Tuesday, 29 September 2026

Daily Telegraph

Labor’s hand behind a likely RBA rates rise

If interest rates rise today it will be because the Albanese government forced the hand of the Reserve Bank in their game of inflation "chicken".

Australian households and small business are doing it tough. Recent employment data shows more Australians than ever have more than one job just to make ends meet. We have near record insolvencies and record closures.

Yet the RBA is likely to increase interest rates to dampen private demand because the economy is running too hot, fuelling inflation. But the problem isn't households which the ABS has said "continue to behave cautiously".

In deciding whether to cut or raise rates, the RBA is guided by the underlying inflation rate that removes short-term influences to decide whether they're within their 2-3 per cent target. The latest data from the ABS showed that underlying "inflation was 3.6 per cent, unchanged from 3.6 per cent in the 12 months to June 2026", effectively signalling a rate increase.

The Albanese government wants to claim Australia's inflation problem started in Iran. But the first rate rise this year was off last year's data, at the RBA's meeting on February 3, and the first bomb hit Tehran weeks later.

The May Budget predicted Iran would cause headline inflation to be "5 per cent through the year to the June quarter 2026". It ended up being 3.9 per cent.

The problem is the Albanese government's economic model that the Prime Minister has co-opted from Dan Andrews and Victorian Labor.

The economic model starts with the government spending to buy off voters. As they run out of money, they increase taxes.

To minimise political pain they focus tax increases on those least likely to vote Labor: investors, business and the productive sectors of the economy. That leads to less private investment, and therefore less tax revenue and private sector job growth.

Government revenue declines, while government expenditure rises. To cover for it the government finances employment from debt.

Jobs growth data shows how damaging this model is. In Victoria around one in 10 jobs is created from private investment. Nine in 10 jobs are financed by debt and created from different forms of public spending.

Nationally, we follow the same trend. The jobs created by different forms of public spending peaked at eight in 10, with two in 10 created by private investment.

Anthony Albanese's last federal budget could have been designed by Dan Andrews. Our economy is now caught in an inflation vortex and government spending is speeding it up.

We have crossed $1 trillion in public debt, and the federal budget projected increases in debt to $1.25 trillion by the end of the decade. The Intergenerational Report now projects deficits for 40 years. Rather than change their active inflation agenda, the Albanese government is doubling down.

That model forces the hands of the RBA to increase rates on households and small business, but it doesn't solve the inflation problem.

Last week David Koch correctly identified that hitting households misunderstands the nature of our inflation problem: "Commonwealth spending has climbed to 26.8 per cent of GDP ... [with] a meaningful slice of the inflation your board is trying to contain ... set in a Cabinet room".

Kochie argued the RBA should start to publish "an explicit estimate of how much of the cash rate is attributable to government spending".

The RBA governor has been cautious about telling the federal government to cut spending. But the RBA's mandate is to "promote the economic prosperity and welfare of the Australian people", not facilitate the government's inflation addiction.

If the RBA increases interest rates it owes Australians the truth: that households and small business are being punished because the Albanese inflation junkies can't kick their habit.