Like many Australians, I am about to get a tax cut. I’m not sure that’s a good thing.

It was no surprise that the Reserve Bank left the cash rate on hold on Tuesday, but many economists are flagging rate cuts later this year. My concern is that the tax cuts will stall the rate relief that I and so many others sorely need. I’m not saying rates won’t fall at all, but they will fall slower than they would without tax cuts.

Higher rates are likely to squeeze many with big loans.Credit: Simon Letch

Some economists say the stage 3 tax cuts will be inflationary. Others, including the boffins in Treasury, say they won’t. That doesn’t mean they disagree about the basics.

Economists in the first camp suggest that the tax cuts are a stimulus that could increase consumer demand. Those in the second argue this stimulus won’t cause a sudden spike in the inflation figures because it will come when the economy is already slowing.

When Reserve Bank governor Michele Bullock said on Tuesday that the tax cuts did not affect the bank’s forecast on inflation, it was because they had already factored in the old stage 3 tax cuts and “it was the same amount of money being handed to households distributed slightly differently”. Note she was comparing the new stage 3 cuts with the old stage 3 cuts, not the alternative of no tax cuts.

If the economy slows, tax cuts are one way to add fuel, while rate cuts are another. I know which I would prefer.

RBA governor Michele Bullock says the tax cut changes will not affect the bank’s forecast on inflation.Credit: Louise Kennerley

In my household, we owe more than $800,000 on our Sydney mortgage and repaying it is our biggest expense. Despite refinancing, our costs are three times higher than 18 months ago, and our savings have gone backwards. We know it is so much tougher for many other people.

If our rate fell by 50 basis points (0.5 per cent), we would save nearly $3000 a year through lower repayments. (Full disclosure: we are also high-income earners. How else would we afford a house in Sydney? Also, my husband stood to gain a lot from the original stage 3 tax cuts.)