The New South Wales premier, Chris Minns, has warned that an expected interest rate increase will force job losses and cause businesses to close, arguing that both the federal government and the states should rein in spending to take pressure off the economy.
The intervention from the leader of the country's biggest state adds further pressure on the Albanese government before the Reserve Bank of Australia announces its cash rate decision on Tuesday. Markets predict the bank will deliver the fifth rate rise in 2026, with a move to 4.85% taking rates to their highest level in 18 years.
Minns, who has become increasingly outspoken about his differences with the prime minister, Anthony Albanese, said increasing rates was not a straightforward decision for the RBA. He said the impact of another rise on the NSW economy would be massive, warning there would be jobs lost that never return and shops that close and do not reopen. He added that the call could not be treated flippantly and described it as a very tough one for the bank.
Asked whether government spending was adding to inflation pressure, Minns said everybody needed to do their bit.
Albanese and the treasurer, Jim Chalmers, have confirmed that next month's mid-year budget update will include a savings package, even as they point to international factors, including the war in Iran, as the cause of price increases.
Internally, frustration is growing over the government's handling of the economy. One Labor MP told Guardian Australia that voter anger was already high ahead of the rates decision, likening the political climate to the slump in polling the government experienced during its first term. The MP said Albanese and Chalmers would be hoping the trajectory for inflation and interest rates seen before the 2025 election would play out again next year, noting that inflation peaked at nearly 8% in late 2022 before falling within the Reserve Bank's target band ahead of the poll. The MP described it as the midpoint in the cycle, when people are grumpy.
Albanese will be at the Commonwealth leaders' summit in Antigua and Barbuda on Tuesday when the RBA announces its decision, leaving Chalmers to speak for the government.
The environment minister, Murray Watt, defended the government's spending on Monday, telling ABC radio that Australia was not the only country experiencing inflationary pressures. He described it as a global phenomenon and said that even if the Australian government cut its budget to zero, inflationary pressures would persist because of what is happening around the world.
Labor frontbencher Tanya Plibersek defended Chalmers, insisting the savings would be meaningful but would not hurt households. She said no reforming treasurer in Australian history had avoided criticism when making big changes, and added that the party supports him.
The ACTU secretary, Melissa Donnelly, warned at a demonstration outside the RBA's Sydney headquarters that workers cannot survive another interest rate rise. She blamed big banks and supermarket giants for adding to pressure on households, saying workers were already struggling with cost-of-living pressures and were feeling the pain daily.
The Australian Council of Social Service chief executive, Cassandra Goldie, urged the RBA not to raise rates, calling instead for action to lower housing and energy prices and out-of-pocket medical costs. She said higher interest rates create unemployment by design and that an increase towards or above 5% would be disastrous, locking people out of jobs for years.
Monday's Newspoll put Labor's primary vote at 27%, behind One Nation on 28% but ahead of the Coalition on 21%.
The opposition leader, Angus Taylor, accused the federal government of losing control of inflation and interest rates. He said the government cannot control its spending and that the result is the Reserve Bank having to do all the hard work.
Sources: The Guardian World.