Albanese concedes savings needed as he faces internal Labor pressure on cost-of-living crisis

Anthony Albanese has ruled out major cuts to health, education and essential services in December’s mid-year budget update, but conceded savings are required as Labor struggles to curb accelerating inflation.

Amid growing pressure from within Labor’s own ranks, as well as from the opposition and business, Albanese said the Coalition was hypocritical in not supporting existing savings proposals, including the government’s plan to reduce the private health insurance rebate for people over 65.

Privately, Labor MPs admit the strong likelihood of the Reserve Bank delivering the year’s fifth interest rate increase next week will compound the government’s political problem over the high cost of living, with some calling for radical moves from the federal government. Ed Husic, the former industry minister, this week said price controls on essential groceries items were needed, calling for caps on the cost of bread, milk, meat and fresh produce.

Australia’s headline inflation rate rose to 4.3% on Wednesday, dramatically increasing expectations of another interest rate rise on Melbourne Cup day.

The cash rate already stands at 4.6%, its highest level in 15 years, after four rate hikes in 2026. A move to 4.85% would bring rates to their highest levels in 18 years, putting further pressure on household budgets.

As the Coalition criticises Labor for the rate of government spending, Albanese said he understood frustration in the community and efforts to find savings were 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, ahead of the budget update due in mid-December.

“What we won’t do is rip tens of billions of dollars out of health and education. That’s what happened last time when the Coalition came into office.

“We’re not looking at cutting funding for hospitals and schools and essential services because we’re a Labor government that understand that people are under pressure.”

The treasurer, Jim Chalmers, on Thursday accused the Coalition of being consumed by “weird post-truth stuff” by refusing to acknowledge the global fuel shock as the biggest contributor to inflation.

Transport costs have risen 8.7% over the past 12 months, due in large part to escalating fuel prices stemming from the US and Israel conflict with Iran.

Food prices have also jumped another 3.2% in a year, and housing costs were up 5.2%.

“The issue with inflation in our economy right now is really a function of two things. First of all a much quicker–than–anticipated recovery in the private sector,” Chalmers told parliament.

“Secondly, obviously, the escalation in fuel prices that came from the biggest oil shock in the history of the world.”

The government’s plans to wind back the private health insurance rebate for people aged 65 would save about $3bn over four years, money earmarked for aged care services. But the plan appears friendless in parliament, with the Coalition opposed.

Coalition MPs believe they have Labor cornered over the budget and rising interest rates, with the budget update expected to be further buffeted by higher costs for government debts due to conditions in the global bond market.

The shadow treasurer, Tim Wilson, said Labor’s budget settings were “forcing Australian families to pay more for everything”.