Treasurer Jim Chalmers has vowed to cut government spending as a former Treasury economist warns that interest rates may need to rise further to curb inflation.
Speaking on Monday, Chalmers acknowledged the need for fiscal restraint, stating that the government is committed to responsible economic management. He emphasised that reducing spending is a key priority to ease pressure on the Reserve Bank of Australia and support the broader economy.
The warning from the ex-Treasury economist comes amid ongoing concerns about persistent inflation and a tight labour market. The economist cautioned that without significant spending cuts, the RBA may be forced to hike rates again, potentially slowing economic growth and increasing the cost of living for Australians.
Chalmers' pledge to cut spending marks a shift in tone from the government, which has previously focused on targeted relief measures. He noted that the budget will prioritise areas such as healthcare and infrastructure while reducing waste and inefficiencies.
The Opposition has criticised the government's economic record, arguing that previous spending has fuelled inflation. Shadow Treasurer Angus Taylor called for a more aggressive approach to fiscal consolidation, warning that households are already struggling with high interest rates.
Economists remain divided on the outlook. Some believe the RBA's tightening cycle is nearing an end, while others argue that further rate rises are necessary to bring inflation back to target. The next RBA board meeting is scheduled for June, where the cash rate decision will be closely watched.
Chalmers stressed that the government will continue to work with the RBA to achieve price stability and sustainable growth. He urged Australians to remain confident in the economy's resilience, despite the challenges ahead.
