Reserve Bank rate hike warning sparks Labor Coalition clash over Australia’s inflation

Fears of another interest rate rise have emerged after Reserve Bank governor Michele Bullock warned the central bank is prepared to raise rates again if needed, as Australia’s inflation remains stubborn.

Appearing on Sunrise on Wednesday morning, Employment and Workplace Relations Minister Amanda Rishworth was forced to defend the Albanese Government’s handling of the economy, while Nationals Senate leader Bridget McKenzie argued Labor’s spending had left the Reserve Bank with little choice but to keep interest rates higher for longer.

Ms Bullock’s warning comes ahead of key inflation data due to be released on Wednesday, with economists expecting underlying inflation to remain above the Reserve Bank’s target range.

Asked whether the Government should be doing more to bring inflation down, Ms Rishworth stressed that interest rate decisions were a matter for the Reserve Bank’s independent board.

“We are doing what is in our power to support Australians when it comes to cost of living, when it comes to being responsible with the Budget and improving productivity,” she said.

Ms Rishworth pointed to recent Budget measures aimed at boosting productivity, including investment in skills and permanent free TAFE, while acknowledging inflation had remained higher than hoped amid difficult global economic conditions.

“We know that inflation is and was running higher than we’d liked, and that’s why we’re doing what we can as a government,” she said.

But Ms McKenzie said Australians had lost confidence in Labor’s economic management, accusing the Government of driving up spending while failing to tackle inflation.

“You’ve seen in the polls Australians know our country’s heading in the wrong direction,” she said.

“Five Budgets, no reduction in spending, a trillion dollars’ worth of debt, and inflation, which hurts the poorest the most, is above the band that the Reserve Bank governor needs to see.”

Ms McKenzie argued the Government had failed to present a credible economic plan, leaving the Reserve Bank to rely on higher interest rates to cool inflation.

“That’s leaving it to the Reserve Bank to use a very blunt instrument for an interest rate rise while Australians’ living standards are literally seeing the biggest drop in the developed world,” she said.

Pressed on where a Coalition government would cut spending, Ms McKenzie said the Opposition would reduce migration, rein in spending on the National Disability Insurance Scheme and stop funding projects linked to the CFMEU.

The exchange comes as borrowers anxiously await the latest inflation figures, which are expected to play a key role in shaping the Reserve Bank’s next interest rate decision. Ms Bullock has made clear the board remains focused on returning inflation to its target, warning policymakers are prepared to act again if price pressures fail to ease.