There’s an inflation whodunnit and everyone’s a suspect.
While Reserve Bank boffins begin a two-day meeting on Monday to decide interest rates, who’s to blame for ballooning price tags will dominate the political discourse.
Tuesday’s announcement offers little mystery: borrowing rates are almost certain to tick up to 4.6 per cent – their highest in 15 years.
But whether US President Donald Trump’s war with Iran or runaway government spending is forcing the central bank’s hand is hotly contested.
On spending, the actual outcomes of the 2025/26 budget are expected to deliver the government a pleasing report card, with the deficit coming in billions of dollars better than Canberra expected in May.
Back then, Labor predicted the budget would be roughly $28.3 billion in the red, an $8.5 billion improvement on the December forecast and about $14 billion better than the prognosis in March.
Those numbers are still a good deal worse than the previous year’s final budget outcome, which put the deficit at just under $10 billion for 2024/25, undershooting that year’s forecast by $18 billion.
Deputy Prime Minister Richard Marles said Australia was better able than most to weather economic storms, painting conflict in the Middle East as the primary driver of inflation.
“We’ve seen that play out at the petrol bowser, but we’re also now seeing it in terms of global inflation and that’s being experienced in advanced economies around the world,” he told ABC’s Insiders program on Sunday.
Those higher servo costs will likely nudge headline inflation from 3.5 to four per cent by the time the Australian Bureau of Statistics reports on Wednesday.
The US, Europe and Japan have all hiked interest rates due to rising fuel prices since the RBA met in August.
Opposition frontbencher James Paterson said the real factors influencing interest rates could be found much closer to home.
“The government always has an excuse for why inflation is high and likes to point to external factors … (they are) spending at stimulus levels,” he told News24.
“Another rate rise will be a body blow for many households and small businesses and the government has done very little to deal with it.”
While drivers despair at the pump, auction clearance rates, a leading house price indicator, slumped to a 10-week preliminary low of 50.3 per cent on Sunday, according to housing data firm Cotality.
Median property prices nationwide have slumped 3.6 per cent since March’s cyclical peak as the removal of tax concessions in May’s budget combines with three consecutive rate hikes to cripple buyer confidence.
While RBA governor Michele Bullock has stressed interest rate decisions are not designed to target house prices, economists have linked lower house prices to consumers tightening wallets across the board, tugging inflation down.
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