NSW Premier Warns Another Australian Rate Rise Will Close Shops for Good and Cost Jobs That Never Return

The premier of New South Wales, Chris Minns, has warned that an expected interest rate increase in Australia will force job losses and cause businesses to close, insisting the federal government and the states should rein in spending to take pressure off the economy.

The intervention from the leader of the country's biggest state will heap more pressure on the Albanese government ahead of the Reserve Bank of Australia's (RBA) cash rate decision on Tuesday. Markets predict the bank will deliver the fifth rate rise in 2026; a move to 4.85% would bring rates to their highest level in 18 years.

Minns said increasing rates was not ‘a straightforward decision’ for the RBA. ‘The impact of another rate rise on the New South Wales economy will be massive,’ he said. ‘There'll be jobs that go that will never come back. There'll be shops that close that do not reopen with another rate rise. We can't be flippant about this, this is a very, very tough call for them.’

Asked about government spending adding to inflation pressure, Minns said: ‘I think everybody needs to do their bit.’ Prime Minister Anthony Albanese and Treasurer Jim Chalmers have confirmed next month's mid-year budget update will include a savings package, even as they point to international factors including the war in Iran as the cause of price hikes.

Internally, frustration is growing about the government's handling of the economy. One Labor MP told Guardian Australia voter anger was already high ahead of the rates decision. Another said Albanese and Chalmers would be hoping the trajectory for inflation and interest rates experienced before the 2025 election would play out again next year; after peaking at nearly 8% in late 2022, inflation fell to within the Reserve Bank's target band before voters went to the polls. ‘It's the mid point in the cycle and people are grumpy,’ the MP said.

Albanese will be at the Commonwealth leaders' summit in Antigua and Barbuda on Tuesday when the RBA announces its decision, leaving Chalmers to speak for the government. Environment Minister Murray Watt defended the government's spending on ABC radio, saying Australia is not the only country going through inflationary pressures and that it is a global phenomenon.

Labor frontbencher Tanya Plibersek defended Chalmers, insisting the savings would be meaningful but would not hurt households. ‘There's been no reforming treasurer in Australian history that hasn't copped it when they've made big changes,’ she said. ‘We all support Jim.’

The Australian Council of Trade Unions secretary, Melissa Donnelly, warned at a demonstration outside the RBA's Sydney headquarters that workers ‘cannot survive another interest rate rise’. She blamed big banks and supermarket giants for adding to pressure on households, and said workers did not create this inflationary crisis — it is caused by Trump's war in the Middle East — but workers feel the pain of it every day.

The Australian Council of Social Service chief executive, Cassandra Goldie, urged the RBA not to increase interest rates, calling instead for action to lower housing and energy prices and out-of-pocket medical costs. ‘Higher interest rates create unemployment by design,’ she said, warning that an increase towards or above 5% would be disastrous.

Monday's Newspoll put Labor's primary vote at 27%, behind One Nation on 28% but ahead of the Coalition on 21%. Opposition leader Angus Taylor accused the federal government of losing control of inflation and interest rates, saying the Reserve Bank has to do all the hard work because the government cannot control its spending.