Rates to stay low for some time: Access

INTEREST rates should remain low for a couple of years given there is no immediate danger to the inflation outlook, an independent forecaster says.

Deloitte Access Economics says a high Australian dollar, a peaking mining boom and the impact of earlier state and federal budget cuts should limit economic growth to average rates of growth.

"We expect interest rates to stay low for a couple of years - long enough, in fact, to ginger up both retail and housing construction, and keep overall growth in the economy on a relatively even keel," economist Chris Richardson says in Deloitte Access Economics latest business outlook on Tuesday.

"It's hard to see immediate dangers to the inflation outlook."

Official inflation data for the March quarter is released on Wednesday, which economists expect will show both annual the consumer price index and underlying inflation around the middle of the Reserve Bank's two to three per cent inflation target band.

Mr Richardson said there were only modest retail price pressures, wage growth was subdued and a recent lift in productivity also cut inflation risks.

The dollar is also riding high, keeping the lid on import prices.

He said that although the federal government had slowed its surge towards a budget surplus, it, along with Queensland, overdid earlier cuts, leaving their austerity weighing on economic growth.

"Even so, there's still heaps to do," Mr Richardson said.

Lower commodity prices have also cut tax revenues, forcing federal and state governments to tighten their collective belts "in a belated recognition that they spent too much in the glory years of the mid-2000s", he said.

Yet despite this, both sides of federal politics are promising the budget will do even more, even though it's still in deficit."

Labor was promising to spend more on education and disability insurance, while the Liberals were promising to do away with new taxes and to spend more on defence, yet neither side had said how these would be paid for, he said.

"We should be worried about that," Mr Richardson said.

"It's an election year, so we should focus less on politicians' promises and instead press them on exactly how they'll pay for them," he said.

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