ANDREW GREENE: As economic conditions worsen, Albanese and Chalmers face a tough 2027
ANDREW GREENE: As Australia’s economy implodes, the timing couldn’t be worse for Anthony Albanese and Jim Chalmers
For most Australian families 2026 has already been a hard year financially, but in the lead up to Christmas the cost-of-living crunch is almost certain to worsen as the Reserve Bank contemplates lifting interest rates again.
If the RBA does hike interest rates in November as widely expected, it will be the fifth time this year, pushing the official cash rate to 4.85 per cent and forcing even more households and businesses to the wall.
Leading economic forecasters now believe any interest rate relief from the RBA for mortgage holders will not emerge until well into 2027, and not before the economic pain deepens.
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By continuing you agree to our Terms and Privacy Policy.“There remains a risk of further rate hikes due to structural forces though this will wane if there are clearer signs of a slowing economy from here as we expect,” the Commonwealth Bank declared after Wednesday’s confirmation of rising inflation.
“Further tightening after November will very much depend on the progression of the Australian economy, the Middle East conflict and inflation data.”
For the Albanese government, next year is also looking particularly bleak as Labor’s options narrow for tackling stubbornly high inflation while also under pressure to help a growing number of Australians who struggling to make ends meet.
Throughout Wednesday the Prime Minister and Treasurer repeatedly argued the Middle East conflict and private sector growth were the primary factors for Australia’s higher inflation, not their own government spending.
During Question Time Anthony Albanese conceded the challenges facing the economy were serious, but insisted the government was helping the Reserve Bank fight inflation by delivering “budgets grounded in responsible management”.
“These are tough economic times around the world and they’re far from over. We have got a plan to get through it and the government that I lead will continue to do everything we can to shield Australians from the worst of the impact,” Mr Albanese told the House.
Treasurer Jim Chalmers also repeatedly pointed to surging fuel prices as the main driver of higher inflation, arguing government spending was not to blame for the cost-of-living increases over the past year.
“We’re managing the budget and the economy in the most responsible way that we can,” Dr Chalmers told Parliament.
“You can see in these figures the very substantial impact on oil prices from the war in the Middle East. The single biggest driver of higher headline inflation was higher fuel prices.”
Eight months since US President Donald Trump launched military strikes with Israel against Iran, the conflict appears to be widening across the Middle East, keeping soaring oil prices high and feeding the inflation problem at home.
Labor’s nervous MPs are reporting growing unhappiness in their electorates and calls to reduce public spending are politically difficult with large numbers of voters depending on government assistance.
The timing of the deteriorating economic conditions could not be worse for the Albanese government going into 2027 as it prepares to fight to hold onto office in an election due by mid-2028.
For an Opposition that has been struggling to gain political traction until now, the timing of the government’s economic woes could not be better.
Dr Chalmers — long considered the government’s best communicator — is now the subject of growing taunts from the Opposition which believes his political standing has been diminished since May’s budget.
“The only solution, because the Treasurer seems unable to kick his spending addiction, is for the Prime Minister to seriously consider the position of his Treasurer,” shadow treasurer Tim Wilson gleefully suggested after the latest inflation figures were released.
It was a provocative line of attack picked up by the Coalition during Question Time, with backbencher Henry Pike questioning Dr Chalmers’ fitness as treasurer and describing him as “out of touch and out of ideas”.
“When are you going to give the <ember for Parramatta a go?” Mr Pike asked, referring to recent speculation that rising Labor star Andrew Charlton may be the person who could one day replace Dr Chalmers.
Before the next election, due in 2028, Anthony Albanese will need to reshuffle his frontbench team to replace departing ministers, but switching Treasurers is not on the Prime Minister’s agenda.
