Inflation debate intensifies as budget shows improved deficit but rate hike looms

Australia's 2025/26 budget posted a deficit that outperformed May's expectations, though it remains higher than the 2024/25 shortfall. Deputy Prime Minister Richard Marles attributed one outlet inflation surge to geopolitical tensions in the Middle East and rising global fuel prices, noting their impact on local petrol prices. Meanwhile, the Reserve Bank will convene for two days to decide on interest rates, with most analysts expecting a rise to the highest level in 15 years.

Opposition frontbencher James Paterson contended that the government's stimulus-level spending, rather than external factors, is fuelling inflation and warned that another rate increase would strain households and small firms. Housing market data showed a decline in auction clearance rates and a 3.6% drop in median property prices since March, reflecting reduced buyer confidence amid tax concession removals and consecutive rate hikes.