconstruction Fund.

Dr Kennedy said he was not aware exactly how the proposed funds would function but that they typically worked differently to grant programs that directly pump money into the economy.

"My own view is that it's important the focus for those funds is on their aims, and whether they're contributing to productivity," he told the parliamentary committee.

"'I've observed those funds arising now over quite a few years, and in all cases our advice is related to what's the fund for, will it be effective, is it value for money, given that the government will have to, in general, in its current circumstances, borrow that money to invest," he said.

The International Monetary Fund warned earlier this month such below-the-line investment vehicles could add to demand in the economy.

"I think they're right to ensure that we focus on the policy integrity of those funds," Dr Kennedy said.

"I don't think they're adding significantly to the near-term risks of inflation."

Sign up to read this article
Read news from 100’s of titles, curated specifically for you.
Already a member? Sign in here
Related Stories
Top stories on inkl right now
One subscription that gives you access to news from hundreds of sites
Already a member? Sign in here
Our Picks
Fourteen days free
Download the app
One app. One membership.
100+ trusted global sources.