EDITORIAL: Public spending is prolonging our inflation plan

Inflation is on the march and the cash rate is soon to follow.

The news out on Thursday was worse even than economists had feared.

Headline inflation reached 3.8 per cent in the year to the end of October, a 16-month high.

And underlying inflation lifted to 3.3 per cent across the same period, outpacing RBA predictions.

The upshot of these figures is that the bank’s easing cycle is over. The odds of a further cut in December are as close to zero as you can get. The best Australia’s mortgage holders can hope for in 2026 is that rates remain steady at 3.6 per cent.

But some economists aren’t even that optimistic.

The pessimists among the bunch are predicting rate hikes from next November.

What was initially hoped would be a temporary spike in inflation is beginning to look stubbornly persistent.

If that’s the case, Michele Bullock and her Reserve Bank board will have no choice but to push rates up to prevent even greater pain.

Predictably, Treasurer Jim Chalmers is blaming the conclusion of State energy rebates, which had worked to artificially lower the headline inflation rate.

Queensland’s $1000 annual rebate and Western Australia’s equivalent $400 program both finished at the end of June, triggering a 37.1 per cent increase in electricity prices over the year. Federal rebates will end at the end of this year.

We always knew it was impossible to subsidise our way out of this inflation pit. This is precisely what economists — and commonsense — have been telling Dr Chalmers would happen.

Still, he wants Australians staring down the barrel of another tightening cycle to look on the bright side.

“Inflation is higher than we’d like, but it is much, much lower than we inherited from our predecessors,” Dr Chalmers said.

“Inflation remains persistent in many advanced economies, and there have been recent increases in inflation in the United States, New Zealand and Japan.

“The global economy remains uncertain and people are still doing it tough, but Australia is well placed and well prepared to confront the challenges coming at us.”

The question for Dr Chalmers and his colleagues in the Albanese Government is what are they willing to do about it?

Figures out earlier this month showed Labor has sent the public service on a hiring binge, with the employment in the sector growing three times the rate of the general population.

Dr Chalmers and Finance Minister Katy Gallagher have instructed department heads to find massive savings within their budgets — reportedly of up to 5 per cent.

Speaking on Wednesday, Dr Chalmers said that didn’t necessarily mean budgets would be slashed by that amount.

“What we’re asking them to do is to identify areas of spending which is lower priority so we can redirect it if we want to,” he said.

The public service’s continued bloat is strangling private sector growth. Will this Government have the guts to make the cuts necessary to rein it in?

Responsibility for the editorial comment is taken by Editor-in-Chief Christopher Dore.