The economy may be swinging the government's way

While careful to observe that it is not yet "mission accomplished" in the fight to tame price pressures, the treasurer was keen to acknowledge the "really welcome and really encouraging" result.

His ebullience is understandable.

After almost two years in office marred by ever-rising living costs and a brutal succession of interest rate hikes, the government may feel that it is finally cutting a break on the economy.

The unexpectedly steep slowdown in price growth to an annual rate of 4.1 per cent, and an even more marked deceleration to 3.4 per cent in December, have boosted hopes that living costs will recede much more rapidly than the central bank expects.

For the government's purposes, the surprisingly sharp drop in inflation could hardly have been better timed.

Since the start of the year, the government has been at pains to combat perceptions that its has been distracted from the living cost pain felt by households by issues like the Voice referendum.

The centrepiece of its efforts came last week when Prime Minister Anthony Albanese broke his election promise and unveiled changes to the stage three tax cuts aimed at increasing the relief to middle and low income earners while scaling back the amount going to the most well-off.

How voters perceive the push and pull between a revised package delivering greater tax relief to more households and breaking an election commitment will become clearer at the Dunkley byelection on March 2.

The government has been pushing its case hard, arguing that its tax changes will build upon other cost of living measures to support families without fuelling inflation.

Its claims have been backed by the Australian Bureau of Statistics, which has noted that without measures like its energy bill relief and rent assistance, electricity, gas and rent charges would be growing much faster.

The government is also spruiking its Medicare reforms which it says have pushed up national bulk billing rates by 2.1 percentage points, reducing patient out-of-pocket costs.

The Coalition is yet to decide whether or not it will oppose the tax changes, but has clearly marked out the trustworthiness of the prime minister and the government as a battleground heading into the next federal election.

Opposition treasury spokesman Angus Taylor also claims the government is "at war with aspirational Australia", a message the Coalition hopes will resonate with electors like those in Dunkley.

For its part, the government may increasingly see the economy as a position of strength for it rather than as a source of vulnerability.

If inflation continues to recede at its current pace, salary earners will soon begin to see their pay packets stretch further at the supermarket and the bowser.

The central bank may also begin to consider how long interest rates need to stay where they are.

Markets and many economists expect rate cuts to begin later this year, a view that has only been reinforced by the latest inflation reading.

If the government holds off on an election until 2025 it may feel it has the economic winds at its back.