Labor fails to confirm whether government spending lower ahead of looming rate rise

Finance Minister Katy Gallagher could not confirm whether the mid-year budget update in December will contain net savings as Australian households brace for an anticipated fifth interest rate rise.

A worse-than-expected inflation result of 4.3 per cent in the year to September has triggered expectations the Reserve Bank of Australia (RBA) will raise rates again at its next meeting on Tuesday.

Speaking to ABC Insiders on Sunday, Gallagher was unable to confirm whether the federal government would have greater overall savings than spending by the update.

“What I’m saying to you is we’re doing a lot of work on the saving side, but I can’t get ahead of decisions that haven’t been made yet,” she said.

“We’re very conscious of the responsibility we have.

“I mean, government spending is not the primary driver of prices in the economy, but we have a role to play and we have been playing that role.”

Gallagher also stressed there were real and increasing pressures on the budget.

“I’m not saying it’s too difficult but I am saying that there should be some acknowledgement of the world in which we are living and the pressures on the Commonwealth budget and they are real,” she said.

Read more

Albanese calls rate hikes a ‘blunt instrument’ amid seventeenth predicted rise

Treasurer Jim Chalmers, who is under pressure for highest level of government spending in 40 years outside the pandemic, promised to provide savings by the budget update in December as part of his role in helping rein in sticky inflation.

But he also refused to say whether savings would be greater than spending on Wednesday.

“A lot of those questions are still unresolved and I’m reluctant to preempt bits of it where there are discussions with ministers to come,” he said.

The RBA will meet next week and hand down its next rate decision on Tuesday.

RBA Governor Michele Bullock is determined to rein in inflation back to the 2-3 per cent range and has declared that “the board will increase interest rates again if that’s what’s needed to get inflation down”.

Markets are now expecting another rise after the latest monthly inflation figures showed prices rose by 0.3 per cent.

Transport and housing costs were the largest contributors to the September rise, according to the Australian Bureau of Statistics.

RBA chief economist Sarah Hunter said federal and state “government spending is definitely part of the picture” when asked about the country’s persistent inflation problem in October.

The war in Iran, high oil prices and demand for AI have also been blamed.

With no end to either of those global factors in sight, Treasury’s latest forecast has inflation above target until the end of 2027.