NSW Premier Chris Minns has warned that an expected Reserve Bank interest rate rise on Tuesday will cause permanent job losses and business closures, as markets predict the bank will deliver its fifth rate increase of 2026, with a move to 4.85 per cent bringing the cash rate to a level not seen in 18 years.
The Reserve Bank of Australia is widely expected to lift the cash rate to 4.85 per cent on Tuesday, the highest since 2008, amid persistent inflationary pressures. The government has pointed to international factors including the war in Iran as the cause of price hikes.
Minns, who has grown increasingly outspoken in his differences with Prime Minister Anthony Albanese, said another increase would have a massive impact on the New South Wales economy. “The impact of another rate rise on the New South Wales economy will be massive,” Minns said. “There’ll be jobs that go that will never come back. There’ll be shops that close that do not reopen with another rate rise. We can’t be flippant about this, this is a very, very tough call for them.”
Asked about government spending adding to inflation, Minns said: “I think everybody needs to do their bit.” Albanese and Treasurer Jim Chalmers have confirmed next month’s mid-year budget update will include a savings package, even as they point to international factors including the war in Iran as the cause of price hikes.
Internally, frustration is growing within Labor about the government’s handling of the economy. One Labor MP told Guardian Australia voter anger was already high ahead of the rates decision, likening the tough political climate facing the government during a slump in polling in its first term. They said Albanese and Chalmers would be hoping the trajectory for inflation and interest rates experienced before the 2025 election would play out again next year. After peaking at nearly 8 per cent in late 2022, inflation fell to within the Reserve Bank’s target band before voters went to the polls. “It’s the mid point in the cycle and people are grumpy,” the MP said.
Albanese will be at the Commonwealth leaders’ summit in Antigua and Barbuda on Tuesday when the RBA announces its rates decision, leaving Chalmers to speak for the government.
Environment Minister Murray Watt defended the government’s spending on Monday. “We need to remember that Australia is not the only country going through inflationary pressures at the moment,” he told ABC radio. “This is a global phenomenon, and even if the Australian government was to cut its budget to zero, we would still be experiencing inflationary pressures because of what’s happening around the world.”
Labor frontbencher Tanya Plibersek defended Chalmers, insisting the savings would be meaningful but would not hurt households. “There’s been no reforming treasurer in Australian history that hasn’t copped it when they’ve made big changes,” Plibersek said. “We all support Jim.”
The ACTU secretary, Melissa Donnelly, warned workers “cannot survive another interest rate rise”, at a demonstration outside the RBA’s Sydney headquarters. She blamed big banks and supermarket giants for adding to household pressures. “Workers are already struggling and feeling the brunt of these cost-of-living pressures. Workers didn’t create this inflationary crisis, it’s caused by Trump’s war in the Middle East, but workers are feeling the pain of it every day,” she said.
The Australian Council of Social Service chief executive, Cassandra Goldie, urged the RBA not to increase rates, calling instead for action to lower housing and energy prices and out-of-pocket medical costs. “Higher interest rates create unemployment by design,” she said. “We cannot be certain what the impact of another rate hike now will be on unemployment in a year’s time. An increase towards or above 5% would be disastrous, locking people out of jobs for years and forcing them to rely on grossly inadequate income support payments.”
Major bank economists say Australia’s economy is set for a “sharper, longer slowdown” as the RBA is forced to keep rates higher to rid the nation of persistent inflationary pressures, amid rising worries the economy could even be tipped into recession.
Monday’s Newspoll put Labor’s primary vote at 27 per cent, behind One Nation on 28 per cent, but remaining ahead of the Coalition on 21 per cent. Opposition Leader Angus Taylor accused the federal government of losing control of inflation and interest rates. “We’re seeing a Labor government that can’t control its spending,” he said. “It cannot control its spending and the result of that is the Reserve Bank needs to do all the hard work.”
Analysis
Why This Matters
- The expected rate rise would push mortgage repayments to their highest in 18 years, deepening the cost-of-living crisis for millions of households
- The political fallout is significant: Labor’s primary vote has fallen to 27%, trailing One Nation, with internal party frustration mounting as the government faces a slump in polling
- A sharper economic slowdown is now predicted by major bank economists, raising the risk of recession
Background
Australia narrowly avoided recession after the pandemic, but has been grappling with high inflation since 2022. The RBA began lifting rates in 2022 and, after a period of stability, resumed hikes in 2026 amid renewed inflationary pressures linked to global events, including the war in Iran. The cash rate is expected to reach 4.85%, matching levels last seen during the 2008 financial crisis.
Key Perspectives
NSW Premier Chris Minns (Labor): says another rate rise will be devastating, leading to permanent job losses and business closures, and that “everybody needs to do their bit” on government spending.
Environment Minister Murray Watt (Labor): defends government spending, saying Australia is not alone in facing inflation and that even a zero budget would not stop price pressures because of global events.
Labor frontbencher Tanya Plibersek (Labor): supports Treasurer Chalmers, saying meaningful savings will be in the mid-year update without hurting households.
ACTU secretary Melissa Donnelly: warns workers cannot survive another rise, blaming big banks and supermarkets for adding to pressure.
ACOSS chief executive Cassandra Goldie: says higher interest rates “create unemployment by design” and urges alternative action on housing, energy and medical costs.
One Labor MP (anonymous): says voter anger is already high and “people are grumpy” at the mid-point of the electoral cycle.
Opposition Leader Angus Taylor (Coalition): blames the government for losing control of spending, forcing the RBA to do “all the hard work”.
What to Watch
- The RBA’s decision on Tuesday and the tone of its statement: will it signal further hikes or a pause?
- Next month’s mid-year budget update: will the government’s promised savings package be substantial enough to ease pressure?
- Labor’s primary vote in the coming weeks: whether further slippage prompts a leadership response or policy shift
Checked
12 claims in this story checked against 1 source: 11 supported.
Show each claim
- Partly supportedThe headline quotes Minns as saying “shops that close and don't reopen.”Australia news | The Guardian: ““There’ll be shops that close that do not reopen with another rate rise.””
- SupportedMinns warned that an expected rate rise would cause job losses and business closures, including jobs that would never return.Australia news | The Guardian: “The NSW premier, Chris Minns, has warned an expected interest rate increase will force job losses and cause businesses to close”
- SupportedThe RBA is widely expected to deliver its fifth rate rise on Tuesday, with markets predicting five rises in 2026.Australia news | The Guardian: “The RBA is widely expected to hit mortgage holders with a fifth rate hike on Tuesday”
- SupportedA move to 4.85% would take the cash rate to its highest level in 18 years.Australia news | The Guardian: “A move to 4.85% would bring rates to their highest level in 18 years.”
- SupportedFrustration is growing within Labor about the government’s handling of the economy.Australia news | The Guardian: “Internally, frustration is growing about the government’s handling of the economy.”
- SupportedMinns said, “The impact of another rate rise on the New South Wales economy will be massive,” and warned that jobs would not return and shops would not reopen.Australia news | The Guardian: ““The impact of another rate rise on the New South Wales economy will be massive,” Minns said. “There’ll be jobs that go that will never come back. There’ll be shops that close that do not reopen with another rate rise.”
- SupportedMinns said, “I think everybody needs to do their bit.”Australia news | The Guardian: “Asked about government spending adding to inflation pressure, Minns said: “I think everybody needs to do their bit.””
- SupportedMajor bank economists say Australia’s economy is set for a “sharper, longer slowdown.”Australia news | The Guardian: “Australia’s economy is set for a “sharper, longer slowdown”, major bank economists say”
- SupportedDonnelly said workers “cannot survive another interest rate rise.”Australia news | The Guardian: “The ACTU secretary, Melissa Donnelly, warned workers “cannot survive another interest rate rise””
- SupportedGoldie said an increase towards or above 5% would be disastrous and could lock people out of jobs for years.Australia news | The Guardian: ““An increase towards or above 5% would be disastrous, locking people out of jobs for years and forcing them to rely on grossly inadequate income support payments.””
- SupportedMonday’s Newspoll put Labor on 27% primary vote, One Nation on 28%, and the Coalition on 21%.Australia news | The Guardian: “Monday’s Newspoll put Labor’s primary vote at 27%, behind One Nation on 28%, but remaining ahead of the Coalition on 21%.”
- SupportedTaylor said Labor could not control its spending and that the RBA consequently had to do the hard work.Australia news | The Guardian: ““We’re seeing a Labor government that can’t control its spending,” he said. “It cannot control its spending and the result of that is the Reserve Bank needs to do all the hard work.””