The Reserve Bank says government spending is still helping to drive high inflation, but it has little power to control it. Assistant governor Sarah Hunter said on 60 Minutes that households are bearing the cost, and more high prices are expected before conditions improve. Four rate rises have been made since February, and at least one more is widely expected before Christmas. Hunter said it was not the bank's place to tell politicians what to spend money on, adding that voters decide at the ballot box.
Victorian taxpayers still do not know the full cost of the state's COVID-19 response, according to the Victorian Auditor-General's Office. Its latest report says there is no transparent, easily accessible reporting on pandemic spending across government. The office previously put the total at roughly $39.8 billion. It said the Daniel Andrews-led government stopped publishing cross-departmental pandemic figures after 2021-22, contrary to its earlier recommendation.
Mortgage holders can expect interest rates to stay higher for longer, whether or not the Reserve Bank lifts them again. Assistant governor Christopher Kent said neutral rates, the level needed to keep inflation low, appear to be rising in Australia and abroad. The cash rate sits at 4.6 per cent, its highest in 15 years. Markets do not expect rates to fall below current levels before mid-2028. Commonwealth Bank chief economist Luke Yeaman said heavy government and AI company spending is reducing how well rates slow demand.
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The Reserve Bank of Australia says interest rates will likely remain higher for longer due to rising neutral rates driven by global competition for capital. Christopher Kent, the RBA's assistant governor for financial markets, noted that neutral rates are increasing both in Australia and abroad. Markets expect the cash rate to stay above 4.5 per cent until at least mid-2028, the longest period since before the global financial crisis. Commonwealth Bank chief economist Luke Yeaman warned that government spending could undermine the RBA's efforts to control inflation.
Assistant Treasurer Daniel Mulino has rejected criticism of the government's housing tax changes, saying some commentary exaggerates the property downturn. He told 7NEWS that the tax distortions needed to be addressed alongside building more homes. Industry data shows new home sales fell 17.5 per cent in the September quarter, with interest rates and post-budget uncertainty identified as key problems. Economist Richard Holden argues inflation has risen on the back of increased government spending, while Mulino says savings have been found in every budget. Some have questioned whether Treasurer Jim Chalmers should keep his job, which Mulino dismissed.
Victorian government spending reached $112.1 billion over the past 12 months, $891 million above budget expectations. The rise was driven mainly by public sector wages, which totalled $46.1 billion, and by interest on state debt, which reached $7.9 billion. Premier Ben Carroll said the government wants to reduce debt in a responsible way without hurting frontline services. Opposition leader Jess Wilson said the figures show the state's finances have deteriorated under Labor.
The International Monetary Fund says Australia will have some of the highest inflation among rich countries this year. The Reserve Bank of Australia has hinted it could raise interest rates to an 18-year high at its next meeting in November. The IMF also warned that high government spending and debt are unsustainable and adding to inflation. The IMF forecasts Australian headline inflation of 3.9 per cent by the end of the year.
The International Monetary Fund says Australia will have some of the highest inflation among rich countries this year. The Reserve Bank of Australia has hinted it could raise interest rates to an 18-year high at its next meeting in November. The IMF also warned that high government spending and debt are unsustainable and adding to inflation. The IMF forecasts Australian headline inflation of 3.9 per cent by the end of the year.
Twelve executives at the Future Fund Management Agency earn more than $1 million annually, with one receiving over $1.5 million. The Greens have criticised the high salaries, while the government defends them as necessary to attract skilled investment professionals. The Future Fund reported a 14.8 per cent return in the 12 months to June 2026, adding $37.4 billion to its portfolio. The government is also facing scrutiny for spending $860 million on external consultants, including $59 million to KPMG.
A major ratings agency has warned that record-high government spending could threaten Australia's fiscal health if economic conditions worsen. Federal government payments reached 26.9 per cent of GDP in 2025/26, the highest level in 40 years excluding COVID-19. S&P Global Ratings lead analyst Martin Foo noted that while high tax revenue currently offsets this, structural spending increases and potential declines in revenue could pose long-term risks. Veteran economist Chris Richardson echoed these concerns, cautioning against making permanent spending commitments based on temporary revenue windfalls.
The federal government spent $860 million on external consultants in the 2025-26 financial year, with KPMG receiving $59 million. Labor increased its contracts with KPMG despite scandals involving the firm. The Australian National Audit Office found that government spending on external labour increased, with 12 of 22 sampled entities raising their expenditure on contractors and consultants. Greens spokesperson Barbara Pocock criticised the government's outsourcing practices, calling for a review of KPMG contracts and a ban on future agreements until investigations are completed.
