New South Wales warns of business closures as Australia braces for possible RBA rate rise

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NSW warns of RBA rate rise

Highlights

New South Wales Premier Minns warns that a potential Reserve Bank of Australia rate rise could cause permanent job losses and business closures in the state.
Prime Minister Albanese's government faces heightened political pressure as Labor’s primary vote drops to 27% according to the latest Newspoll ahead of the rates decision.
Unions and welfare advocates strongly oppose a rate hike, with ACOSS warning that interest rates moving toward or above 5% would cause severe employment damage.

Rate decision sharpens political and economic pressure

As reported by The Guardian, Minns says another rise in borrowing costs is not a straightforward decision for the Reserve Bank of Australia and argues federal and state governments should rein in spending to ease pressure on the economy.

The New South Wales premier says the impact on the state economy would be severe, warning that some lost jobs would not return and some shops forced to shut would not reopen. His intervention adds to pressure on Prime Minister Anthony Albanese’s government before Tuesday’s rate announcement, with Albanese due to be at the Commonwealth leaders’ summit in Antigua and Barbuda when the decision is released.

Albanese and Treasurer Jim Chalmers have confirmed that next month’s mid-year budget update will include a savings package, while continuing to point to international drivers, including the war in Iran, as a cause of higher prices. Environment minister Murray Watt defends government spending, saying inflationary pressure is a global phenomenon and would persist even if Canberra sharply reduced its budget.

Labor frontbencher Tanya Plibersek also backs Chalmers, saying the savings measures will be meaningful without hurting households. She says major reforms regularly attract political criticism and insists the government supports the treasurer.

Voter frustration grows as unions and welfare groups oppose rise

Internal frustration is also growing within Labor over the handling of the economy. One Labor MP tells the newspaper voter anger is already elevated ahead of the rates decision and compares the political mood with the difficult mid-cycle period governments often face when polling weakens.

The MP says Albanese and Chalmers are likely hoping inflation and interest-rate trends improve next year as they did before the 2025 election, when inflation fell back into the Reserve Bank’s target band after peaking near 8% in late 2022. Monday’s Newspoll shows Labor’s primary vote at 27%, behind One Nation on 28% and ahead of the Coalition on 21%.

Outside the RBA’s Sydney headquarters, ACTU secretary Melissa Donnelly says workers cannot survive another rate rise and argues households are already under intense cost-of-living pressure. Australian Council of Social Service chief executive Cassandra Goldie also urges the central bank not to lift rates, saying higher interest rates raise unemployment by design and warning that a move toward or above 5% would severely damage employment prospects.

Opposition leader Angus Taylor says the federal government has lost control of inflation and interest rates, arguing excessive spending is forcing the Reserve Bank to do the hard work of restraining prices.

In our earlier article on rising long-term U.S. borrowing costs, we explained how higher Treasury yields were feeding through to mortgages and government interest expenses, tightening financial conditions for households and the federal budget. We also noted that large deficits and political gridlock were limiting the prospects for near-term fiscal tightening, keeping pressure on yields and debt-servicing costs elevated.

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