Return of inflation threatens to hijack Labor’s second-term agenda

The return of high inflation in Australia threatens to hijack the Albanese government’s second‑term agenda and has increased fears of interest rate rises, with the Reserve Bank said to be likely to hike rates on Tuesday for the first time since November 2023. Cost of living has been the number‑one issue for households, and consumer price growth has been climbing for six months to 3.8%, well above the 2.4% rate leading into the last election.

Westpac’s consumer confidence survey showed growing pessimism in January, which the bank said was rooted in renewed fears of interest rate hikes. The return of high and rising inflation is a blow to workers who were starting to see wage growth through 2025 and is expected to hit the heavily indebted mortgage belt.

Many households will also see electricity bills "snap back" to where they would have been without government power bill subsidies. Treasurer Jim Chalmers said some of the inflationary rebound is temporary, citing higher prices associated with holidays and the rolling end of energy bill subsidies, but he warned "there are some persistent price pressures in our economy" that "will have a very substantial bearing on the budget settings".

The May budget, once planned as a launchpad for reform, "will now be hijacked" by the economic rebound, the piece says.

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