The Prime Minister has signalled cuts to government spending in a looming budget update later this year, while again denying Labor’s policies are responsible for this week’s interest rate rise.

Speaking on the sidelines of the CHOGM, Anthony Albanese insisted “international pressures as well as domestic demand” cannot be ignored for Australia’s high inflation.

On Tuesday the Reserve Bank hiked interest rates for the fifth time this year to 4.85 per cent, the highest level since late 2008, with governor Michele Bullock blaming high public and private demand across Australia for the move.

“We will take appropriate action. We won’t rip money out of health or schools,” Mr Albanese told reporters in the Caribbean after meeting with his Canadian counterpart Mark Carney.

“It’s not a full budget. The budget’s in May. But we make statements, and in every one of them, we produce savings.

“I make this point: a range of savings that we have put forward have been rejected by the Coalition, and a range of expenditures have been called for as well.”

Mr Albanese singled out the Coalition’s opposition to changes to private health insurance which would scrap rebates for people over 65, and its divided stance on the European Union free trade agreement.

“You can’t oppose the private health insurance changes at the same time as you’re calling for changes to fuel taxation, which would have an impact on inflation, and you can’t oppose the European Free Trade Agreement,” Mr Albanese said of the Coalition’s stance.

“The European free trade agreement will make goods to Australia cheaper. That has a downward impact on inflation. It is just one of the reasons why the European free trade agreement should be supported by everyone across the board.”

Mr Albanese also flagged that fiscal policy reforms meant “hard decisions” — which his Government was prepared to make.

“We were always going to be fiscally responsible because my Government is a fiscally responsible Government, and we will take appropriate action,” the Prime Minister said after the 17th interest rate rise since he came to power in 2022.

Speaking in Antigua and Barbuda, the PM name-dropped Ms Bullock in arguing that his Government’s policies were not responsible for higher inflation — a position also mounted by Treasurer Jim Chalmers.

“I’m sure that Michele Bullock would have acknowledged that oil prices have had an impact, as Jim Chalmers did yesterday,” he said.

“She has spoken about international pressures as well as domestic demand.”

On Tuesday, after the rate announcement, Ms Bullock stressed oil prices were not the primary reason for the rise.

“I know there is confusion in the community so I want to be very clear: monetary policy cannot impact global oil prices; rather the tightening in monetary policy is to address domestic capacity pressures.”

Responding for the first time to the rate hike, Opposition Leader Angus Taylor accused the Prime Minister of being “in denial” over the cause of soaring inflation, which he insists is homegrown.

“We’ve got a Prime Minister who is always in denial,” Mr Taylor told Seven’s Sunrise on Wednesday.

“He was in denial about falling off a stage. He’s certainly in denial about the causes of interest rates and inflation.”

“The Reserve Bank governor called it out yesterday. She said interest rates aren’t going up because of oil prices, because of the war in the Middle East.

“The reality is they’re going up because (the) Government has lost control of its spending, and it needs to get back in control of that spending.”

Following the RBA’s decision on Tuesday to lift interest rates to an 18 year high, Ms Bullock warned the economic conditions could make 2027 particularly difficult for Australians.

“It is going to make people feel like it’s a recession because they feel poorer, their spending can’t grow very quickly because their incomes aren’t growing very quickly,” she said.