Inflation kills rate cut hopes<\/a><\/p>\nA November rate cut is dead, buried and cremated. It now looks far from certain that interest rates will fall again at all.<\/p>\n
It was bad news in so many ways.<\/p>\n
Prices are again rising. The CPI is above the Reserve Bank of Australia’s 2 per cent to 3 per cent target range and the price pressure is widespread across the economy, including services sectors driven by wage increases.<\/p>\n
At the same time, those cost pressures are putting employers into a noose. Unemployment is rising at the same time as inflation \u2014 reprising 1970s-era concern about stagflation.<\/p>\n
Should it continue, households with mortgages will cop a double-whammy.<\/p>\n
The cost-of-living will continue to rise \u2014 adding to a near four-year leap in the cost-base across everything they need, while wage rises will be consumed by inflation and taxes. And hopes for more interest rate relief will be dashed.<\/p>\n
People betting that interest rates will fall by another 100 basis points or more any time soon could be in trouble.<\/p>\n
Which will be a tough ground for the government, regardless of how weak the opposition looks.<\/p>\n
Loading…RBA’s upcoming meeting\u00a0<\/p>\n
Tuesday’s Cup Day Reserve Bank rate meeting is shaping up as an exercise in frustration.<\/p>\n
With inflation at the top of the band, another rate cut would risk fuelling price rises.<\/p>\n
Policymakers also have little scope to increase interest rates to attack inflation as that would worsen the labour market.<\/p>\n
“The bottom line is they’re in a massive bind,” says economist Richard Holden. “They have to stay where they are.”<\/p>\n
Opposition treasury spokesman Ted O’Brien has blamed the government’s high spending growth \u2014 which he says is running at four times the speed of the economy \u2014 for keeping inflation higher than it should be.<\/p>\n
The lack of more interest rate cuts is Jim Chalmers’s fault, he asserts.<\/p>\n
Holden says there are multiple causes, including the treasurer’s generous fiscal stance \u2014 which Chalmers has repeatedly defended as a way to cushion the blow from inflation and avoid what he has tried to portray as a scorched earth counterfactual in which workers are sacrificed en masse to the interest rate gods.<\/p>\n
But the University of NSW economist also points to Labor’s industrial relations changes and support for strong wages growth.<\/p>\n
“Whether it’s the treasurer or IR minister, the government bears responsibility,” he says.<\/p>\n
![\"Michele](\"https:\/\/www.newsbeep.com\/nz\/wp-content\/uploads\/2025\/10\/bcc4c97f6adba683c933668c29fc8bdb\")
<\/p>\n
Tuesday’s Cup Day Reserve Bank rate meeting is shaping up as an exercise in frustration. (AAP Image\/Dean Lewins)<\/p>\n
RBA adopts the Chalmers strategy<\/p>\n
And then there’s the Reserve Bank.<\/p>\n
“They adopted this strategy that Jim Chalmers certainly championed; that we want to take our time to get inflation back in the band and ‘preserve labour market gains’,” Holden says.<\/p>\n
“That was part of a government-wide plan. The [the RBA] operated in tandem and we’re seeing the consequences of that.”<\/p>\n
Given its timing early in the three-year political cycle, well out from the next election, Holden says next year’s May budget may well be the only opportunity for the government to “really try to do something about spending restraint”.<\/p>\n
The government points out that some of the rebound in inflation is due to electricity bill relief coming to an end.<\/p>\n
And Chalmers will now be under political pressure to extend that support, despite indicating in late September \u2014 when the inflation picture looked more rosy \u2014 that the energy rebates “won’t be a permanent feature of the budget”.<\/p>\n
Former Treasury secretary Ken Henry told Insiders host David Speers this week that extending energy support is a bad idea.<\/p>\n
“You can’t keep rebates going forever,” Henry said.<\/p>\n
“If you have to provide a permanent or semi-permanent rebate for something, then you’re saying that your policy settings are wrong.”<\/p>\n
![\"Jim](\"https:\/\/www.newsbeep.com\/nz\/wp-content\/uploads\/2025\/10\/bf63b3828f6c066af4aaa6c59a943b02\")
<\/p>\n
The government points out that some of the rebound in inflation is due to electricity bill relief coming to an end and Jim Chalmers will now be under political pressure to extend that support. (ABC News: Ian Cutmore)<\/p>\n
Keeping voters onside<\/p>\n
Labor’s political economy is all about rising government welfare, aged care, child care, NDIS and defence spending \u2014 alongside growing direct intervention in energy, critical minerals and heavy industry such as the Hunter’s Tomago aluminium plant.<\/p>\n
Keeping voters on side probably means offering more than band-aid solutions.<\/p>\n
Meanwhile, while it’s been badly bruised by the last election, there are tentative pointers to how the Coalition intends to reposition itself and seize on what it sees as community angst over persistent inflation, particularly linked to energy and climate policy.<\/p>\n
On Friday, Liberal backbenchers met and discussed a pathway to maintain support for climate action while agreeing it should not come at “any cost”.<\/p>\n
Sure, the “any cost” line smacks of a straw man argument, but it will probably resonate among voters feeling overwhelmed.<\/p>\n
While some in the Liberal Party want to go further and dump all mention of net zero, there is a strong view that the political ground is shifting on how much of the burden for the transition should be frontloaded.<\/p>\n
Bill Gates dropped something of a bombshell this week in a long essay<\/a> in which he chastised the “doomsday view of climate change” and rejected the idea that it’s “existential” to humanity.<\/p>\nCritically, while still a staunch advocate for action to curb warming, Gates argued that there is “too much focus on near-term emissions goals” at the expense of human welfare.<\/p>\n
The prime minister seems to be sniffing the same shift in mood.<\/p>\n
He has reportedly scrapped plans to attend next week’s United Nations climate summit amid indifference among some in cabinet to Chris Bowen’s push to host next year’s summit in Adelaide.<\/p>\n
In the meantime, obsessing about T-shirts risks reinforcing the idea that the Coalition is too focused on culture wars. And not enough on what matters to households.<\/p>\n
Jacob Greber is political editor of ABC’s 7.30 program.\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"As the prime minister saunters down the RAAF VIP airstair on Sunday after another successful overseas trip some…\n","protected":false},"author":2,"featured_media":111443,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[5545,5187,138,390,65,219,7797,3508,5546,3678,33656,111,139,69,7419,16549,71083],"class_list":{"0":"post-111442","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-anthony-albanese","9":"tag-bill-gates","10":"tag-business","11":"tag-climate-change","12":"tag-donald-trump","13":"tag-economy","14":"tag-elections","15":"tag-interest-rates","16":"tag-jim-chalmers","17":"tag-labor","18":"tag-michele-bullock","19":"tag-new-zealand","20":"tag-newzealand","21":"tag-nz","22":"tag-rate-cuts","23":"tag-rba","24":"tag-sussan-ley"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/111442","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/comments?post=111442"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/111442\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media\/111443"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media?parent=111442"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/categories?post=111442"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/tags?post=111442"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}