Brief
Treasurer Jim Chalmers says rising bond yields will curb new cost‑of‑living measures
Chalmers warned that a spike in borrowing costs adds billions to the budget and could rule out significant new relief measures.
By Felo News Desk · Published
Australia’s Treasury chief Jim Chalmers told ABC’s Insiders on Oct. 4 that a surge in bond yields and a federal debt balance just over $1 trillion will force the Labor government to run a “pretty tight ship” in its upcoming mid‑year budget update, limiting any major new cost‑of‑living assistance.
Chalmers said the Reserve Bank of Australia’s recent move to a 4.6% cash rate – a 15‑year high – has intensified pressure on the budget, which is already at its highest level in four decades outside the pandemic era. He warned that “additional pressure” from rapidly rising borrowing costs could add billions of dollars to the federal budget, making large new spending programmes unlikely.
The treasurer linked domestic inflation to external factors, noting the war in the Middle East has worsened price pressures. He cited a split in demand trends – public demand down 50% while private demand rose 200% over the past year – to argue that factors beyond budget settings are driving inflation.
Chalmers confirmed the government is drafting a new savings package for the mid‑year update, due in about ten weeks, but said the impact on the budget bottom line remains uncertain because of volatile bond yields. He pointed to the U.S. 10‑year Treasury yield hitting its highest level since 2002 and Australian government bond yields hovering around 5.4%, near their 2011 peak.
Assistant Science Minister Andrew Charlton added that higher productivity is essential to bring down interest rates and inflation, describing productivity as “the speed limit on our economy.”
Key facts
- Treasurer Jim Chalmers warned that rising bond yields will add billions to the budget and limit new cost‑of‑living relief. (smh.com.au)
- The RBA raised the cash rate to 4.6%, a 15‑year high, increasing pressure on federal spending. (smh.com.au)
- Australian government bond yields are around 5.4%, near their highest since mid‑2011. (smh.com.au)
- Chalmers said a new savings package is being prepared for the mid‑year budget update due in about ten weeks. (smh.com.au)
- Assistant Science Minister Andrew Charlton said higher productivity is needed to lower interest rates and inflation. (smh.com.au)
Sources
- [1] smh.com.au — originally reported as “Federal budget and inflation: Jim Chalmers warns rising bond yields and government debt will limit new spending”
