Australian news and politics live: Westpac predicts rate hike following RBA Governor's inflation warning

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You can read tonight’s edition of The Nightly below:

Anthony Albanese has signed a major security treaty with Indonesia, with both countries agreeing to consider a joint military response if either comes under attack.

The Prime Minister was met with pomp and ceremony in Jakarta on Friday before he sat down with Indonesian President Prabowo Subianto.

The pact, which is considered to be an upgrade of existing arrangements, had been first announced in November during the President’s one-day State visit to Australia but was formally signed today.

“The best way to secure peace and stability in our region is by acting together,” he said.

Hours after RBA Governor Michele Bullock’s testimony, Westpac became the latest big four bank to predict a May rate hike, warning that stronger-than-expected demand is continuing to fuel inflation.

Chief economist Luci Ellis, a former Reserve Bank of Australia assistant governor, said inflation and overall demand were running hotter than forecast.

“With inflation now higher (and overall demand growth stronger) than previously expected, the RBA raised the cash rate in February,” she said.

“The question then becomes, how much more is coming and when? We believe that another cash rate increase will occur in May.” Ms Ellis added that while shifts in public and private demand were anticipated, the overall impact has been stronger than expected.

“While a slowdown in public demand growth and pick-up in private demand growth were both expected – as can often be an issue – the net of the two has been more positive than anticipated.”

Another 25 basis point increase in May would lift the cash rate to 4.1 per cent, effectively undoing last May’s cut and adding renewed pressure for borrowers.

Liberal frontbencher is keepling leadership speculation alive by declaring if he moves to topple Sussan Ley he will inform her first.

During an appearance on Sydney radio station 2GB, the shadow Defence Minsiter was quizzed about his ambitions for the party’s top job.

“Well, as I said, there is no plan. If I had a plan to remove Sussan as Leader, or put my hand up for the Leadership, I would be telling Sussan Ley about that first.”

“I wouldn’t be saying anything about it on this radio program,” Mr Taylor added.

Liberal sources claim Mr Taylor is still working to secure enough support for a leadership challenge but is also concerned about the optics of removing the party’s first female leader so soon after the election.

Opposition defence spokesman Angus Taylor has avoided addressing how removing the Liberal Party’s first female leader might alienate women voters, instead highlighting widespread Australian discontent.

“You know, I think we can break down Australians by gender and by race and by all sorts of other things, but what I hear and see when I’m getting around my neck of the woods and around Australia more generally, is Australians saying that they care deeply about whether or not their kids can own a home,” he told 2GB on Friday morning.

“They care deeply about an energy system that’s been driven by ideology, not by reality... and all of that needs a response from the Liberal Party. And that’s what we’re going to focus on.”

Pressed on what message ousting Opposition Leader Sussan Ley would send to women wary of the Liberal Party, Mr Taylor replied: “We’ve got to do better with women across Australia, but we’ve got to do better with lots of people across Australia – including women, of course.”

More than 500 police officers will patrol Sydney’s CBD and surrounding areas on Monday as thousands prepare to rally against Israeli President Isaac Herzog’s visit to Australia.

NSW Police confirmed a Public Assembly Restriction Declaration would be in effect across designated parts of the city, limiting where protesters can move.

Israel President Isaac Herzog is due to arrive in Australia on Sunday.

Speaking at a press conference in Sydney on Friday morning, NSW Police Acting Assistant Commissioner Paul Dunstan said protesters were permitted to gather, but anyone moving beyond approved zones could face arrest.

“If the group starts to spill out on to pedestrian areas, onto roadways, we will have no choice but to issue move-on directions, ask the group to disperse, and if those directions are not complied with, potentially arrest those people not complying,” He said.

He confirmed there would be “in excess of 500 police officers” stationed throughout the CBD on Monday.

The Palestine Action Group plans to march peacefully from Sydney’s Town Hall to NSW Parliament in the afternoon.

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Australia’s chief central banker Michele Bullock has told a parliamentary hearing government spending is driving up inflation in the wake of the first rate hike in more than two years and warned of another increase if demand didn’t slow - putting her on a collision course with her Labor bosses.

Treasurer Jim Chalmers has been arguing that private sector activity is fuelling inflation and not public sector spending, with both headline and underlying inflation now well above the Reserve Bank of Australia’s 2-3 per cent target.

“If we need to put up interest rates to slow the growth in demand, in aggregate demand, then that’s what we will do,” Ms Bullock said.

“I don’t have a view on the Treasurer’s words.”

Ms Bullock made the acknowledgement about government spending on Friday, after refusing on Tuesday “to comment on fiscal policy” when asked by journalists in Sydney about the link between government spending and inflation.

Federal Government spending is forecast by Treasury to hit 26.9 per cent of gross domestic product in 2025-26, which outside of COVID would the highest since 1986.

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RBA Governor Michele Bullock has warned Australians that if she needs to hike interest rates further “to slow growth in demand”, she will.

“If we need to put up interest rates to slow the growth in demand, in aggregate demand, then that’s what we will do,” the RBA boss said on Friday in Canberra.

Aussies were hit with a .25 basis point rate hike on Tuesday, with the Governor’s latest words offering little comfort on where we are heading.

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Liberal MP Simon Kennedy asked Reserve Bank Governor Michele Bullock if high Government spending had pushed up inflation by increasing demand for goods and services.

“Yes, it does, because as you say there’s some public demand and then there’s transfers and taxes which also flow into that,” Ms Bullock said.

“Aggregate demand, we think, is currently in excess of the ability of the economy to supply those goods and services which are being demanded.

“Total demand is too high and that’s what’s giving inflationary pressures.”

Australia’s chief central banker Michele Bullock has told a parliamentary hearing the latest rate rise will be tough for those paying off a mortgage but argued doing nothing would have hurt the poor.

She made the acknowledgement on Friday, three days after the Reserve Bank of Australia increased the cash rate by 25 basis points to 3.85 per cent, undoing the August cut and marking the first tightening since November 2023.

“I recognise the challenges a cash rate increase brings for Australians with mortgages but it’s the right thing for the economy as a whole because we need to ensure inflation is low and stable so that households and businesses can plan, invest and create jobs,” she told the House of Representatives economics committee in Canberra.

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