Chalmers Warns Higher Yields Will Suffocate Cost-of-Living Relief

Treasurer Jim Chalmers has warned that higher yields will likely kill off cost-of-living help, signaling that Labor would run a 'pretty tight ship' in its mid-year budget update. The Treasurer stated that rapidly rising borrowing costs in Australia and other major economies would put additional pressure on the budget, with federal government debt recently passing $1 trillion.

Chalmers emphasized that Australia's domestic inflation challenge has been made worse by the war in the Middle East, but maintained that his assessment was consistent with Reserve Bank governor Michele Bullock. He noted that public demand has halved over the last year while private demand has tripled, indicating that there are other factors at play.

Economists have warned that the issue with public demand is not growth in government spending but its level, which currently sits at 26.9% as a share of the economy. Australia's 3.6% underlying inflation rate is among the highest in the developed world, behind only Iceland, Lithuania, and Puerto Rico.