Chalmers promises to be 'helpful' on inflation but rejects blame for rate hike

Treasurer Jim Chalmers stated the government's budget is not the factor driving up inflation following the Reserve Bank's fifth rate hike this year. The bank raised interest rates due to weaker-than-expected public sector demand in early 2026, when inflation began to surge. Chalmers acknowledged the government could contribute to inflation relief with fresh savings outlined in the mid-year budget update next month. However, he declined to confirm if the savings would suffice to offset new spending.

Reserve Bank Governor Michele Bullock reiterated that overall demand, encompassing both public and private, remains high across the economy and left the government to decide its budgetary plans. She emphasized the independence of the bank in determining interest rates, stating that it does not dictate fiscal policy. The bank's updated forecasts suggest business investment will rise by 12% this year, while public demand growth is projected at only 2.1%.

The main domestic driver behind the bank's decision, aside from external factors like the Middle East situation, was the investment in artificial intelligence. The bank anticipates lower public demand growth, partly due to the winding down of temporary cost-of-living measures and reduced spending on defense, disability, and aged care.

The Albanese government has saved $36 billion over four years in the National Disability Insurance Scheme (NDIS) budget, but doubts have emerged about the achievability of this figure, as preliminary findings from the Australian Government Actuary have highlighted considerable uncertainty in this estimate.

While Finance Minister Katy Gallagher stated they would look across government for cuts, she acknowledged these would be difficult decisions. Shadow Treasurer Tim Wilson accused the government of having a spending addiction and fueling inflation.