While Australians turned their attention to the Melbourne Cup, the Reserve Bank of Australia (RBA) delivered something considerably less enjoyable: another interest rate increase.
It marked Australia’s fifth increase of 2026 and its 18th consecutive rise, more than any other developed country, placing Australia among the world’s most aggressively tightening economies.
If inflation were simply a worldwide problem created by international economic shocks, why has Australia required so much additional monetary tightening?
International pressures have contributed, but Australia’s persistent inflation raises serious questions about domestic taxation, government expenditure, productivity and economic management.
HSBC chief economist Paul Bloxham recently assessed Australia’s probability of recession in 2027 as a 50:50 chance, with unemployment potentially reaching 5.1 per cent.
Has modern Labor shifted its emphasis from creating prosperity through productive employment to redistributing wealth through taxation and government intervention?
Traditional Labor values centred on the dignity of work, fair wages and the belief that hard work should provide a pathway to prosperity.
While redistribution has always played a role in Labor’s philosophy, there is a fundamental distinction between providing equality of opportunity and attempting to engineer equality of economic outcomes.
The former encourages ambition, investment and productivity, while the latter risks creating an economy increasingly dependent on government support.
Australia cannot tax its way to prosperity. Nor can it sustainably redistribute wealth without first creating it.
Victoria provides a particularly concerning example. The state’s net debt is forecast to reach $175.6bn in 2026–27, climbing towards $199.3bn by 2029–30.
Interest payments alone will cost Victorian taxpayers an estimated $8.9bn this financial year – about $24.4m every day.
By 2029–30, that annual interest bill is forecast to reach $11.8bn.
These figures demand accountability. Victoria’s financial challenges cannot simply be dismissed as consequences of international events. Decisions about infrastructure spending, taxation, borrowing and public administration have been made by successive governments.
Meanwhile, the Albanese government’s taxation and spending policies raise questions about whether sufficient priority is being given to private investment and productivity.
Nowhere is this more evident than in property.
Australia desperately needs additional housing supply. Yet investors confront taxation uncertainty, developers face increasing construction and compliance costs, and higher interest rates undermine project feasibility.
State property taxes and development charges add further costs, while policies that discourage investment and construction risk worsening housing shortages and pushing up rents.
Bloxham has argued that tighter federal and state fiscal policy could reduce inflationary pressure and the need for further interest rate increases.
The RBA controls monetary policy, but governments control taxation and expenditure. When fiscal policy sustains demand while monetary policy attempts to restrain it, households and businesses bear the consequences.
Government services ultimately depend upon the wealth generated by the productive economy.
With the Victorian election approaching on 28 November, the state’s economic record deserves serious scrutiny.
Recent Roy Morgan polling places the Liberal–National Coalition ahead of Labor 56 per cent to 44 per cent on a two-party-preferred basis. But polls are not election results.
Under Jess Wilson’s leadership, the Coalition must translate that advantage into parliamentary seats.
A lower-house majority requires 45 seats, and substantial taxation reform would be considerably more difficult without a clear governing majority.
After more than a decade in government, Victorian Labor must answer for the state’s debt, taxation burden and declining economic competitiveness. Meaningful reform, however, should not be taken for granted.
If Australia enters recession in 2027, international circumstances will undoubtedly contribute. But Chalmers, Albanese and Victoria’s Labor government must also answer for the consequences of their economic policies.
Australians deserve an answer to one fundamental question: have we become so focused on how Australia’s wealth is distributed that we have forgotten how that wealth is created?