Albanese Rules Out Deep Health and Education Cuts but Admits Savings Are Needed

Prime Minister Anthony Albanese has said his government will not make major cuts to health, education and essential services in December's mid-year budget update, while acknowledging that savings are needed as Labor struggles to bring accelerating inflation under control.

The comments come as pressure builds from inside Labor's own ranks, as well as from the opposition and business groups. Albanese accused the Coalition of hypocrisy for refusing to back existing savings measures, including the government's plan to reduce the private health insurance rebate for people over 65.

Labor MPs privately concede that a likely interest rate rise from the Reserve Bank next week, which would be the fifth this year, will deepen the government's political difficulties over the cost of living. Some are urging bolder action from Canberra. Ed Husic, the former industry minister, said this week that price controls were needed on essential groceries, calling for caps on the cost of bread, milk, meat and fresh produce.

Official figures released on Wednesday showed Australia's headline inflation rate rising to 4.3%, sharply lifting expectations of another rate increase on Melbourne Cup day. The cash rate sits at 4.6% after four hikes in 2026, its highest level in 15 years. A move to 4.85% would take it to an 18-year high and add further strain to household budgets.

Albanese said he understood public frustration and that work to find savings was already under way. "We will continue to meet over coming weeks as well, as we do consistently, looking for, making sure that appropriate savings are made," he said. He added that the government would not "rip tens of billions of dollars out of health and education", pointing to what he said happened when the Coalition last came into office.

Treasurer Jim Chalmers told parliament on Thursday that inflation was driven by two main factors: a much quicker than anticipated recovery in the private sector, and the escalation in fuel prices from what he called the biggest oil shock in the history of the world. He accused the Coalition of being consumed by "weird post-truth stuff" for refusing to accept the global fuel shock as the largest contributor.

The data supports part of that argument. Transport costs have risen 8.7% over the past 12 months, largely because of surging fuel prices linked to the conflict involving the US, Israel and Iran. Food prices are up 3.2% over the year, while housing costs have risen 5.2%.

The proposed wind-back of the private health insurance rebate would save about $3bn over four years, money earmarked for aged care services. However, the measure appears to have little support in parliament, with the Coalition opposed.

Coalition MPs believe they have Labor cornered over the budget and rising interest rates. The mid-year update is also expected to be hit by higher government debt costs because of conditions in the global bond market. Shadow treasurer Tim Wilson said Labor's budget settings were "forcing Australian families to pay more for everything".