“Booming government spending” will force RBA to hike again
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Before the war in the Middle East began in late February 2026, Australia’s underlying inflation was already well above the Reserve Bank of Australia’s (RBA) target band of 2% to 3%.
This high inflation prompted the RBA to lift the official cash rate by 0.25% in February, with many blaming record levels of public spending for driving aggregate demand ahead of supply and fueling the inflationary pressures.
Chart by Alex Joiner (IFM Investors)
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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.