Australian Finance Minister Katy Gallagher has declined to confirm whether the mid-year budget update in December will include net savings, as households prepare for a potential fifth interest rate hike. The latest inflation data, showing a 4.3% increase in the year to September, has heightened expectations that the Reserve Bank of Australia (RBA) will raise rates at its next meeting on Tuesday.
Speaking on ABC Insiders, Gallagher emphasized the government's focus on savings but avoided committing to specific outcomes. '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 stated. She acknowledged government spending as a factor in inflation but stressed it was not the primary driver.
Treasurer Jim Chalmers, facing scrutiny over record-high government spending, has promised savings in the December budget update to help curb inflation. However, he also avoided confirming whether savings would exceed spending. The RBA Governor Michele Bullock has signaled further rate hikes if necessary to bring inflation back to the 2-3% target range.
Market expectations of another rate rise follow the latest inflation figures, which showed a 0.3% increase in September, driven by transport and housing costs. RBA chief economist Sarah Hunter previously noted that government spending contributes to persistent inflation, alongside global factors like the war in Iran, high oil prices, and demand for AI. Treasury forecasts inflation to remain above target until the end of 2027.