Voters blame government for inflation threat

Australians blame Anthony Albanese and his government for the nation’s inflation pressures as they cut their spending on takeaway meals, drop subscriptions for streaming services and put off repairs around the house and on their cars to make ends meet.

As a former Reserve Bank economist warned the institution – expected to lift interest rates on Tuesday by another quarter percentage point – may have to drive the country into a recession to bring inflation under control, the latest Resolve Political Monitor shows 40 per cent of people believe the federal government is responsible for rising living costs.

Inflation has lifted from 1.9 per cent to 3.8 per cent over the past six months. Treasurer Jim Chalmers at the weekend warned the war in Iran, which has pushed oil prices above $US100 a barrel, could result in inflation climbing to the high fours.

The poll of 1803 people, carried out between March 9 and 14, shows that few voters believe outside factors are behind the inflation pressures.

While 40 per cent lay the blame at the feet of the government, just 6 per cent believe businesses or the Reserve Bank are responsible. Only 3 per cent thought consumers were contributing to higher prices.

Seventeen per cent, the highest proportion since Resolve starting polling people on the issue, agreed that global factors outside Australia’s control were behind the spike in cost of living.

The poor expectations could get even worse, depending on the Reserve Bank and its plans for interest rates.

Financial markets put the chance of a second successive interest rate hike on Tuesday at 75 per cent, with expectations that will be followed up by another increase at its May meeting.

That would push the cash rate back to 4.35 per cent, where it was early last year, adding a cumulative $300 to the monthly repayments on a $600,000 mortgage.

HSBC Australia chief economist Paul Bloxham said the Reserve may have to go even further to bring inflation down to its 2-3 per cent target band.

He said the bank’s options had “narrowed significantly” given inflation was already well above its target band and likely to go higher because of the events playing out in the Middle East.

Higher interest rates on top of the war’s economic fallout, coupled with spending cuts in the May federal budget, could end up with a steep slowdown in growth or even a recession.

“Australia’s economy needs a downturn to deliver the necessary disinflation to get inflation back to the RBA’s 2.5 per cent target. This is the tough, hard and unfortunate reality,” he said.

“The RBA may now have to be clear that a recession may be what is needed to get inflation sustainably back to target.”

Voters are already registering higher costs every time they open their wallets.

The single largest cost-of-living pressure remains the cost of groceries and other basic shopping, with 55 per cent of respondents listing it as a key problem.

Low-income earners (62 per cent), retirees (61 per cent) and those without a job (60 per cent) are all feeling the pinch from high-priced groceries.

The cost of utilities such as electricity and gas is the second-biggest issue, at 41 per cent, although it remains below the peak of 47 per cent it reached in mid-2023 before the federal and state governments started their now-abandoned energy subsidies.

Cost of building a house and higher interest rates have fallen as major issues, but there has been a step up among people who say the cost of renting is a key pressure. It has reached 26 per cent, compared to 21 per cent in late 2024.

To deal with higher costs, 55 per cent said they had cut spending on non-essentials like clothes or a phone. A similar proportion said they were focused on supermarket specials, a development the nation’s major grocery retailers have noted over recent months.

Forty-seven per cent said they are eating out or buying takeaway less often, a third said they had cancelled some subscriptions, while a similar number said they had put off a major expense like car or home repairs.

Low-income earners, people who are renting or sharing a home, plus retirees are more likely to be finding savings to make ends meet.

Australians are also expecting more near-term pain.

Just 8 per cent of respondents said they believe the economic outlook over the next month would get better, compared to 47 per cent who think it will get worse.

Over the next six months, just 14 per cent are tipping an improvement, while half expect it to get worse. Even by this time next year, 22 per cent believe the economic outlook will have improved compared to the 44 per cent who think it will have deteriorated.

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