Albanese, RBA at loggerhead on spending

Prime Minister Anthony Albanese says government spending is helping to put downward pressure on inflation, despite the RBA claiming it was doing the opposite.

The RBA on Tuesday held the cash rate steady at 4.35 per cent, following June quarter headline inflation figures being released last week, which were largely in-line with expectations at 3.8 per cent, up from 3.6 per cent in the March quarter.

The RBA did, however, revise its inflationary outlook, saying it expected inflation to remain higher for longer, and in turn to expect the same with rates.

Before the decision, many forecasters expected rates to be revised down from January 2025.

In a press conference following the decision RBA governor Michele Bullock said Australians should temper their expectations and not expect a rate drop until the latter half of 2025.

“Inflation in underlying terms remains too high, and the latest projections show that it will be some time yet before inflation is sustainably in the target range,” she said.

“Policy will need to be sufficiently restrictive until the Board is confident that inflation is moving sustainably towards the target range.

“Public demand is forecast to be stronger than previously expected, reflecting recent public spending announcements by federal and state governments.”

But in an appearance on Sunrise this morning, when asked if he was concerned government spending was adding fuel to the fire, Mr Albanese said he “agrees inflation needs moderating”.

“But we know as well that what we can't do is just make cuts and hurt families,” he said.

“Whether it be the childcare costs that have reduced by 11 per cent on average since we introduced our increased subsidy, whether it be this reform today, our energy price relief plan, fee free TAFE.

“All of these measures are designed in a way to assist in the moderating further of inflation.”

Shadow treasurer Angus Taylor said the lack of rate cuts showed the government had failed in its bid to lower inflation.

“You need to contain the growth in spending,” he said.

“The first and most important thing to do there is commit to a fiscal strategy where the economy grows faster than spending.”