As we move into 2026, many eyes will be on Treasurer Jim Chalmers.
He will be the person pulling the economic levers upon which so much rests.
And all the indications are that Dr Chalmers is in for a busy time as the inflation dragon bursts back into life, with the Reserve Bank looking to take some steam out of the economy by pushing up interest rates.
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For those with home loans, that spells trouble.
The latest data, released on Wednesday, showed headline inflation at the end of last year accelerated to 3.8 per cent, up from the 3.4 per cent pace in the year to November 30 and above market forecasts of a 3.6 per cent increase.
Even without volatile items — such as power prices, petrol, fruit and vegetables and holiday accommodation costs — underlying inflation, known as the trimmed mean and the Reserve Bank’s preferred measure of inflation, climbed by 3.3 per cent over the year.
This put it well above the central bank’s 2-3 per cent target band for five straight months.
In response Australia’s Big Four banks were immediately tipping a rate rise next week.
On Thursday the potential ramifications looked gloomy, with concerns Australian home loan borrowers may need to brace for at least four rate hikes during the coming year with the Reserve Bank expecting inflation to remain a problem into 2028.
A mortgage holder with an average $694,000 home loan, under this scenario, could potentially pay $451 more a month on their mortgage in a year from now, adding up to $5412 a year in extra repayments.
Many economists have blamed soaring inflation on government spending.
But Dr Chalmers insists this is not the case.
The Treasurer said on Wednesday that there had been a pullback in government spending.
And yet Federal Government spending this financial year is expected to make up 27 per cent of the economy, adding to inflationary pressures.
That’s an undeniably big number by anybody’s standards.
So what does Dr Chalmers do? It is just over five months since his economic roundtable and it is safe to say there were plenty of buzzwords.
The Treasurer finished 29 hours of discussion and 327 contributions from the summit’s participants with plenty of ideas, including tax reform, an overhaul of environmental approval laws, a shift towards road-user charges and a national approach to artificial intelligence.
After the summit Dr Chalmers said participants “came with a lot of goodwill, a lot of expertise, a lot of experience. And they provided their views to us in very generous ways.”
The giant sized elephant remaining in the room is our flagging productivity growth.
We are approaching a potentially pivotal point.
Politically it makes sense to tackle the big items early in a three-year term.
The Federal Budget due in May is the first since the Albanese Government was re-elected.
And so it points to it being a key moment — perhaps the defining moment for Dr Chalmers and this Government.
