Swan wary of global economic storm clouds

FORECASTS of an inflation spike are cause for concern and highlight the need for tight Budget discipline, Treasurer Wayne Swan says.

The TD Securities-Melbourne Institute monthly inflation gauge for November released today rose by a further 0.3 per cent for an annual rate of 3.4 per cent, well above the Reserve Bank's two to three per cent target range.

Mr Swan said tonight he was adamant Labor's election promises would be implemented – including $31bn in tax cuts – despite concerns public spending was fuelling inflation.

"Dealing with inflationary pressures in the economy is our No. 1 priority," he said to ABC television.

"But we can also meet our election commitments because expanding the productive capacity of the economy is very important ... in terms of the fight against inflation."

Labor's agenda of lifting workplace participation, investing in skills and removing infrastructure bottlenecks would all help put downward pressure on inflation, he said.

"But over and above that, strict Budget discipline is very important."

Mr Swan said he took inflation warnings very seriously and was determined to find further savings in government spending.