Federal government spending in FY26 reached 26.9% of GDP, its highest share in four decades outside the COVID-19 pandemic period, the Prime Minister said in a statement, as markets expected the Reserve Bank to lift the cash rate to 4.85%. The increase would mark the fifth rate rise in 2026 and the highest rate in 18 years.
Domestic gas reservation legislation was scheduled for debate and a vote in the House of Representatives, with the measure allowing up to 20% of exports to be reserved for Australian domestic use. The government said the measure was intended to increase supply for Australian manufacturing and put downward pressure on prices. The Digital Duty of Care legislation cleared the House of Representatives, described by the government as making large technology companies accountable for platform content and giving users control over what appears on their devices.
Quarterly trimmed mean inflation, the RBA's preferred measure, recorded 1% for September, surpassing the central bank's 0.8% forecast. Finance Minister Katy Gallagher said no area of the budget would be exempt from savings consideration ahead of December's mid-year budget update, which Prime Minister Albanese and Treasurer Jim Chalmers confirmed would include a savings package.
Environment Minister Murray Watt told ABC radio that Australia was not the only country experiencing inflationary pressures and that even cutting the government budget to zero would not eliminate inflation given global factors.
Gallagher defended spending on electric vehicle tax breaks and home battery subsidies despite the costs of both schemes having exceeded initial estimates due to higher-than-expected demand. She dismissed as overblown media reports of friction between the Prime Minister and the Treasurer over savings proposals, saying Chalmers was carrying out a treasurer's standard role in cabinet budget deliberations and that the two maintained a professional and respectful relationship.
A trade agreement with the European Free Trade Agreement bloc was described by the government as making 98% of Australian goods and services exports tariff free to a market of 450 million people, with a projected boost to the Australian economy of $10 billion.
A mid-year budget savings package is expected in December, which may affect government programs and spending across portfolios. Should the RBA lift the cash rate to 4.85%, borrowers would face a further tightening of loan repayment costs at an 18-year high. The domestic gas reservation measure, if passed, could affect gas supply and prices for Australian manufacturers and energy consumers.
Official statements: Prime Minister of Australia, Ministerial statement
Reporting: ABC News, The Guardian, SBS News
Written by Pick & Scroll News from the reporting and documents linked above.
